Labor lured then betrayed first home owners

rb says:

09:44am | 28/02/11

The first home buyers grant was wrong. But no-one is making all these people buy houses they can’t afford, when rates are low no less.

Mouse says:

09:55am | 28/02/11

I remember paying 17.5% home loan interest rates in 1989, under a Labor government, during the recession “we had to have”, because of their inability to rein in their spending, sending inflation through the roof.
PS Liberals were in for 11 years, so 7 interest rate rises isn’t bad, heh?

ml says:

10:49am | 28/02/11

we had a surplus which turned into a deficit in the few years labor was in.
FAIL.

Jay says:

11:04am | 28/02/11

One day people will realise the Australian Government is minimally influential to the positive gains of this economy, the low credit binge fuelled by the US was a tidal wave for the world and our short term position with China raised our land mass to avoid the tides impact, but eventually the dirt beneath us will erode and expose the pathetic economists this country has, taking credit for basic concepts they dont understand. Where would a country be without house price growth is the question…if we were to artificially stimulate negative house prices as an experiment, would our economy really feel like its riding a commodity boom? i dont think so, GDP would be eroded.. keeping high house price growth intact is the same as assuming getting fatter will prevent diabetes, because exercise causes a recession in cells and going backwards cant be good, can it? We are buggered without Asian demand, and since China is doing a great job at buggering up their property sector with massive misallocation of capital…....time will tell, for now ride the QE2 make believe train and be wary of the second speculative crash

Richard says:

11:23am | 28/02/11

110% on the money there with those comments Jay. How can majority of Australian people be so blissfully unaware that the world’s reserve currency is rapidly going weimar without wondering what the effects of that will be on our economy?

If our leaders took a step back and honestly, earnestly evaluated the real conditions in the international finance markets, there would be white-hot panic as we undertook the necessary measures to protect ourselves a little bit from the effects of it.

There would be no discussion about super-profits taxes, carbon-taxes etc. it all becomes irrelevant when the money-system dies. I call upon our leaders to wake-up and stop listening to the same old economists who are always wrong like Paul Krugman and Ben Bernanke, and start listening to the genius contrarians like Peter Schiff and Marc Faber, that includes you Robb.

Andrew says:

11:35am | 28/02/11

Jay, i agree entirley. The problem is that the pollies and their trolls (from both sides) have jumped on it and will use it in any way possible to make it look like they are better than the other. Imagine if people were actually knowledgable in financial matters and economic matters in this country and held the politicians accountable for their dishonesty.

Johnny Boy says:

12:19pm | 28/02/11

Excellent comment Jay. Very impressive analysis

I don’t know if China will crash and its miracle economy be exposed as a speculative bubble - I do know however that many intelligent people (including fund manager Jim Chanos-  who first determined Enron was fraudulent and who made money betting against US housing during the GFC) are betting heavily that it will, and that the mere posibility of a Chinese slump has not been contemplated (let alone provided for) by any of our senior policy makers.

As for the “its Labor’s fault” canard- as Jay notes, the government has little to do with the economy these days ...indeed, it hasn’t since the days of Malcolm Fraser. Both major parties are committed to the same tired, short sighted programs of ever more extravagent middle class welfare and ramping up property prices beyond all reason(“First home owners grant”? Since when has increasing demand while maintaining current supply ever led to something becoming more affordable?). If Mr Robb or his colleagues on either side of the house were really serious about making housing affordable, they would aboish negative gearing. But with too much of their constituents wealth tied up in property “investment” (actually, speculation) that will never happen.

GG says:

01:59pm | 28/02/11

Sorry nossy but it seems you have a very vague and narrow understanding of how and what the GFC actually was. Labour did nothing, nor did they need to, to protect the banks. The banks’ salvation was the stringent provision requirements set by APRA thus ensuring liquidity of Australian banks. Labour’s love of spending, and in particular, the unnecessary prosperity measures of giving everyone a fist full of cash to spend in turns drives up inflation which needs to be reined in by RBA rate rises. I agree that interest rates were always going to raise under a Labour government post GFC, however the rate of increases can be attributed to Labour’s fiscal policy. And that, nossy, is a lesson on interest rates…. fella!

