It's the economy, stupid!

 
  Carnot Minister for Railways

An interesting article by Peter Turchin.  I wonder if Australia is heading in the same direction?
http://peterturchin.com/cliodynamica/role-finance-structural-demographic-crisis/

"The main dynamical driver is the magnitude of private debt (combining what’s owed by both corporations and households) in relation to GDP. Currently this indicator is at 150% of the US GDP. Why is it bad?

Actually, for a while, as private debt grows, things are just fine because expanding credit drives economic growth (think of new housing construction during building booms). But eventually the cost of servicing accumulated debt starts to depress consumption (the more you pay for your mortgage, the less money you have to buy things). Falling consumption results in overproduction of goods and declining profits for businesses, which makes investment a losing proposition. Credit collapses, businesses go bankrupt, or downsize their labor, less employment means even less consumption, and (absent large-scale increase in government spending) the economy enters a downward-trending “death spiral” of a prolonged depression."

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  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
The Private sector only does what the govt lets it get away with and govt ownership doesn't remove stupidity and govt policy got SA into this mess to start with.
RTT_Rules
Mainly the Federal government stupidity for forcing the states to spend money connecting up to this imaginary national electricity market that doesn't work.
$2.5B is more than the cost of building large scale diesel/oil fired power station and probably cheaper to maintain.
RTT_Rules
Exactly, so why even think about an inter-connector to NSW, somewhere predicted to have blackouts and shortages this summer anyway. The only reason they'd even think about doing something like that is to gouge SA electricity users even more than we're already being gouged.
I don't think there has been alot of gold plating, what has been done is increasing the ability to move power around the country in larger amounts.
RTT_Rules
There's been a huge amount of gold plating with the pretext of increasing network redundancy; God knows what they were actually doing with that money though as the Black Saturday Royal Commission found that poor maintenance was responsible for the outbreak of many of the fires... they don't seem to actually spend the money on fixing problems.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Meanwhile the Vic govt is looking at what to do with the old Point Henry Aluminium Smelter site near Geelong which includes its own shipping berth. Considering the same location has both a salt works and cement plant plus existing incoming HV power lines.

How about starting with a 1800MW x 3 unit brand new coal power station with option to expand to 2400MW using NSW or/and Qld thermal coal.

Provide local high tech jobs

brine from power station cooling is used by salt works to make salt more efficiently.

Fly ash by local cement company.
No chance of a new coal fired power station with the current State Govt.  Political suicide and riots on the streets.
Carnot
Why, do people enjoy paying some of the most expensive domestic power prices in the developed world that discourages any form of industrial job creation and blackouts to boot?

It won't be long before the people will have enough of this BS and first party to put a robust alternative energy plan on the table that reduces power prices and eliminates excessive demand blackouts will be thrown into govt.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
Why, do people enjoy paying some of the most expensive domestic power prices in the developed world that discourages any form of industrial job creation and blackouts to boot?
RTT_Rules
Yes.
Actually, for a while, as private debt grows, things are just fine because expanding credit drives economic growth (think of new housing construction during building booms). But eventually the cost of servicing accumulated debt starts to depress consumption (the more you pay for your mortgage, the less money you have to buy things). Falling consumption results in overproduction of goods and declining profits for businesses, which makes investment a losing proposition. Credit collapses, businesses go bankrupt, or downsize their labor, less employment means even less consumption, and (absent large-scale increase in government spending) the economy enters a downward-trending “death spiral” of a prolonged depression."
Carnot
It's not a worry as long as you have a reasonably recession-proof job. The dummies in charge have finally realised that diminishing wages equals falling taxation receipts equals spending even more money that they don't have... not that government debt is really the problem, it's the private sector binge that continues to scrape the stratosphere.

There's also total confusion at the top about what to do next - raise rates? Leave them at emergency lows?

