An Interest In Real Estate

Newcastle Herald

Saturday August 9, 2008

LEADER

SLUMPING property sales in the Hunter prove what was already known.

The brakes are on the economy and consumer confidence has faltered.

That's chiefly to do with global circumstances. The subprime mortgage disaster in the United States has produced a credit crunch. Some of the world's biggest banks are attempting to absorb painful losses and suddenly the long-running glut of money has turned into a relative shortage.

Australian lenders are having to pay more for their money and they are charging more when they lend it.

Higher interest rates mean higher mortgage payments and these, combined with more expensive petrol, food and energy, means households have less spare cash.

Big spending decisions have been put on hold and consumers are reducing debts rather than taking on new ones. Investors are nervous about real estate, partly because of high transaction costs and land taxes, but also because they are reluctant to enter a falling market which may not yet have hit bottom.

Many eyes are now on the Reserve Bank, which has signalled the likelihood of interest rate cuts from next month to give households back some of their lost spending power. The private banks, however, have already warned that this may not translate into lower mortgage repayments, since the world money supply is still being restricted by the fallout from the subprime crash.

For its part, the Government is doing its best to persuade the banks that dropping their rates will help the nation, even if that means squeezing margins on loans a little more than usual. That's an argument the banks should not lightly ignore.

With its resource-based industries still performing well, Australia is better placed than many countries to ride out the storm, provided its households and consumers aren't cowed so much by expensive repayments and rising costs that they forget how to spend the money the wider economy needs to keep running.

Kahibah to Tanzania

LITTLE ideas can do a lot of good, as Kahibah Football Club has demonstrated. A gift of second-hand soccer boots to keen but poor players in Nzega, Tanzania, was so enthusiastically received that the club's media manager, Peter Sharman, expanded the idea, kitting out scores of Tanzanian players with complete uniforms and soccer balls. The club's initiative is a wonderful example of people making the effort to share their good fortune and spread some happiness and camaraderie in a world that surely needs more of both.

Three cheers for Kahibah!

© 2008 Newcastle Herald

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