Debt: General Characteristics
Debt is the amount of money which is owed by one party to another. There are different kind of debts. Debt can be in either way good or bad. Sometimes it gets complicated and sometimes it changes people’s life with the correct use of money. Since population is increasing day by day more people are going for mortgage loans. Mortgage debt is Australia has not been effected by immigration, and people taking housing debt should become more financially intelligent to manage their finances rather that limited immigration. People with low financial intelligence struggle more to pay off the debt. Some companies offer people to buy now and pay over the time which seems easier at first and it gets difficult to pay back. Debt contains interest rate can be paid into monthly and yearly payments. There are few other debts which are provided by government to their own people and sometimes this loan doesn’t contain any interest.
Immigration is rising over time (Australia Bureau of Statistics), and Australia is getting richer, and is improving economically. Most of the development and prosperity of Australia is based on immigration. Increasing income, rising creativity, adding to government budgets, yet immigration also has an effect on house prices and leases.
Total overseas migration – including the rise in immigrant workers – has reached 200,000 people annually since 2005, up from 100,000 in the previous decade. In the next few years, it is predicted to be around 240,000 per year, immigrants are more likely to move to Australia’s big cities than existing residents, which increases demand for limited urban housing. In 2011, 86% of immigrants are residing in major cities, relative with 65% of the Australian-born community. Housing demand from immigration shouldn’t lead to higher prices if enough dwellings are constructed quickly and at low cost. Building more housing will improve affordability the most – New housing raises the inventory of homes by only 2 percent each year, even at current record levels of development. Yet constructing another 50,000 homes a year annually for a decade will result in house prices varying from 5% to 20% lower than otherwise. Do this for longer, and prices will continue to decline. (Ketchel 2018) Immigration housing demand should not result in higher prices if sufficient housing is built quickly and at low cost. Constructing more houses than required annually will result in low increase in housing prices.
People have low financial intelligence, and people need to spend less on after pay and credit cards, and more on their primary appreciating asset – the house Impact of credit card debt is that it brings financial stress to a high level. If people have more debt, people monthly expenses will be higher. When someone is a debt, not only him but the people around him/her suffers as well, which is why families with low financial intelligence needs to work together and reduce their debt. Which will allow them to have a better financial decisions. (UKEssays 2018)People with low financial intelligence struggle more with debt, especially with credit card debt. Credit card debts are supposed to be use in a sensible way. Sometimes users pay the balance on time and full on time every month. Which help to avoid costly interest fees. However research shows people may end up spending more money with credit cards than would with cash. A financial counsellor can help you sort out your money and negotiate debts with your creditors. Free legal advice on your debts is also available from community legal centres and Legal Aid offices in each state and territory. (AMY 2019)
Debt in itself is not bad, it is what you do with the money that is bad. Housing is not bad debt. Debt is better if it buys for potential income-producing products. Those profits allow the debt to be taken off — like investing to begin a successful business and getting a qualification to make you earn money. (Jason 2019)If the debt which you take is helpful in generating income and in increasing your net value, this can be considered positive. Education debt is a good debt, people with good degrees have more ability to find employment with good pay. The degree programs must be carefully chosen to maximize the value of loans for college. If your degree does not gain a salary or small income, the student loans can easily become bad debts. Similarly, debt for small business is good too. Making money is a big reason to start a small business with the positivity of being your own boss. Most small businesses are struggling, but if the person is passionate and knowledgeable, the chances of success are greater. There are few bad debts which affects the daily life of Australians. Buying a car on interest is also a bad debt and waste of money, by the time you pay off the car debt, the vehicle already is worth less than it was when you bought it. (Lisa 2019)
Housing is not a bad debt, this type of debt helps you to own a house and allows to work towards owning a home, and it also allows to earn income from property by renting out or re-sell the property after few year at higher prices. (Finder 2017)
Not reducing immigration to reduce demand on housing and reduce prices, because house prices increasing is a GOOD thing, as falling prices are a BAD thing, as when mortgages are larger than house prices the economy collapse. Good debt will help to generate more money and help to pay off on the time.
Owning a home or being an educated person is the part of life and everyone wants it. It doesn’t matter if it comes through a debt or loan. Same as owning a small business with a small loan. But it really depends on the person how the person is the using the loan. There are many negative effects of debt and there also can be positive effects as well.
Reference list
- Amy Bainbridge, 2019, ‘Credit card companies want to ‘catch you and keep you’. So, how do you get out of debt?’, Viewed on 16/10/2019 https://www.abc.net.au/news/2019-09-11/how-to-get-out-of-credit-card-debt-and-the-rise-of-p2p-lending/11474418
- AMY FONTINELLE, 2019, ‘10 Reasons to Use Your Credit Card’, viewed on 23/10/2019 https://www.investopedia.com/articles/pf/10/credit-card-debit-card.asp
- Finder, 2017, ‘Australians’ household debt nears highest worldwide’, viewed on 16/10/2019 https://www.finder.com.au/australias-personal-debt-reported-as-highest-in-the-world
- Jason Murphy, 2019, ‘Australia’s $1.8 trillion ticking time bomb’, viewed on 16/10/2019 https://www.news.com.au/finance/economy/australian-economy/australias-18-trillion-ticking-time-bomb/news-story/24a0e6bc727525dd95d6d835e5b4fbe3
- LISA SMITH, 2019, ‘Good Debt vs. Bad Debt: What’s the Difference’ , viewed on 16/10/2019 https://www.investopedia.com/articles/pf/12/good-debt-bad-debt.asp
- Misha Ketchell, 2018, ‘how migration affects housing affordability’, viewed on 16/10/2019 https://theconversation.com/how-migration-affects-housing-affordability-92502
- UKEssays, 2018, ‘Effects of Debt – Positive and Negative’, viewed on 23/10/2019 https://www.ukessays.com/essays/economics/positive-and-negative-effects-of-debt-economics-essay.php?vref=1