Meanwhile Harry Triguboff, Australia's $10 billion man, was whinging to The Australian about that huge amount of tax that he has to pay:

Mr Triguboff, who is concerned about the broader effects of falling prices on the economy and property sector, is fed up with the tax contribution both from his developments and the heavy levies on buyers. Referring to his own bills, Mr Triguboff said it was “one mighty big contribution from one man and one company”…

Someone has to pay the support infrastructure tab for your massive developments don't they Harry? He should be boasting about the amount of tax that he pays to support the nation.
  MILW Junior Train Controller

Location: Earth
An interesting article by Peter Turchin.  I wonder if Australia is heading in the same direction?
http://peterturchin.com/cliodynamica/role-finance-structural-demographic-crisis/

"The main dynamical driver is the magnitude of private debt (combining what’s owed by both corporations and households) in relation to GDP. Currently this indicator is at 150% of the US GDP. Why is it bad?

Actually, for a while, as private debt grows, things are just fine because expanding credit drives economic growth (think of new housing construction during building booms). But eventually the cost of servicing accumulated debt starts to depress consumption (the more you pay for your mortgage, the less money you have to buy things). Falling consumption results in overproduction of goods and declining profits for businesses, which makes investment a losing proposition. Credit collapses, businesses go bankrupt, or downsize their labor, less employment means even less consumption, and (absent large-scale increase in government spending) the economy enters a downward-trending “death spiral” of a prolonged depression."
Carnot
I guess the key here is that the market economy is cyclical. No trend lasts forever, except the general trend of the cycle; what goes up, eventually comes back down, but will eventually go back up again. What varies is the intensity and frequency of changes, etc.

Human behaviour (and stupidity) seems pretty constant much of the time. Therefore, our behaviour in situations like booms and bubbles is very predictable.

So, rising debt is fine while things are on the up and up, but long term it's not so good, because this is a game of musical chairs, and when the music stops (as the market comes down) someone will end up without a chair, unable to service their debt and bankrupt.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
So, rising debt is fine while things are on the up and up, but long term it's not so good, because this is a game of musical chairs, and when the music stops (as the market comes down) someone will end up without a chair, unable to service their debt and bankrupt.
MILW
The Chinese government has been trying to re-hash their books for the last three years to manage away the enormous debts of local governments and the shadow banking sector but S&P recently downgraded their credit rating (again) indicating further problems lie ahead. We haven't seen anything yet with China and we're pretty much dependent on them for all our economic activity.

Our own households won't be able to tolerate any economic shocks - the average wage has increased by $3 a year since 2008 but the debts they're supporting have exploded (Fairfax)... I can't see the Reserve being able to normalise interest rates in this environment without causing a lot of pain.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
So, rising debt is fine while things are on the up and up, but long term it's not so good, because this is a game of musical chairs, and when the music stops (as the market comes down) someone will end up without a chair, unable to service their debt and bankrupt.
The Chinese government has been trying to re-hash their books for the last three years to manage away the enormous debts of local governments and the shadow banking sector but S&P recently downgraded their credit rating (again) indicating further problems lie ahead. We haven't seen anything yet with China and we're pretty much dependent on them for all our economic activity.

Our own households won't be able to tolerate any economic shocks - the average wage has increased by $3 a year since 2008 but the debts they're supporting have exploded (Fairfax)... I can't see the Reserve being able to normalise interest rates in this environment without causing a lot of pain.
don_dunstan
Again we are comparing a trend from the peak of a non-sustainable mining and mineral boom going look how "f__ked up we are, I blame govt!"

https://tradingeconomics.com/australia/wage-growth

Wages growth is around 1.9% now, during the boom from 2004 to 2008 was +4%, then during the 2nd boom 2011 to 2013 + 3.5%. Now compare that to the rest of the developed world were people would have been happy to take a -3.5% cut 2011 to 2013 to keep their job. We had tradesman in the NW WA and parts of Qld on multiple 6 figure salaries during the height of the boom, this is not normal!!! There is no justification for an electrician to earn +$150k in a remote area.

In 2013, the first warning signs of the end of the boom were Geologist's being newly employed with 25 to 33% wage cuts or being laid off and asked to re-apply for their jobs with similar reductions.

I've said it before in their forum and I'll say it again, if you are doing the same job as you were in 2003 and your salary is more than 2003+ 2.5% you increase, you are over paid and expect to be cut or at least have negative growth.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
I've said it before in their forum and I'll say it again, if you are doing the same job as you were in 2003 and your salary is more than 2003+ 2.5% you increase, you are over paid and expect to be cut or at least have negative growth.
RTT_Rules
But everything in this country is predicated on the workers having 3%+ wages growth each year - Scott Morrison has actually built this forecast into the budget. If we don't meet these targets then Scotty's budget plunges further into the red than it already is... by quite a big margin actually.

