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#51 2011-01-10 04:52:40

mmm....shiney!
Silver Stacker
From: 昆士蘭
Registered: 2010-11-15
Posts: 15,893
Trades :   102 
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Re: Australia heads for economic crunch

Stedlar and Auspm, just love to hear the opposing views. Having been down this path in my life, borrowed money for first house when I was 30, nearly 20yrs ago - was actually going to adopt a position of rent for life and invest the savings in the share market - but with so much well intentioned advice from friends, and in particularly family, we decided to buy. We are now a part of the RE Machine. Don't know where we'd be now if we'd stuck to our original plan. I don't know what's right or wrong, but I think it's brilliant for members of this forum to see that there are alternative views to the "Great Australian Dream"tm.

When my wife and I were deciding whether we should buy a house or not, and initially decided to rent, we thought there must have been something wrong with our decision because everyone else we spoke to said we needed to buy a house. No crystal balls out there, you just need a clear objective, have some sound logical plan and back your judgement. And have no regrets.


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#52 2011-01-10 05:51:08

Stedlar
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Re: Australia heads for economic crunch

errol43 wrote:

Stedlar  Would you borrow $300k or $400k to buy a house to day.? My sons refuse to play the game of being a debt slave for 30years with the added worry of interest rate rises plus always being well aware that both you and your partner must have full time employment to fulfill your dream.

Regards Errol 43

I'll tell you what I did. When I was earning $25k working in retail and my wife was earning $22K, we saved up $50K, and took out a $90K loan over 20 years at a variable rate of 11%. We had a house built. It was 12 squares, no garage, no pergolas, no driveway or landscaping. Not even fences. For the first few years we had blankets and sheets on the windows instead of curtains. We paid that loan off in 9 years. We did not get fancy furniture; we did not buy a new car. We both drove old cars.
Over time, we worked on that place, got the landscaping and all done, built the pergolas, all the other stuff. But we did it ourselves to save money.

We bought that house in 91. The property market tanked at about the same time, and then there was that recession, and retails not the greatest place to work in a recession. So at time things got pretty tight. But as we were always ahead on the payments, we were ok. By the time we had paid the loan off in 99, the house was just worth what we had paid for it.  We sold it and bought in closer to the city. By that time I was earning $40k and my wife was earning $34k. We borrowed $195K to make the difference between the two properties. This was a 30 year loan.

Once again, pay off loan as fast as we can. However 1 year after we bought, 1st kid comes along, wife can't work. Fortunately we were ahead on the loan enough to give us a buffer. So we just kept doing what we could to save what we could as best as we could. Three kids later, wife has never returned to work as she does not have to. We have the nice cars; all the old furniture is gone. But the best thing is the kids have a mum at home, and we can provide for them. Their lives will not be impacted by interest rate or rent raises.

Now I compare that with people who want to buy today. They want McMansions, in the right location, they want the place fully fitted out, and they want all the correct furniture, and they want the new car in the double garage, and they want to buy their $5 cups of coffee, and see the latest movies. And they are not prepared to wait.

I understand that $400k seems daunting, but the maths of compounding returns can work for us as well as against us. We just have to be prepared to forgo things now to be able to pay down the debt as hard as we can at the start of the loan. And if we aren't prepared to make that sacrifice, then fine. It's about individual priorities. We make our decisions and live with them.


It's going to take much longer that we think, and happen much quicker than we expect.

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#53 2011-01-10 07:35:28

errol43
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From: Bundaberg
Registered: 2010-04-13
Posts: 6,324
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Re: Australia heads for economic crunch

Stedlar.  I went down much the same road as you did. My wife and I have lived in four houses. Paying off 2 and buying the last 2 outright but only owning one at a time but the house I now live in , I must admit is the biggest and near the beach.

But if I was starting off again I would be terrified if I had to commit to a $400k loan to buy a house that is much like the first one we bought. I know I was a little apprehensive when buying the first house for $22k with a deposit of $10 but it all worked out well.

Would I do it today?   No way! The times have changed. Young people sure have hard decisions to make these days. 

Tell us what you would do today if you were just married.

Regards Errol 43

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#54 2011-01-10 08:19:31

Stedlar
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Registered: 2010-08-16
Posts: 1,068
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Re: Australia heads for economic crunch

It's about the life style you are prepared to lead. No credit cards, no car loans, no expensive holidays. Living well within your means. Never spending windfalls like tax returns or bonuses. 

