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Australia open to conducting joint exercises with indonesia in south china sea




FOREIGN Minister Julie Bishop has confirmed the Australian government is open to conducting joint patrols with Indonesia in the South China Sea.

She told ABC Radio today that such an operation would be in line with international law and the countrys interests.

The Defence Minister Ryacudu talked about increasing our maritime exercises and both Senator Payne and I said we would look into that, she said.

We have agreed to explore options to increase maritime co-operation and of course that would include co-ordinated activities in the South China Sea and the Sulu Sea.

This is all consistent with our policy of exercising our right of freedom of navigation.

Last week, Indonesian Defence Minister Ryamizard Ryacudu suggested that Indonesia and Australia conduct joint military patrols in the South China Sea.

According to The Jakarta Post, Mr Ryamizard met with Australias Foreign Minister Julie Bishop and Defence Minister Marise Payne on Thursday last week to make the proposal.

We have already suggested to Australia the possibility of conducting joint patrols in the eastern part of the South China Sea. We are sure that we will soon create a plan on how to realise it. They have more or less agreed, he told reporters on Friday.

He said he believed the joint patrols would help bring peace to the disputed region.

While its not a claimant state to the disputed region, Indonesia sides with Australia in opposing territorial claims that are not in accordance with international law.

If the plan does go ahead, Australia may come under further scrutiny from China, which claims almost the entirety of the mineral-rich region.

Just last month, the rising superpower urged Australia to speak and act cautiously on the issue.

Earlier this year, one of the countrys state newspapers The Global Times issued a more direct threat to Australia, accusing the nation of trying to please the US and intending to suppress China.

It warned that if Australia physically involves itself in the South China Sea waters, our country will be an ideal target for China to warn and strike.

But Ms Bishop said joint patrols with Indonesia would be nothing out of the ordinary.

This is a regular part of what our navy does, she said. This is part of our engagement in the region and this is in accordance with Australias right of freedom of navigation including in the South China Sea.

During a visit to Bali last week, Ms Bishop publicly declared her support for Indonesias push for a code of conduct for the region.

We have urged the ASEAN (the Association of South-East Asian Nations) countries and China to conclude a code of conduct as soon as possible, otherwise it leaves it open for others to suggest that the parties arent serious about a code.

Defence ministry spokesman Djundan Eko Bintoro says at this stage, it was simply a proposal and theres no agreement yet.

In July, an international tribunal in The Hague ruled that Chinas claim to the South China Sea was unfounded.

While Australia vowed to continue exercising the right of freedom of navigation in the disputed area, China rejected the ruling.

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Australias shadow banking sector mum and dad




HAVE Australia’s youth finally come up with a brilliant ploy to reverse the intergenerational inequity of the housing market?

This graph certainly suggests so. Asking mum and dad for help to buy a house is surging. Parents are not only shelling out for deposits, but also helping kids pay back their loans.

This is wonderful for some young Aussies. But not everyone is in the same lucky position.

Not all Australian families have the resources to finance a new home for the kids. While 10 per cent of Aussie households have more than $1.8 million in total assets, another 10 per cent have less than $10,000. So whether you can wring an $80,000 deposit out of the olds depends a lot on who they are.

If you have a sole parent, the chances are worse still poverty levels are higher and wealth is lower among sole parent households than for couples with children.

The housing market is already tough to get into. Most first homeowners grants are gone but prices are still rising parental contributions probably only make prices higher.

HELICOPTER PARENTS WITH HELICOPTER MONEY

But the bank of Mum and Dad could be doing more than making Australias housing market increasingly unfair. It could be making it more unstable.

There are two main risks in parents turning themselves into home lenders.

1. When the parents want the money back.

2. When they dont want the money back, but theyve got the kid into a home they cant really afford.

Either way, it adds a layer of complexity into the financial system by loading kids up with money banks might not know about.

Banks are limited by lending rules. They may bend or break these rules from time to time but they mostly adhere to them. Overgenerous parents, meanwhile, have no idea how to do prudential management and could easily overextend their kids.

The problems only multiply when the money the parents are accessing comes from refinancing their own homes creating a cavalcade of apparent property wealth that could all be at risk in case of lost earnings or a broader property downturn.

While the scale of parental lending remains quite modest for now, the 2014 Financial Systems Inquiry made direct mention of the way risks emerge outside the main financial channels:

History tells us that the next financial crisis never looks quite like the last. It is not possible to know for certain where systemic risks will arise; however, it is perhaps more likely that they will emerge outside the prudentially regulated part of the financial system, such as in the shadow banking sector, where oversight is more limited.

When we talk about shadow banking, we mostly talk about China, where close family connections and black market money lenders create an elaborate network of financing that rivals the scale of Chinas banks. Over there, shadow banking is a real and present danger to the health of the economy.

Australias problem is not at the same scale. But for people already worried about the housing market and Australias growing private debt pile, it adds another straw to the camels back.

With the US contemplating further interest rate rises within months, it is only a matter of time before Australias period of record low rates comes to an end too. And an apartment supply surge could also put Australias house prices under pressure. If that happens, every overextended borrower could help contribute to a price slide becoming a price crash.

Jason Murphy is an economist. He publishes the blog Thomas The Thinkengine. Follow Jason on Twitter @Jasemurphy

A look at the nation's property market for the week ending Saturday 8th October

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