Condemning ourselves to the Eureopean doom loop

The AFR has a nice little exclusive today from S&P:

Australia’s household debt levels are among the highest in the developed world, adding urgency to the federal government’s achievement of its surplus pledge, warns the Standard & Poor’s analyst charged with keeping watch over our AAA credit rating.
“It’s only really been in the last four years that Australia’s household savings rate has been rising,” analyst Kyran Curry told The Australian Financial Review from London.
“[High household debt] creates a vulnerability because if there is a downturn in the labour market and people start losing their jobs, then given the banks’ exposure to households it could create problems if we see a lot higher levels of non-performing loans.”
Final budget outcomes released for the 2012 financial year this week that showed the government’s quest to achieve surplus to be on track were “an endorsement” of the plans, Mr Curry said.

I’ll just add that clarifying where S&P sees the Budget headed this year would have been useful. Is it the $25 billion deficit they told the ABC? The $15 billion deficit implied by their recent analysis. Or the surplus they mysteriously endorsed following the release of the first two forecasts?
Still, there is one thing here that we should take notice of and it is this: S&P is telling only half the story. If we have high household debt and we must have a surplus to offset it – that is, protect creditors through government guarantees – then how do we grow if we’re also running a current account deficit?

Read more: http://www.macrobusiness.com.au/2012/09/condemning-ourselves-to-the-eureopean-doom-loop/