Jed says:

03:15pm | 28/02/11

Nossy, John Howard did say he would keep interest rates low. He DID NOT say interest rates would never rise.  And even now the interest rates under the Howard government are still far better than that of the present government.

M says:

03:18pm | 28/02/11

My interest rates are currently much less under labor than they were when the libs were in power. It isn’t sensible peoples faults that a lot of people borrowed what they couldn’t afford. I’m quite happy with the current interest rates thank you very much.

nossy says:

04:24pm | 28/02/11

@Jed - absolute rot Jed - even now interest rates are lower under Labor than when Howard was in power - the cunning old bugger tried to pull the wool over the voters eys pretending he would keep interest rates down - they evetually responded to his rubbish by not only voting his government out but also Howard - how embarressing !  hahahahahah

me my mo says:

06:02pm | 28/02/11

@nossy, I was curious to know whether that’s true or not and so quickly threw in the Indicator Lending Rates for home loans into spreadsheet and got the averages. Under Howards tenure, the average was 7.23%, Labors average including February is 7.47%. The current rate is 7.79%. A graph is here if you want it http://www.loansense.com.au/historicalrates2.gif

IG says:

06:35pm | 28/02/11

GG it would appear that you don’t know much about what the Labour government did to underwrite the banks.  The 1 million deposit guarantee and the first home vendor grant both propped up the banks and gave them the appearance of having good credit worthieness.  Now look at what they are charged to sell their debt (bonds)  and you will see just how credit worthy we all think they are even the ratings agencies have them on a negative credit watch.  Thats why your mortgage rates are going up regardless of the RBA’s decisions.

Richard says:

12:58am | 01/03/11

Is Andrew Rob paid to write this tripe?
Hmmm does he understand the intertwining of economics globally… Or that high cost in labor markets, high investment inputs, high profitability for companies, tax minimization by companies, mining companies paying less tax than service delivery companies… Or perhaps say… Why Westpac can charge a higher interest rate than its subsidiaries st George or RAMS… Why can these lenders support marginally lower rates than Westpac? Figure that one out Rob. When you do write some more crap on how the liberal party let the cartel flourish and fix fees and prices in the Macquarie st parking lots… Or perhaps how high interest rates attract billions in corporate investment… Which feed into tax revenue, jobs creation, wage and salary increase… Hmmm oversight Andrew? Or how about the blatantly obvious…. All the countries with little or no interest rates… Are all running huge deficits… Have 5 to 100 times the Australian deficit… And your knobbing about pocket change covered in lint…

Greedypeoplegetlost says:

03:05am | 01/03/11

To rb,the first home owners grant was not wrong,people that take out loans that don’t account for interest rates are wrong..The fact that so many people who have to pay exorbitant rent for properties they don’t own,can’t hang a picture on the wall and are subject to either the landlord dropping in or the real est agent demanding yet another inspection when if they had a deposit they could be owning their own homes and be quite away from all that stress is wrong.Ispeak from experience,have just bought our own home in the last 6mths.what a drama…After so many stuff ups by the people who make money from this game we finally settled on a $180,000 dollar loan,7 from government,the rest up to 202000,our payment.For this we have a huge historic place that can be divided into flats orb@bif we ever had the money.Bottom line.we took out our loan with the cheapest source in September last year paying back we weretold 280-290aweek.Way better than the disgusting properties we had the choice of renting inNewcastle for 340 a week.Yes we had to move to the country near Cowra to get this deal,but,our repayments have already as a couple of months ago gone to over 324 a week.280 to. 324 in around 3mths is rather a lot,however I still think we are far better off because of the govs help as we could be paying so much more for a tiny place that let’s face it maybe the owners might want to come back to live in or want to sell….no pictures,inspections,subjectionsetc….....so you are so wrong rb,and most don’t have the luxury of finding rural employment to make it work.If only the pollies would do away with their personal greed and see it as a privilege to be in a job! That serves the common brotherhood of man…it is not a perk for ripping off Australian citizens….they are NOT SO FAR AWAY FROM Egypts beloved pres or even africas Mugabe.  They just manipulate in different ways but really if they are prepared to play useless unthoughtout competitive games with each other at our expense,many times ourchildrens raw needs.  Millions on personal campaigns to win again(Ididnt ask for or want it did you)any parent goes without to look after their children .Being a parent is a privilege.These guys recommend themselves as the one to count on as “elders,parents,dependable,the ones who catch the bullet….....I think that’s why they pay themselves so well