I work with people who have car loans, iphones, big TVs, go out on the weekends and spend a small fortune on meals and drinks. They buy coffee, and lunch and go on overseas trips. And they still live with their mums and dads, or rent.

Then there are the ones who've borrowed to buy a new house and they borrow to furnish it. No time for waiting, everything now. Certainly no thought to paying off more than the minimum repayments.

If I was starting again I would do pretty much what I did already.  I would buy the house and take the life style hit, and the risk, and work to be debt free.

Others look at what they want out of life and decide they want other things more.  That's fine but you can't both have your cake, and have eaten too. It's either eaten or saved. 

You make your decisions, based on your best understanding at the time, and no regrets.


It's going to take much longer that we think, and happen much quicker than we expect.

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#55 2011-01-10 08:28:19

Auspm
Banned

Re: Australia heads for economic crunch

Stedlar wrote:

It's about the life style you are prepared to lead. No credit cards, no car loans, no expensive holidays. Living well within your means. Never spending windfalls like tax returns or bonuses. 

I work with people who have car loans, iphones, big TVs, go out on the weekends and spend a small fortune on meals and drinks. They buy coffee, and lunch and go on overseas trips. And they still live with their mums and dads, or rent.

Then there are the ones who've borrowed to buy a new house and they borrow to furnish it. No time for waiting, everything now. Certainly no thought to paying off more than the minimum repayments.

If I was starting again I would do pretty much what I did already.  I would buy the house and take the life style hit, and the risk, and work to be debt free.

Others look at what they want out of life and decide they want other things more.  That's fine but you can't both have your cake, and have eaten too. It's either eaten or saved. 

You make your decisions, based on your best understanding at the time, and no regrets.

The house prices in this country are 200%+ above long term trends.

It's not even a question of lifestyle choice, but rather practicality.  The bottom line is this.

If you bought pre-2000, yes, it was hard.  The Recession we had to have burned many and jobs were tough to find.  But 200k bought you a friggen mansion in most areas and a very nice place in most capitals.  Add in wage appreciation of the 2000-2010 boom period and you did wonderously well.

Fast forward to 2007 and unless you're on a triple figure salary or dual income with no kids, you were pretty well shit out of luck.

The Australian housing market :

IMG0015_739078.PNG

You and people like you bought pre-2000 and it's obvious what the difference is today.

If it was pre-2000 and you could afford it, of course it was a good idea.

If you bought after and especially today?

You're a debt mule living on borrowed time.

For most people, there was no decision here.  No option.  You either swallowed 200% the debt level of the decade before for the SAME THING and hoped to god the interest rates didn't kill you or you/your partner didn't lose their job, or you went without and became a renter.

Whether or not you buy iPods or play video games has next to no practical relevence today when house prices are double what they were a single decade before and THAT is a fact.  'Saving' in the traditional sense ceased being relevent when we moved to a climate of 105% home loans with no deposit requirements, extended mortgages and government handouts.

The PRIMARY driver for housing affordability in this country is NOT savings.  It's CREDIT!

How much you can borrow.  How much you can afford to repay.

There is a reason now why the average age of first time parents (for the first time in Australian history) is now over 30.

May as well throw the rules book out now folks.  It's a completely different game now.

Last edited by auspm (2011-01-10 08:35:24)

#56 2011-01-10 08:53:13

Stedlar
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Registered: 2010-08-16
Posts: 1,068
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Re: Australia heads for economic crunch

Yes, it is always different now. All the rules have changed. It is so much harder. Poor people, who have it so hard, not like the easy ways of days gone by. Nope, it's harder and meaner and more difficult and the rules don't work like they used to. The old days were so different, and look, here are all the reasons that prove that it's not like it was. Not easy anymore. It's hard and risky now. Not like back then. And it doesn't matter if I piss all my money up the wall, cause it wouldn't make a difference, cause it different now. Harder


It's going to take much longer that we think, and happen much quicker than we expect.

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#57 2011-01-10 09:10:41

Dwayne
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From: Sydney
Registered: 2010-10-06
Posts: 1,281
Trades :   21 

Re: Australia heads for economic crunch

Stedlar wrote:

Yes, it is always different now. All the rules have changed. It is so much harder. Poor people, who have it so hard, not like the easy ways of days gone by. Nope, it's harder and meaner and more difficult and the rules don't work like they used to. The old days were so different, and look, here are all the reasons that prove that it's not like it was. Not easy anymore. It's hard and risky now. Not like back then. And it doesn't matter if I piss all my money up the wall, cause it wouldn't make a difference, cause it different now. Harder

Except that in some demonstrable and measurable ways it is different now - or did you not actually read auspm's last message?

