Wednesday, January 05, 2011

I put my sandwich in the air sometimes

Saying hey-o, where's my mayo...

Happy 2011! I hope everyone had a wonderful time, because I did.

I kicked off the new year at Bondi Beach with good company at Shore Thing...a night beach party featuring Armand van Helden of Barbara Streisand fame:

...and David Guetta, the most famous DJ in the world at the moment. If you don't know who David Guetta is you've either lived under a rock the past two years or don't listen to pop music.

Sydney definitely knows how to kick off the new year, with it being the biggest city in the world to do so first (Auckland? pfffft.)

If you like trance, apparently Australia is the place to be for NYE since Basement Jaxx, Bob Sinclar, and Carl Cox were also in town at other venues, and Tiesto was off in Melbourne.

But enough about music.

I've been here for 1/3 of a year now and here are some observations I've made about the system in place here in comparison to America: statistics and armchair economist opinions/critiques coming up ahead.

I'll start with income/economy.

As a resident I pay lower taxes here, and get more for my tax dollars. My income tax rate is effectively 22%. If you add medicare, it tops out at 23.5%. You get universal healthcare for 1.5% of your income! Granted, there is a queue for procedures like surgery, but Australia also offers privatized healthcare so you don't need to wait if you don't want to, and it's still cheaper than America. As a non-resident, I would be taxed at 28% and would not be eligible for medicare, but it's still cheaper than America.

In America you pay a federal tax, a state tax (most states), medicare tax (only senior citizens benefit from this), and social security tax (Generation Y will see none of this.) After all those taxes, you're looking at 30% or more, with the only way of lowering it is by your 401k deduction.

Speaking of retirement plans, Australia has something called Superannuation, which is reminiscent of a pension plan. Pension plans are pretty much impossible to find in America nowadays, as companies have forced you to fund your own retirement (nothing wrong with personal responsibility,) but the days of a company taking care of you and looking after you are long gone. With superannuation, 9% of your base salary will be contributed into a fund (like a 401k) that you can then use to invest. For example, if I earn $100,000 a year, $9000 a year is put towards my super. This is not taken out of my salary, and is completely paid for by my company. If you choose to do so, you can contribute more with your own money.

Isn't that awesome?

On top of this, a standard savings account can yield up to 6.51% APY! This is compared to the best rate I found in America at 1%. ridiculous. With the AUD slighty above parity with the USD, now is a great time to be paid in AUD. The unemployment rate in Australia is 5.1%, compared to 9.8% in America (I think this figure is underrepresented.)

Now for the downsides of a strong economy.

It is expensive to live here. When I say expensive, I mean EXPENSIVE. Sydney is ranked the 24th most expensive city to live in the world, with NYC at 27th. That should give you an idea of how expensive it is. However, the cost of living doesn't destroy how far your money can go because of the lower taxes...unless you plan on buying a house or luxury car. Then things get pretty expensive. Gas is close to $5/gallon. Average home prices in Sydney are over $400k, with interest rates near 7%. If you're like me and don't plan on buying any of those things in the future, if at're perfectly fine. Food is affordable as long as you don't eat out all the time, and minimum wage is $15/hr.

Why is the minimum wage so high?

Because there's a high standard of living here. Businesses charge more since there are less people to charge in comparison to America. Immigrants with money come in and buy property, therefore, raising the prices in a demanding market. The government does not subsidize industries like America does (High Fructose Corn Syrup, anyone?) and prices are not artificially lowered because of illegal immigrant labor like it is in America. Australia's economy is heavily tied to China because of its natural resources, and as long as China succeeds and grows, so will Australia.

What happens if China's in a bubble and pops?

I think this is a highly unlikely scenario because nearly everything is made in China, China pretty much owns the US right now, and as US influence decreases in the APAC region, China's will increase with up and coming economies like India, all of Africa, and already strong ones like Korea/Singapore. China's also sitting on trillions in reserves. I think Australia will be fine.

What's more concerning is the future of America.

Obama extended the Bush tax cuts for the "rich"...WHY?!!? Are people making over $250k a year (they would have received the cuts on any income earned less than $250k anyways) really feel a 3% hike? A lot of those people make most of their money off dividends from investments anyways, so their effective tax rate is 15%....meaning the middle class of America is getting screwed. The US national debt is over 14 TRILLION dollars. Instead of cutting defense spending, they've decided to have salary freezes. Defense spending...where there has been an instance where 1 billion dollars disappeared and was unaccounted for.

There are two wars being fought, student loan debt in America has surpassed credit card debt at nearly 1 trillion dollars, housing is still overpriced, unemployment for people aged 18-24 is at nearly 50%, the dollar is losing its value, and so on. How will graduates pay back their student loans if they don't have a job? How will they get hired for a job if companies want entry level employees with 2-3 years experience, when they can hire someone a little older with more experience who will take any job they can get after being laid off?

With the global financial crisis, I saw a lot of friends and colleagues go back to school because there was a lack of mobility in the job market. In years' past I think this would have been a smart move, but I couldn't help but think to myself that if there are no jobs now and this recession is as bad as I think it is, where will the jobs be when they graduate? The result will be that you have a degree, but now you owe a ton of money. Thousands upon thousands of people did the exact same thing you did and now you all have the same degree, more debt, and you're all fighting for the same job openings in America. Is it worth it?

I wonder if people realize you can't claim bankruptcy for student loans; they're with you forever. There's no collection agency cutting a deal for you, you owe every single dollar. As much as I love America and loved growing up there, I think the party's over and the next 20+ years will be a rude awakening for many, especially for people in Generation Y (1982 - 1995.) I think the future of America will see a lot of brain drain towards developing economies, because that's where the jobs will be.

To be fair, Australia has its problems...I just haven't been here long enough to get to know them, or I have my blinders on.

Cultural differences coming up in the next post, starting with the college experience.


At January 6, 2011 at 3:01 PM , Blogger Amy said...

sometimes i like rude awakenings.
comfort is overrated.

At January 6, 2011 at 3:02 PM , Blogger Amy said...

oh yeah, and thanks for the interesting post. hehe.


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