Breaking The Debt Habit
Newcastle Herald
Monday October 6, 2008
NOT all that many decades ago, Australian families saved their surplus money when they wanted to buy big-ticket items. In the absence of credit cards, personal loans and other forms of consumer finance, saving for bigger items could take months or even years.
It was inconvenient, of course, having to go without for so long. Even lay-bys, where stores put items aside while customers paid them off, suffered that disadvantage, and also forced stores to set aside space to keep large numbers of reserved items.But having to save for goods had some advantages too. Items were greatly valued when they were finally acquired. The desire to save drew close attention to household budgets and whether they were in the black or the red. Frivolous spending was reduced. Perhaps most importantly, community wealth was built. Over time consumer credit became widely available and households began to acquire big items up front, paying interest in return for earlier acquisition. The trouble was, growing interest bills chewed into disposable income, and deferring liabilities made it easy to overlook the real state of the household's cash-flow.Over a generation many Australian households stopped saving and became net debtors, lured by ever-easier access to credit. Most recently, the practice of borrowing against equity in real estate has taken this level of indebtedness to still greater extremes.One of the few bright spots in Australia's savings record has been the national compulsory employer superannuation contribution policy introduced by the Keating Labor government. Despite ups and downs in the fortunes of super investments, the existence of this massive lump of money has provided some extremely valuable stiffening to the nation's financial backbone. In the context of debate about debt and savings, the Federal Government's new home-saver accounts are a refreshing change. These accounts encourage potential first home buyers to save surplus money by offering them cash incentives of up to $850 a year and a reduced tax rate on interest earned.It's a small step, perhaps, but anything which counteracts the prevailing trend of excessive reliance on credit is to be applauded. With luck, those who take advantage of the new accounts will acquire the habit of saving and apply its benefits more widely in their lives. Overpass dangerTHE Roads and Traffic Authority and the police must act quickly to prevent a motorist being killed or seriously injured under the Windale overpass. Twice in two weeks vehicles have been hit by rocks or bottles dropped from the overpass. In the most recent incident this week a 19-year-old woman suffered cuts to her hands and arms after her windscreen was smashed by an object thrown from the overpass.Police presume a gang of youths is to blame, but no arrests have been made.Better screening of the overpass to prevent missiles being thrown or dropped may be an answer. So may surveillance cameras preferably hidden ones.
© 2008 Newcastle Herald