Tuesday 20 December 2016

The prized AAA credit rating

remains in place in Downunder - for now. 
I don't know how this has happened. Were the grinches at S & P feeling a little festive when they made the decision? Are they planning bigger strife in the future?
I don't know a lot about economics. I do know that spending money you do not have causes debt. I know that debt can lead to bankruptcy. If you borrow money you have to be able to pay it back - with interest.
I had an interesting conversation with a former bank manager recently. He worked for some time in an area with a large Greek migrant population. Sometimes the Greek men would come in looking for a loan to buy a house. They would have saved a deposit and they were in good steady employment. The loan was not a problem. 
He would suggest the bank's usual terms but there would be shaking of heads. No, they didn't want a 25yr loan. They wanted a 10yr loan and they would pay it back at the rate of.... a week.  He would try to argue with them but they would insist. As the terms could be varied he would give in.
And they paid the loans back in 10yrs. Then they took out another loan...and another loan. Now they or their families own a number of houses...and sometimes their children are continuing the same pattern. They rent the houses out and use the rent to pay the mortgage.
Other people will say they are "lucky" but it isn't "luck". They have done it through hard work and good management. 
Running a country is not like owning a house. It is much more complex than that but if we do want to borrow money then we need to be able to do it on the most favourable terms possible and we need to pay it back on the most favourable terms we can as well.
There are budget measures which have stalled. They involve things that are not popular with the electorate but some of them do need to occur. The Opposition knows this. They are currently "fighting" them. It is to their political advantage to do this. They know they overspent in government, seeing it as a way of avoiding the results of the GFC. They took out loans to buy pink batts and school halls instead of the houses and power plants which might have bought batts and halls in the future. It is why we should have lost the AAA credit rating - and lost it while they were still in government.
I wonder what the Greek migrants who own  houses think of all this?

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