The death spiral has started
I’ve long been a happy passenger on the good ship Victoria, but I can’t help but notice that we’re taking on a bit of water.
Things are looking a bit grim.
Last week we learnt that Victoria now has the fastest growth in construction sector collapses (that’s not good growth).
I’ve been watching the shakeout in the construction industry for a while – it’s one of the things contributing to the ballooning housing shortage.
But things in Victoria are deteriorating quickly:
Victoria has overtaken Queensland as the big state with the fastest-growing total of construction industry wrecks, highlighting the precariousness of a sector in which contractor Roberts Co shut its Victorian doors and John Holland swung to a $55.5 million loss from two infrastructure projects.
New figures this week from the Australian Securities and Investments Commission show the pace of construction insolvency growth in the southern state overtook Queensland in December. In the months since, it has kept up the fastest pace of growth of the three largest states.
… Victoria led the large states, clocking a 46 per cent year-on-year gain in new insolvency appointments to 693 between July and the start of March – nearly double the national growth rate.
That’s a little alarming.
And it comes at a time where Victoria is leading the nation in all the red-light warning indicators (that’s not good leadership).
Like state debt, for example. Per capita debt is the highest in the country – by a fair way.
The forecast trajectory of debt growth is also the most concerning in the country, and it looks like breaking away from the peloton (that’s not good breaking away from the peloton):
And at the same time as companies are going bust at a record rate, Victoria is also posting the lowest level of new-company growth in the country:
None of this is good.
And states go bankrupt the same way people do: very slowly then all at once.
In the good times, the government starts splashing the money around, and they become everyone’s friend.
Then the good times end, but you can’t rein that spending in now without making enemies – and politicians don’t like to make enemies.
So now you have to fund these ongoing spending commitments through debt.
Initially, that’s ok, because interest rates are low, and you’ve been doing so well the ratings agencies give you a good rating, which means you get to pay low rates.
But then interest rates go up. (We’ve just had the quickest lift in interest rates ever).
Now you’re stuck in a death spiral. The cost of servicing your debt goes up, and as it increases as a multiple of your revenue base, that puts you into a different bracket.
The ratings agencies then re-rate you on the back of this, and you have to pay higher rates of interest when you refinance.
The only way out is to cut spending, which makes people unhappy, or increase the revenue base, which also makes people unhappy.
But if you try to increase the revenue base (i.e increase taxes), you end up killing off the exact economic recovery you’re trying to engineer!
And this is where Victoria is at in the death spiral.
And its why governments need to be disciplined, even in the good times, (which Victoria wasn’t) because once the debt-trap springs, it’s very hard to get out of.
We’re going to need all the help we can get.
JG.
Blind Freddie could see Victoria was on the ropes 3 years ago with in controlled infrastructure spending by a moron.
We all knew of had to be paid back. But many have no clue.
We left in 2023 as it was clear where this was going.
People who voted a total fool back.into.office will.now just have to pay for their stupidity.
An important topic that we can’t ignore, and Graham Johnson has made some excellent points regarding the stupidity of Victorians, stupid is, stupid does.
As Jon Giaan said, we need all the help we can get.
There is some light at the end of this tunnel.
I just completed my Diploma in Building and Construction in December 2024 and made a new friend who also completed the course with me. He has invented seven new renewable materials and has a Chemical Engineering and Science degree from Melbourne University. He also has access to all the laboratories and help from all the professors. He has also invented a new construction method using these materials in a panel system, including all trusses. They are also fireproof and are estimated to save 30% in construction costs, a significant saving.
The government has granted 50% of the costs, and a prominent housing developer has already been chosen.
The first factory will cost $14 million, about as much as I am allowed to disclose until it is disclosed in the news and goes national. I am not sure if it will be in 2025.
I have seen it with my own eyes, and I also have a mechanical engineering background. The first thing that came to my mind was geopolymers. That’s a whole other hidden technology from the past.
Anyway, I thought it was an appropriate time to disclose a little without saying too much.
I am also a new Ultimate I Love Real Estate -Knowledge Source member, and it’s great to be among you.
I am also a day trader and an AI algorithm trading bot developer. I will be starting a new Building and Construction company with a certain broker and future partner.
It has taken me 16 years to recover from when I lost my health, wealth and happiness and ended up separated, homeless, penniless and with cancer.
I am a warrior and beat them all.
Be careful of what goes through your mind because we become what we think, and what we think we manifest into reality.
I hope this all has shed some light in this tunnel.
I will share more information with I Love Real Estate – Knowledge Source when the time is right.