I agree that most people piss their money away and deserve everything they (don't) get - but no objective person can look at the facts and not recognise that it takes a far greater proportion of income to buy an average house than it did 15+ years ago.

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#58 2011-01-10 09:30:13

Stedlar
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Registered: 2010-08-16
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Re: Australia heads for economic crunch

No it's not different. You can quote your affordability numbers all you like, but it has and always been about what sacrifices people are prepared to make. Where they are prepared to move to, what luxuries and wants they are prepared to forgo. 

I could not afford to live where and like I do now if I had not lived where and how I did then. It was not easy, but it was the choice I made. We all make our choices.

By the way, not owning a house is a valid choice. It just wasn't the one I wanted.


It's going to take much longer that we think, and happen much quicker than we expect.

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#59 2011-01-10 09:33:40

Dwayne
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From: Sydney
Registered: 2010-10-06
Posts: 1,281
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Re: Australia heads for economic crunch

you can have your own opinion but you can't choose your own facts

Last edited by Dwayne (2011-01-10 09:35:10)

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#60 2011-01-10 16:08:57

THUCYDIDES79
Silver Stacker
From: Brisbane/Greenbank
Registered: 2010-09-01
Posts: 3,646
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Re: Australia heads for economic crunch

Great website hotel 46 - thanks heaps


www.professorfekete.com

*** With paper you ensure yourself against everything - except for paper itself ! big_smile ***

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#61 2011-01-10 18:34:34

zargor
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From: Australia
Registered: 2010-12-04
Posts: 101
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Re: Australia heads for economic crunch

As with everything, there are pros and cons (and always will be) with the whole rent vs buy debate.

Some of those points in Web's link tho should be considered carefully and adjusted for the Australian context, not the US.

Zargor smile

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#62 2011-01-10 20:19:19

intelligencer
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From: Bris
Registered: 2010-06-24
Posts: 2,681
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Re: Australia heads for economic crunch

Yes there is probably an advantage to renting in some respects but that article is completely jaundiced towards renting.

What about the risk of being evicted, the feeling of no control to hammer a nail where you like or install whatever you want?

But worse than all those things is it doesn't say that with buying there is an end to the slavery. Once your loan is paid off in an average of 10-15 years you don't have to pay anywhere near the cost of renting ever again.

You get to do what you want.

The suckers who are "saving" while they rent are having their money inflated away so are suckers twice over. They'll never save enough to buy a house outright anyway.

My advice is to buy but not overstretch.


Nothing is enough for the man to whom enough is too little.

Bitcoin donations welcome: 1L8WpWV6AbgDAMUwGZwqjY1Ecoo7PkCEZk

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#63 2011-01-10 20:32:59

JulieW
Silver Stacker
From: Australia
Registered: 2010-10-14
Posts: 11,087

Re: Australia heads for economic crunch

http://www.bobdylan.com/#/songs/subterr … sick-blues

Johnny's in the basement
Mixing up the medicine
I'm on the pavement
Thinking about the government
The man in the trench coat
Badge out, laid off
Says he's got a bad cough
Wants to get it paid off
Look out kid
It's somethin' you did
God knows when
But you're doin' it again
You better duck down the alley way
Lookin' for a new friend
The man in the coon-skin cap
By the big pen
Wants eleven dollar bills
You only got ten

Maggie comes fleet foot
Face full of black soot
Talkin' that the heat put
Plants in the bed but
The phone's tapped anyway
Maggie says that many say
They must bust in early May
Orders from the D.A.
Look out kid
Don't matter what you did
Walk on your tiptoes
Don't try "No-Doz"
Better stay away from those
That carry around a fire hose
Keep a clean nose
Watch the plain clothes
You don't need a weatherman
To know which way the wind blows

Get sick, get well
Hang around a ink well
Ring bell, hard to tell
If anything is goin' to sell
Try hard, get barred
Get back, write braille
Get jailed, jump bail
Join the army, if you fail
Look out kid
You're gonna get hit
But users, cheaters
Six-time losers
Hang around the theaters
Girl by the whirlpool
Lookin' for a new fool
Don't follow leaders
Watch the parkin' meters

Ah get born, keep warm
Short pants, romance, learn to dance
Get dressed, get blessed
Try to be a success
Please her, please him, buy gifts
Don't steal, don't lift
Twenty years of schoolin'
And they put you on the day shift
Look out kid
They keep it all hid
Better jump down a manhole
Light yourself a candle
Don't wear sandals
Try to avoid the scandals
Don't wanna be a bum
You better chew gum
The pump don't work
'Cause the vandals took the handles

Bob Dylan in 1965.