Anyway working for a living is for losers - just be born into the right family and you'll be right. Seem to have worked for these people in Sydney who were gifted a block of flats in Neutral Bay from their grandfather (News Ltd).
  nswtrains Chief Commissioner

I've said it before in their forum and I'll say it again, if you are doing the same job as you were in 2003 and your salary is more than 2003+ 2.5% you increase, you are over paid and expect to be cut or at least have negative growth.
But everything in this country is predicated on the workers having 3%+ wages growth each year - Scott Morrison has actually built this forecast into the budget. If we don't meet these targets then Scotty's budget plunges further into the red than it already is... by quite a big margin actually.

Anyway working for a living is for losers - just be born into the right family and you'll be right. Seem to have worked for these people in Sydney who were gifted a block of flats in Neutral Bay from their grandfather (News Ltd).
don_dunstan
Bring on an inheritance tax for really large bequests.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
Again we are comparing a trend from the peak of a non-sustainable mining and mineral boom going look how "f__ked up we are, I blame govt!"

https://tradingeconomics.com/australia/wage-growth

Wages growth is around 1.9% now, during the boom from 2004 to 2008 was +4%, then during the 2nd boom 2011 to 2013 + 3.5%. Now compare that to the rest of the developed world were people would have been happy to take a -3.5% cut 2011 to 2013 to keep their job. We had tradesman in the NW WA and parts of Qld on multiple 6 figure salaries during the height of the boom, this is not normal!!! There is no justification for an electrician to earn +$150k in a remote area.
RTT_Rules
Most of Australia is NOT the mining industry and did not get the windfall wages boom that occurred. You can't point to one individual industry that employs less than 2% of the workers and use that as justification for cutting EVERYONE'S wages.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
Westpac's Chief Economist Bill Evans calls BS on the rate rises the business sector has been chanting for... Australia's economy is simply too weak (Business Insider):

Despite the mixed performance over this period, and narrow breadth that drove the slide in the headline [commodities] index, Evans remains of the view that Australian economic growth will remain below trend next year, something that he says will see the RBA keep interest rates unchanged throughout 2018.

“The dominant dynamic that is likely to keep rates on hold will be ongoing weakness in income growth — reflecting weak wages growth and slowing employment — constraining consumers’ capacity to lift spending,” he says, adding that “high household debt levels and ongoing risk aversion will discourage households from further substantial cuts to their savings rates”.

Not to mention electricity bills up by 25% in one hit, skyrocketing gas prices closing whole industries eg: Brickworks recently announced they're looking at off-shoring because their gas bills have doubled. We can't even manufacture basic things like bricks in Australia any longer - the price of energy is destroying what's left of our industries. Bill Evans says Australia won't see rate rises for the rest of this decade - the economy will fall apart even faster if the Reserve tries to raise them.

Sounds like the dynamic, future-focused economy Malcolm has been promising us actually contains sub-standard jobs, falling wages, the world's highest energy prices and households pushed to edge.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
One of the most interesting stories of the last few days is Uber being banned by Transport for London because of their lack of corporate responsibility (News Ltd):

London Mayor Sadiq Khan said he supported Friday’s decision, saying any operator of taxi services in the city “needs to play by the rules.”
He said that “providing an innovative service must not be at the expense of customer safety and security.”

It seems this situation has been festering for a long time in the UK with the sexual assault of minors by private hire drivers - as seen in the sorry story of Rotherham. Uber has also been accused of allowing drivers with a history of sexual assault and predatory behaviour to work for them as discussed in this Daily Mail article from a few months ago:

Perhaps most worrying is the situation in Rotherham. There, tough licensing requirements — including enhanced Disclosure and Barring Service checks and cameras in vehicles — were introduced after the scandal that saw private-hire taxis used in the sexual exploitation of children. But drivers have evaded the requirements by registering outside the town.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
Reserve Bank governor Phil Lowe once again laments the fact that an (irrational) fear of aliens and robots is somehow preventing people from asking for wage rises (The Australian):

“My primary explanation is we all feel we are under more competition, we’re worried about competition from the foreigners and the robots, and when any of us are faced by competition, we’re less inclined to put our price up,” Dr Lowe said.

