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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

doing it tough « Previous | |Next »
June 8, 2012

The link between "the end is nigh" scenario and the booming economy is less the bad economic news from Europe or China's economic growth stalling. It is more the declining house prices in Australia.

Jessica Irvine in the Sydney Morning Herald points out that:

After falls of about 5 per cent last year, figures from RP Data-Rismark show home prices fell 1.4 per cent last month alone across five capital cities - Sydney, Melbourne, Brisbane, Adelaide and Perth. Over the year ended May, the falls range from 8.5 per cent in Melbourne, to 6.5 per cent in Brisbane, with Sydney down by a smaller 3.5 per cent. Sydney's housing boom went bust nearly a decade ago now, giving it a head start on price pain .... Turnover has slumped, with families preferring to withhold properties and not sell into a weak market.

She adds that after a decade long debt binge, spurred by lower interest rates and freer availability of credit, households remain financially stretched.

RoweDspeedster.jpg David Rowe

Australia had enjoyed housing and consumption booms on the back of cheap credit. The period of asset price inflation has come to an end and Australia's debt-fuelled housing boom is over. Households are paying off the debt on their massive mortgage bill and a markedly reduced rate of home ownership among young Australians.

The recession in Europe doesn't help because Europe faces a lost decade as creditors continue to shift the entire burden of debt adjustment onto debtors. The division between debtor and creditor countries looks to become permanent, with Germany dominating and the periphery (Greece) becoming a depressed hinterland.

Proposals from the Grattan Institute to broaden the GST to include the 40 per cent of spending devoted to things like education, health and fresh food--it would add about $20 billion to GDP and allow significant lower personal and corporate tax rates ---aren't going to help restore consumer confidence. It would be politically difficult--eg., it would be seen as squeezing working Australians to benefit the Big Miners who oppose carbon price and the renewable energy .

This is especially so with a couple of decades of an aging population in front of us and Australian corporations claims that the carbon price will cause huge economic damage---"a carbon tax would be "disastrous" for jobs and industry" and saying that Australia will suffer some kind of investment strike as a result of the carbon tax.

| Posted by Gary Sauer-Thompson at 1:17 PM | | Comments (4)


It's remarkable that people mainly complain about the rising 'cost' of just about everything; but when it comes to housing they panic when the notional 'price' of their housing asset fails to rise, because they have come to believe they are entitled to money for nothing. Much like the Facebook investors who were outraged when the share price failed to rise and deliver the unearned windfall they were convinced they were entitled to.

Falling house prices in Australia should be welcomed as an unalloyed good thing, after long years when people struggled to buy their own homes. But it certainly does not fit comfortably into the casino trading mentality that passes for an economy these days.

I think most in Oz are moving towards or already in a "bunker down" mentality. Big tv's and holidays are off the agenda for a while. Wait and see where house prices, stock market/ super and costs relating to the new tax puts them.

After Ken L ( yes, of course, it also applies to me) and is the same line that Laura Tingle was again raising, when when she could get past Emma Alberici's blocking tactics, on Latteline last night.
The Hugh Mackay of Howard's era of High victimhood/entitlement deserves an enduring pat on the back for presenting this concept, about a decade ago.

Look... up north.... ASYLUM SEEKERS!!! We're doooomed!!!!!