Last edited by JulieW (2011-01-10 20:35:42)

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#64 2011-01-10 21:03:02

Agauholic
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From: Australia
Registered: 2010-09-20
Posts: 880
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Re: Australia heads for economic crunch

intelligencer wrote:

Yes there is probably an advantage to renting in some respects but that article is completely jaundiced towards renting.

The article acknowledges the 'financial' scope of it's arguments.

intelligencer wrote:

What about the risk of being evicted, the feeling of no control to hammer a nail where you like or install whatever you want?

as above, this 'emotive' scenario noted specifically.

intelligencer wrote:

But worse than all those things is it doesn't say that with buying there is an end to the slavery. Once your loan is paid off in an average of 10-15 years you don't have to pay anywhere near the cost of renting ever again.

The article touches on this by suggesting investment of the savings etc.

intelligencer wrote:

The suckers who are "saving" while they rent are having their money inflated away so are suckers twice over. They'll never save enough to buy a house outright anyway.

The article scope is financials of "buying" vs financials of "renting".

Introducing subsequent investment strategies of those savings is irrelevant, probably why a baseline cash rate was included in the attached calculator.

I'd rather own, but having been through these calculations continuously of late, it's beyond sense to commit at present. later i hope, as the emotive arguments are the very real motivators.

Last edited by Agauholic (2011-01-10 21:04:00)

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#65 2011-01-10 21:34:50

bennybbc
Silver Stacker
From: Melbourne
Registered: 2010-05-30
Posts: 456
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Re: Australia heads for economic crunch

I hammer nails in wherever I want. I built a work bench in the garage and put in an extra power point without asking, also did the gardens to my likeing. I do keep it in good nick as I have to live there and the land lords couldn't be happier. I couldn't be happier either as I could now buy back my place for less that what I sold it for and my high interest account pays me more than the rent. I would say that a double win for me not a double loss.

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#66 2011-01-10 21:39:07

Peekay
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From: Victoria
Registered: 2010-10-12
Posts: 132
Trades :   12 

Re: Australia heads for economic crunch

The more of these graphs I see the more I worry.
I have suggested sell + rent to my partner but she nearly died at the suggestion. I don't think their is any possible way I can explain to her that we will end up much better off.

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#67 2011-01-10 23:07:17

Randomz
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From: Adelaide
Registered: 2010-05-18
Posts: 758
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Re: Australia heads for economic crunch

Peekay, thank your partner!

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#68 2011-01-10 23:49:33

Auspm
Banned

Re: Australia heads for economic crunch

Peekay wrote:

The more of these graphs I see the more I worry.
I have suggested sell + rent to my partner but she nearly died at the suggestion. I don't think their is any possible way I can explain to her that we will end up much better off.

You have to do your own due dilligence here and not listen to the thickheads who will give you free 'advice' on what you should and shouldn't do without knowing the first thing about you or how your financial situation is set up.

There are some VERY pro buying types here who will dole out the usual advice of buy and hold, no matter what.  Ignore them.

You need to decide what works best for yourself and your family and certainly not let the 'advice' of randoms who don't know you from a bar of soap to dictate what you should and shouldn't be doing with your personal finances and state of living.

This thread will show you clearly there are VERY clear divisions of opinion with the pro buy - pro rent - pro just live within your means camps.

I am not afraid or embarrassed to admit I simply cannot afford a home AND maintain a decent standard of living to raise a family.  So I simply chose the lesser of two evils and remained a renter, but having a better quality of living for myself and my family.

Stedlar wrote:

Yes, it is always different now. All the rules have changed. It is so much harder. Poor people, who have it so hard, not like the easy ways of days gone by. Nope, it's harder and meaner and more difficult and the rules don't work like they used to. The old days were so different, and look, here are all the reasons that prove that it's not like it was. Not easy anymore. It's hard and risky now. Not like back then. And it doesn't matter if I piss all my money up the wall, cause it wouldn't make a difference, cause it different now. Harder

I honestly find your ignorance disturbing mate.