“Western workers feel like there’s more competition out there so the price of labour is not going up very much. That’s changing the inflation dynamics in many economies.”

How can someone with a PhD be that dumb? It's a matter of LNP policy that wages should be falling as discussed by Peter Martin recently (Fairfax):

Within weeks of taking office in 2013 employment minister Eric Abetz upbraided "weak-kneed employers" whom he said were unable to "just say no".

They were all for the carrot, but saw no role for the stick. He led by example, abolishing the Commonwealth guidelines for cleaners employed in places such as Parliament House. It meant that when their contracts expired the workers who cleaned his office would get just $17.49 an hour (the minimum wage) instead of the $22.02 they had previously been guaranteed; an absolute pay cut of 20 per cent.

This extremely low wage growth has been deliberately pursued since Howard introduced 457's and Workchoices and now they're complaining that income tax revenues are plummeting for that very reason? We're in serious trouble if they can't actually anticipate the consequences of their actions.
  HardWorkingMan Chief Commissioner

Location: Echuca
Unfortunately being able to see the consequences of your actions seems to be rare these days.  People don't like taking responsibility for their actions (and in some cases are actively discouraged in doing so)

Also a lot of figures get manipulated on the way through to suit people's purposes on the way through that the final figures end up inaccurate.   Eg. surveys are sent out to businesses about their hiring intentions, particularly larger organisations.  a company is often asked if they are creating new positions but not if they are getting rid of other positions.  Eg  bank may respond to an IT survey stating they are creating 3000 new positions. However the reality has often been those 3000 "new positions" are 'offshore' and replacing 1500 local positions.  The appropriate body then says 'we don't have the people to cover the shortage so gets the occupation listed as needing skilled workers'.  The local economy gets shafted as not only are those new positions not in Australia but 1500 Australians are out of work for a period of time.  This has been repeated since 1999 in some industries as politicians believe the industry bodies not the individuals in the industry
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
I've said it before in their forum and I'll say it again, if you are doing the same job as you were in 2003 and your salary is more than 2003+ 2.5% you increase, you are over paid and expect to be cut or at least have negative growth.
But everything in this country is predicated on the workers having 3%+ wages growth each year - Scott Morrison has actually built this forecast into the budget. If we don't meet these targets then Scotty's budget plunges further into the red than it already is... by quite a big margin actually.

Anyway working for a living is for losers - just be born into the right family and you'll be right. Seem to have worked for these people in Sydney who were gifted a block of flats in Neutral Bay from their grandfather (News Ltd).
don_dunstan
Umm,
Scotty's budget deficit forecast just improved by $4B, but I agree not on wages growth, just more working.

Being born with a silver spoon in your mouth is luck of the draw, being born in Australia automatically means you dodged the poverty, war, famine.... bullet by the skin of your teeth. So good luck to block of flat owners in Neutral Bay.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
Scotty's budget deficit forecast just improved by $4B, but I agree not on wages growth, just more working.
RTT_Rules
Only because they're spending slightly less - we won't know till next year whether revenues from income tax have increased due to the Pollyanna 3%+ wages increases he was asking for.

The LNP have presided over a doubling of the government debt since taking office.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Again we are comparing a trend from the peak of a non-sustainable mining and mineral boom going look how "f__ked up we are, I blame govt!"

https://tradingeconomics.com/australia/wage-growth

Wages growth is around 1.9% now, during the boom from 2004 to 2008 was +4%, then during the 2nd boom 2011 to 2013 + 3.5%. Now compare that to the rest of the developed world were people would have been happy to take a -3.5% cut 2011 to 2013 to keep their job. We had tradesman in the NW WA and parts of Qld on multiple 6 figure salaries during the height of the boom, this is not normal!!! There is no justification for an electrician to earn +$150k in a remote area.
Most of Australia is NOT the mining industry and did not get the windfall wages boom that occurred. You can't point to one individual industry that employs less than 2% of the workers and use that as justification for cutting EVERYONE'S wages.
don_dunstan
You are going to have to get back in your box and peg forgiveness over this statement Don.

