While the rapid deterioration in diplomatic relations between the US and China has been put on hiatus until after the election, at which point Beijing hopes that a Biden administration would promptly restore amicable relations between Beijing and DC, trade relations within the Pacific Rim region are getting worse by the day, with nobody getting more impacted by China’s desire to flex its muscles than Australia: escalating bilateral tensions have resulted in China’s “unofficially” asking cotton and ore traders to stop buying products from Australia.
Foodbank South Australia has been approached by banks wanting to refer their clients to the charity, in the hope it will prevent people from defaulting on mortgage payments.
It comes as a new report has shown mental distress is increasing in older Australians, with nearly half of all homeowners aged 55 to 64 still paying off a mortgage — up from just 14 per cent 30 years ago.
Foodbank South Australia is now working on a new agreement which would enable clients to access its food services directly, with a voucher funded by the major bank.
However, Foodbank South Australia chief executive Greg Pattinson told ABC Radio Adelaide it was still exploring how the program would work.
“That’s what we are exploring with some of the banks at the moment … it hasn’t started yet because we are still working through the process.
“We’ve never been approached by financial institutions in the past and the banks, to their credit, are doing the right thing in trying to find a way of keeping people in their houses.”
He said traditionally, Foodbank worked through charities and the welfare sector but it had seen an increase in the number of people who require food assistance that are working.
“Increasingly we are being approached now by organisations other than traditional charities, so schools for example, where the schools have identified the children of parents who are doing it tough,” he said.
“Each year we’ve seen an increase in South Australia of anywhere up to 20 per cent in the number of people seeking food assistance.”
‘Cost of living’ is causing a shift
Mr Pattinson said the stereotype of a person or family that required food assistance was diminishing.
He said more people must be suffering from mortgage stress because more of those needing help were from working families.
“We certainly do provide services to the unemployed and to people who are homeless,” he said.
“But we are seeing an increase in the numbers of working families and working Australians who are needing to seek food assistance because of cost of living increases.
“We see an increase in demand, for example every three months, when people get their electricity bills.
“It’s a case of those weeks where people are saying, ‘we’ll make sure the kids are fed, the roof is over our head but mum and dad don’t eat this week’.”
Trying to help clients ‘balance their budget’
Mr Pattinson said the fact it had been approached by the banks had shown a significant shift and Foodbank was working on a project to support those in need.
“We’re getting inquiries from schools, pastoral care workers, from principals at various schools around the state,” he said.
“And increasingly, we are now seeing inquiries from banks and financial institutions who are looking to try and find a way of helping their clients balance their budget.”
He said the program was still in its early stages, but he hoped Foodbank would have a concrete program in place within the next two to three months.
“It may even be as simple as the banks referring their clients to the Foodbank food hubs,” he said.
“But there would obviously be conditions to that which would have to be assessed by the bank to make sure those people … are genuinely in need of those services.
“We don’t want to shift the food away from people who are genuinely needing it.”
Just weeks after ZeroHedge noted that Australia’s household debt to income ratio has ballooned to shocking levels over the past three decades as Sydney is ranked as one of the most overvalued cities in the world, Australia’s regulators have been warned to prepare “contingency plans for a severe collapse in the housing market” that could lead to a “crisis situation” in one or more financial institutions.
Australia has transitioned from the lowest household debt-to-income ratio to the highest in the world, in just three decades.
And now Australia’s News.com.au reports that The Organisation for Economic Co-operation and Development’s (OECD) latest in-depth assessment of Australia maintains that while the “current trajectory” of house price declines “would suggest a soft landing… some risk of a hard landing remains.”
Wage stagnation and elevated home prices have turned into the perfect storm that will bring forward a housing crisis.
The Paris-based global forum recommends the Aussie Reserve Bank begin raising the cash rate from its record low as soon as possible to prevent “imbalances accumulating further”.
The RBA last cut the cash rate to 1.5 per cent in August 2016, following an earlier cut to 1.75 per cent in May. There has not been an official cash rate increase since November 2010.
“Australia’s housing market is a source of vulnerabilities due to elevated prices and related household debt. A direct hit to the financial sector from a wave of mortgage defaults is unlikely,” the report says.
“However, if house prices collapse consumer spending could suffer, via negative impact on wealth, including from exposures to bank shares, which would encourage deleveraging. Together with reduced housing-related expenditures, this would put pressure on the whole economy.”
Additionally, News.com reports that while describing the housing market slowdown as “welcome” after a period where prices were overvalued by 5 to 15 per cent and noting current evidence pointed to a soft landing, the OECD said its research in the past “has found soft landings are rare”.
The OECD report recommends contingency plans in the form of “a loss-absorbing regime in the case of financial-institution insolvency”, including controversial “bail-in provisions”.
“… the possibility of financial-institution crisis should not be discounted entirely.”
Finally, the OECD notes, unlike in the US or EU, the law does not include provisions that would automatically convert some unsecured senior bonds and deposits from other banks into equity in the event of a crisis
“The absence of explicit bail-in provisions could slow down the speed of resolution and risk encouraging financial institutions to gamble for resuscitation.”
Notably, OECD’s ominous warnings come after RBA deputy governor Guy Debelle raised alarms (after Q3 GDP dramatically undershot expectations at just 2.8%) by suggesting the next move in rates could be down, not up, and floated the possibility of controversial money printing policies known as quantitative easing in the event of a crisis.
As John Rubino recently noted, for the past few years, homeowners just about everywhere have been able to finesse life’s problems by thinking “at least my house is going up.”… But now that’s ending, and a reverse wealth effect is kicking in. Homeowners are seeing their home equity – aka their net worth – stop growing and in some cases drop by shocking amounts. In Australia it’s $1,000 a week, which is enough to darken the mood of pretty much anyone not in the 1%. A consumer with a dark mood is an unenthusiastic shopper because new debt accelerates the decline in net worth.
As home prices fall, so therefore does “discretionary” spending. Australians will continue to eat and to air condition their bedrooms, but they’ll cut way back on vacations, new cars, etc. And the debt-based part of the economy will suffer. This will cause stock prices to fall, knocking another leg out from under the average citizen’s net worth and making them even less likely to splurge. And so on.
Credit-bubble capitalism depends on mood, which makes it fragile. That fragility is about to be on full display pretty much everywhere.
By Lori Zimmer
Australian prefab architecture specialists Modscape Concept have designed an exciting five story home that clings to a cliff’s edge. Aptly called Cliff House, the design was created in response to a growing number of clients exploring design options for living on extreme coastal plots in Australia. The modular home was inspired by the shape of barnacles clinging to a hull of a ship, and it extends off the side of a cliff, rather than sitting upon it.
Rather than being a disruption built along the skyline, Cliff House almost propels off of it, acting as an extension to the natural topography. The unique positioning also gives the home’s residents an incredible connection to the ocean below, while alleviating construction problems associated with building on uneven rock.
The prefab modules are arranged in a vertical floor plan, the rooms stacked atop each other and held securely in place with engineered steel pins. Residents would enter at the floor level with the cliff top, which includes an outdoor patio adjacent to their parking space. An elevator or stairs connects each floor, with the bedroom, living area and kitchen each having separate space on the various floors. The interior features minimal furniture throughout, in order to emphasize the connection to the ocean and the horizon. At the lowest floor, the home opens up to another outdoor space, which seems to float above the water. Patio furniture, an outdoor kitchen and a jacuzzi tub extend the luxurious feeling of being perched above the ocean.
Although still a concept, Cliff House could provide efficient and innovative housing in rocky areas deemed unlivable.