Things ARE changing here in terms of cost of living if you can sit down and just look at the figures...

161_costofliving1.jpg
161_costofliving2.jpg

(data & images care of Hobo Jo)

I take a particularly dim view of those who wish to harp back to the assumption it was 'always' difficult as a means to dismiss claims the current environment is not 'as' affordable.  It's a common myth that's been continuously debunked, disproven and put to rest many times but the old school crowd (because they've done it successfully) still refuse to see beyond their own front yard.  The old adage of 'if I can do it, then ANYONE can and if you can't, you're just a whinger'.

It's this level of ignorance which has drawn so much angst out of me in the part here on the issue.

Not just the snide and derogatory attitude of the haves, but the sheer ignorance on display when looking at the facts.

#69 2011-01-11 00:06:47

2ds
Member
From: Victoria
Registered: 2010-10-19
Posts: 933
Trades :   41 

Re: Australia heads for economic crunch

Wow, that is a really interesting comparrison.

Lets discard gambling and pets because they're totally optional

Lets also discard phone as well because phone in 1960 didn't mean the same thing as phone in 2011

Housing, health and education...

Ever get the feeling you're being screwed...

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#70 2011-01-11 01:28:58

JulieW
Silver Stacker
From: Australia
Registered: 2010-10-14
Posts: 11,087

Re: Australia heads for economic crunch

I am constantly dismayed at the last place that education gets in any debate. It is the single most important thing next to home and hearth. If the world were better educated it would be a better place of that I'm sure.

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#71 2011-01-11 01:30:42

Auspm
Banned

Re: Australia heads for economic crunch

JulieW wrote:

I am constantly dismayed at the last place that education gets in any debate. It is the single most important thing next to home and hearth. If the world were better educated it would be a better place of that I'm sure.

You have to remember that those who run the system don't actually want their citizens educated.

#72 2011-01-11 01:37:50

boston
Silver Stacker
From: Australia
Registered: 2009-07-06
Posts: 3,995

Re: Australia heads for economic crunch

Auspm wrote:
JulieW wrote:

I am constantly dismayed at the last place that education gets in any debate. It is the single most important thing next to home and hearth. If the world were better educated it would be a better place of that I'm sure.

You have to remember that those who run the system don't actually want their citizens educated.

The older I get the more I realise that the best education that anyone can have, is generally achieved outside of the education system!


Light travels faster than sound. This is why some people appear bright, until you hear them speak...

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#73 2011-01-11 01:38:20

boston
Silver Stacker
From: Australia
Registered: 2009-07-06
Posts: 3,995

Re: Australia heads for economic crunch

Randomz wrote:

Peekay, thank your partner!

+1


Light travels faster than sound. This is why some people appear bright, until you hear them speak...

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#74 2011-01-11 01:40:37

Randomz
Member
From: Adelaide
Registered: 2010-05-18
Posts: 758
Trades :   

Re: Australia heads for economic crunch

Peekay, do you see selling to rent as being the same as choosing to rent instead of to buy?


2ds, in the 60's you bought an empty unfurnished 2 bedroom 1 bathroom house without a garage or carport.  House expectations are a lot higher now.

Similar for health, in the 60's go to doctor and say you don't feel well, you got a packet of aspirin (which is probably cheaper now) and then died in 6 months from colon cancer.

These days you get a colonoscopy, followed by a CT scan, followed by surgery, followed by chemotherapy and live for another 30 years.

As for education, have teacher wages increased anywhere near in line with the figures on the chart?

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#75 2011-01-11 01:47:55

JulieW
Silver Stacker
From: Australia
Registered: 2010-10-14
Posts: 11,087

Re: Australia heads for economic crunch

boston wrote:
Auspm wrote:
JulieW wrote:

I am constantly dismayed at the last place that education gets in any debate. It is the single most important thing next to home and hearth. If the world were better educated it would be a better place of that I'm sure.

You have to remember that those who run the system don't actually want their citizens educated.

The older I get the more I realise that the best education that anyone can have, is generally achieved outside of the education system!

Provided you have a basis to start with. Good teachers give good education.

Closing a school means opening a prison - Mark Twain (or words to that effect).

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