2%, just so happens that across the board the average mining sector employee earns more and in some cases double that of almost any other sector during the boom.

When the mining boom took off, so did the economy. When the mining boom ended, so did the booming economy in particular Perth and Darwin and parts of Qld as you frequently point out.

Obviously when one sector booms, it quickly runs out of internal candidates and starts pulling from others and does so by offering higher salaries. Once the countries unemployment reserves are exhausted, salaries start to rise further.

And not Everyone's wages have been cut, if anything the mining sector has taken the hit with 25-50% wage cuts plus the many 10,000's loosing their jobs. All these people will obviously put downward pressure on wages elsewhere, especially coupled with reduced internal demand for services that include the mining sectors needs.

Back to the Sin Bin for you on this one.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
Some of Australia's richest locales found to be in mortgage stress (News Ltd):

RICH people are getting themselves into trouble. Severe mortgage stress is cropping up in some of Australia’s richest suburbs, revealing that wealthy Australians have been guzzling at the debt fountain.
Thousands of households in suburbs like Mosman, Brighton and Nedlands are in mortgage stress, with some at risk of mortgage default in the next 12 months, according to new data from Digital Financial Analytics. Digital Finance Analytics principal Martin North says more and more affluent households are in dangerous territory, and it is often because of the amount of debt they have taken on.
“Those with larger mortgages are more impacted by rate rises if and when they occur,” he says.

Meanwhile you need a household income of around $190,000 in order to avoid mortgage stress in the Greater Sydney area according to Domain:

Households in four of Australia’s capital cities need six-figure incomes to afford a median-priced house without feeling the pinch, a new analysis shows. Buyers in Sydney would need to make more than $190,000 a year to avoid spending more than 30 per cent of their income on mortgage repayments, a RateCity analysis found. This is almost $90,000 more than the current average income, and assumes they have $235,000 to cover a 20 per cent deposit on a median-priced home.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
Scott Morrison's unconvincing lies aren't fooling anyone... Last Friday in an address to the Business Council of Australia he mounted an incredibly weak defence of the slumping wages in Australia by (of course) trying to shift the blame (Treasury):

Nonetheless, I understand that in a period of subdued wage growth people can rightfully feel like things are not getting better and can see others doing better than them.

Labor has chosen to cynically exploit this by seeking to leverage these people’s genuine concerns, promising that they can only do better if they make others do worse. It’s a con.

The Government has not only acknowledged and sought to understand the deep frustrations Australians are feeling over low wages growth, but we are doing the work to understand what is driving these outcomes and implement policies that will turn this around. The strong growth in jobs is a substantial down payment on the success of our approach to date.

Central to our continued response is embracing the economics of opportunity, providing hope, rather than surrendering to Labor’s cynical politics of envy.

Scotty's speech makes no mention of the fact that there are 400,000+ new migrants every year depressing wages, particularly for unskilled and semi-skilled workers... and if anything they're planning to increase our already-record numbers of migrants even further in an effort to 'stimulate' the economy (Business Insider), stuff the people in Sydney and Melbourne struggling against traffic.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
Two things of note today - the Reserve holds interest rates at a record low of 1.50%. And Toyota has now closed in Altona with the loss of over 2,000 jobs in Melbourne.

These are not signs of a healthy economy, are they?
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
It's official - after tens of billions thrown at it our internet speeds are still complete rubbish - worse than Kenya's (Bloomberg). Like all other things that the government has tried to tackle it's been bogged down with other people trying to sabotage it (ie: a fully privatised Telstra) right from the start?

UBS finds that up to a third of borrowers are unaware that they have interest-only loans and may be completely unprepared when they have to start repaying the principal (ABC):

"We are concerned that it is likely that approximately one-third of borrowers who have taken out an IO mortgage have little understanding of the product or that their repayments will jump by between 30-60 per cent at the end of the IO period," UBS wrote. While the result surprised the analysts themselves, they argue that there is already a lot of evidence that many Australians have a poor understanding of financial products.

"Although this may seem farfetched it needs to be considered in the context of the lack of financial literacy in Australia," UBS observed.

