Some people that I know sometimes refer to me as a 'glass half full' kind of person. This classifies me as a negative thinker; or a pessimist. But I insist I am not. I think I am a logical thinking realist. Realists only make up about seven to eight percent of the population so we are a relatively rare type of person. About 60 percent of the population are positive thinking optimistic soles and the remaining third of people (more or less) are considered pessimistic negative thinkers.
Just how 'they' work out if people are optimists, realists, or pessimists I am not too sure.
Sometime early in 2014, and you will find evidence of this on this very site, I started suggesting that 2015 was not going to be a very good year for Australia—in financial terms. Further, I added that 2016 was most likely going to be even worse; especially here in Western Australia.
Well, baring those West Australian's that won the Lotto or inherited big money, I don't think there is any doubt that 2015 was a somewhat less than encouraging year. Depending which report you read property prices have fallen either 4.5 percent or 6.2 percent. Household debt is at an all time high, and both the Federal and state governments are basically bankrupt. If they were normal people they would be in court filing for bankruptcy.
The big mistake the governments made is a classic one. They borrowed money in 2011, 2012, 2013, and 2014 as if the resourced boom was going to last 20 years (as the experts were then predicting), or more, and they could pay these loans pay it back with ease—twice over if they wanted to. The good times were amazing.
And then in late 2014 the boom went bang and they were stuck with massive amounts of money owing that they really have no hope of paying back within the prescribed time—unless they do something magical. In some cases, even though the boom was obviously over, they still kept borrowing money based on the assumption the bust was only temporary.
But now it is pretty obvious that the resources lead boom is over, at least for the foreseeable future. Even BHP Billiton are saying that they don't see iron ore or coal or gas or crude getting back to pre-2015 levels for the remainder of 2015 and all of 2016.
Unlike you and me, and businesses, Governments do have some 'magic' they can call on. Magic called taxes. Due to the amount of debt both the Federal and state governments are carrying due to the double-arm gimmee-gimmee borrowing they did before the bust it is almost certain that some kind of tax has to go up. Outside of striking an easy-draw oil field half the size of the moon somewhere in inland Australia I just don't see how they can avoid increasing taxes.
So the question then becomes: What taxes will they increase to get the money needed to service the loans?
The current favourite is the GST, but some initial calculations by people far smarter than me seems to suggest that increasing the GST to 15% will not make enough money to cover the problem. Another option is to increase the Medicare levy for a couple or years. Or they could lower the income tax threshold. One option that is getting more traction every month is to amend how capital gains tax is assessed. Currently only 50 percent of capital gains on property or profit from the sale of shares is taxable. Even an amendment like making the first $5,000 of capital gains in a year tax free but the remainder fully taxable might make up the difference they need after raising the GST to 15%.
The one that worries me the most is when articles pop up suggesting changing superannuation in some way so that the government can somehow milk a percentage off the 2 trillion dollars of superannuation that Australian's have tucked away. Even if the government could just skim 5 percent off this handy little treasure chest of loot they would get 100 billion dollars back in the bank; and a 10 percent skim would get them 200 billion. That would be a very handy sum and they could get it quickly in a lump sum.
So, in those oft-used words; 2016 is shaping up to be an interesting year.
I think it was John C. Dvorak that said (something like): The signs of a coming depression are that there are more hookers, they are better looking, they cost less; and the middle classes pay more tax.