It took an FOI…

We are not sure why in a supposed democracy it takes a Freedom of Information request for someone inside the economic establishment to finally admin a problem exists that has been obvious to many people, including us, for a long time. But it seems that it did.

Today we note that under duress Australian Treasury officials have finally admitted that the Australian economy has a large issue of systematic risk caused by indebtness.

AUSTRALIAN banks’ reliance on overseas funding and the high level of household debt loom large as a ”significant” economic risks, Treasury has told the government in a normally secret briefing.

The nation’s top economic advisers yesterday released the incoming government brief known as the Red Book after a flurry of freedom-of-information requests. While the document painted a bullish picture in which the resources boom drives a return to full capacity, the frank commentary also said debt was a vulnerability.

”A key risk for the Australian economy is our reliance on short-term external debt, largely intermediated through the banking system,” the brief said.

Wow what a suprised. Talk about the worst kept official secret ever.

Highly indebted households, together with high dwelling prices, further heighten the vulnerability of the economy to shocks. While household finances are in good shape overall, and arrears rates and other financial stress measures remain much lower than in the early 1990s, households are more exposed than previously to adverse shocks.

Internationally, the Red Book said the risks to growth were “real and ongoing”.

So the RBA releases a paper trying to tell everyone we have no problem, the next day the Treasury is forced to admit we do.

As we quoted in a recent post

Governments are so incompetent that even “moderately intelligent” behaviour is unlikely.

Just a little more proof.

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  1. Surely the government was aware of this collosal elephant in the room. The augmentation of the FHBG and loosening of the foreign investment rules speaks volumes of an (undeclared) awareness of this massive economic distortion, this tottering grandiose edifice of housing prices. They had ample exemplars of this globally not least of which were the US UK and Ireland. It is interesting to notes that paragraphs were blocked out intermediate to the statements mentioned in the press. I imagine that the risk ennunciated by treasury is even more explicit. Why? Why wasn't something done? As awareness of a bubble precipitates their rupture they may have been hoping for a fanciful deflation rather than popping. Initial injections of stimulus overshot an intended mark of stabilization. Some have suggested vested interest based on gen x and baby boomer divides. Certainly government in Australia seems tirous and more pandering, less inclined to have a dialogue with people over complex issues. The media cycle and quality (lack) of commentary on the issue has been flabergasting. And finally a failure of we the people to hold the government to account. Any story on real estate bubbles are replete with comments demonstrating all thw worthy human emotions suchas smugness hubris intergenerational contempt shrill anger and projective blame. This is an issue that goes to failures not just of a polis
    on the economy but also the human condition itself. I am certain there will be innumerable post mortems in the future.