"A recent survey from S&P found 36 per cent of Australians were not financially literate, while ME Bank's survey found 42 per cent did not understand compound interest and 38 per cent had no understanding of an IO mortgage."
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
Retail sales slump in August with the weakest result in some years - a 0.6% slump in sales (ABC);

Adding to the negative surprise was a downward revision to July's number, now a 0.2 per cent fall.

Worse still, the weakness was spread across the country, with sales in every state falling.

Even worse, sales fell in almost every type of retailing — among the biggest declines were a 1.8 per cent slump in the previously booming restaurants and cafes sector and a 1 per cent drop in household goods sales, including a dive in electronics.

Everyone I know is affected by this ridiculous 25% power price hike and is not spending any money as a result - a relatively fixed cost like power going up so much in one single hit is really hitting people for six.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
Outgoing Commonwealth Bank CEO Ian Narev calls for the government to do something about falling wages and exploding house prices (Financial Review):

Mr Narev said while the economic data suggested all was well, it didn’t match the “qualitative view of the economy, which feels like households are doing it tough and feel stretched.

“The absolute key and No.1 question we should be demanding of policymakers is for households to feel better off, and the No.1 metric is wage growth,” he said at the Morningstar Individual Investor Conference in Sydney on Friday.

“It’s an important policy discussion we ought to have. We must have that discussion around the full range of supply and demand factors – it’s a very important part of the housing equation.”

Ian is only worried because falling wages could potentially collapse the entire banking system - if people can't afford to keep borrowing those huge amounts of money for houses in Sydney and Melbourne then the whole houses/consumption driver of the economy is finished. All the traditional mechanisms that used to drive wages growth (unionisation, reasonably paid manufacturing jobs) are all gone and all that's left is 'service' industry jobs that don't even pay a living wage.

I think even the banking industry is starting to worry about the consequences of 30 years of neo-conservative policies...?
  nswtrains Chief Commissioner

Outgoing Commonwealth Bank CEO Ian Narev calls for the government to do something about falling wages and exploding house prices (Financial Review):

Mr Narev said while the economic data suggested all was well, it didn’t match the “qualitative view of the economy, which feels like households are doing it tough and feel stretched.

“The absolute key and No.1 question we should be demanding of policymakers is for households to feel better off, and the No.1 metric is wage growth,” he said at the Morningstar Individual Investor Conference in Sydney on Friday.

“It’s an important policy discussion we ought to have. We must have that discussion around the full range of supply and demand factors – it’s a very important part of the housing equation.”

Ian is only worried because falling wages could potentially collapse the entire banking system - if people can't afford to keep borrowing those huge amounts of money for houses in Sydney and Melbourne then the whole houses/consumption driver of the economy is finished. All the traditional mechanisms that used to drive wages growth (unionisation, reasonably paid manufacturing jobs) are all gone and all that's left is 'service' industry jobs that don't even pay a living wage.

I think even the banking industry is starting to worry about the consequences of 30 years of neo-conservative policies...?
don_dunstan
The term hypocrisy comes to my mind in regard to the statement about wages and housing prices by Narev.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
It's official - after tens of billions thrown at it our internet speeds are still complete rubbish - worse than Kenya's (Bloomberg). Like all other things that the government has tried to tackle it's been bogged down with other people trying to sabotage it (ie: a fully privatised Telstra) right from the start?

UBS finds that up to a third of borrowers are unaware that they have interest-only loans and may be completely unprepared when they have to start repaying the principal (ABC):

"We are concerned that it is likely that approximately one-third of borrowers who have taken out an IO mortgage have little understanding of the product or that their repayments will jump by between 30-60 per cent at the end of the IO period," UBS wrote. While the result surprised the analysts themselves, they argue that there is already a lot of evidence that many Australians have a poor understanding of financial products.

"Although this may seem farfetched it needs to be considered in the context of the lack of financial literacy in Australia," UBS observed.

"A recent survey from S&P found 36 per cent of Australians were not financially literate, while ME Bank's survey found 42 per cent did not understand compound interest and 38 per cent had no understanding of an IO mortgage."
don_dunstan
I've said it before and I'll say it again, the govt should not have got involved directly with the NBN. Rather provided incentives for the private sector to do it.

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