David says:

07:43am | 01/03/11

Nossy,you are a complete and utter moron…When a government borrows money like this government is borrowing money,they get it from the same place that the public does,they are in direct competition for money as you are,so when you go the the bank and ask for a loan,guess who is your competitor??? Bingo…And to say they saved us from the GFC is just fraudulent,we are more aligned with Chinas economy than Americas…and at last look,we never had sub prime loans! Plus we had a huge surplus,that Labor has destroyed…hey buddy,it isnt hard to spend other peoples money…You are just one of the idiots that votes Labor and destroys the country we work hard to build!! I cant state enough,what an arrogant idiot you are

Drunk Guy says:

09:13am | 01/03/11

How is that the first comment is always some Labor hack trying to somehow justify putting millions of saved funds back into the economy in a lump and saying that is comparable any otehr interest rate cycle Australia has ever seen?  If “nossy” could get out from under the Labor trough long enough to see the real facts , it is easy to see cause and effect, put money into peoples hands, they spend it, the reserve raises interest rates due to inflation, simple. Of course if you’re Labor, . . .well there just has to be someone else to blame doesn’t there.

john says:

12:15pm | 01/03/11

Your all wrong, interest rates today are more than ever, median house price in 1986 was about 80,000 and about 17%, today median price is about 500,000 and 7-8%.....when comparing in real terms is~ 21% in 2011 ...more than what it was in 1986 !!!!

Money is obtained for nearly 0% from overseas and we are the idiots borrowing for crooks to make a killing for all they can steal.

KH says:

08:10am | 28/02/11

What, you mean the ‘fact’ that interest rates are normal now?  What kind of dimwit would have thought interest rates would stay as low as they were during the GFC?  If stupid people are losing their houses, I have little sympathy.  That is one of the problems in the US crash - people who got big loans thinking that buying was like renting, and not considering the extra costs of home ownership, and the interest rate payments.  If you can’t afford to save money whilst renting and paying bills, you probably can’t afford a mortgage.

Jedi_T says:

09:37am | 28/02/11

KH
I dont sympathise with fools who live beyond their means.
That includes this inept Govt.
But what Andrew is saying is that the ALP lured more people into purchasing homes during the GFC, ceffectively creating a false market which created a false economy thus will result in a downturn now.
While we wont get anything close to a GFC we will have our own little crisis thanks to the ALP.

Dissident says:

10:44am | 28/02/11

KH, I appreciate that interest rates are historically around the 7-8% mark so they are ‘normal’ in that regard, but they are also usually somewhat in line with the rest of the developed world. Having our rates a lazy 5% (and the rest) higher than the rest of the world clearly isn’t normal.

Is this the new normal?

I would have thought that in a world of international money markets and instant electronic transactions that we should remain at least somewhat in line with international financial markets.

NB - This is a legitimate question. I understand that the reserve bank sets rates in relation to inflation, but how is it that we don’t have a flood of international money pouring into Australia to take advantage of a risk free rate that exceeds the borrowing rate internationally? Meanwhile the interest rate spread between the reserve bank and the lending rate keep expanding…

Z says:

11:18am | 28/02/11

KH
These stupid people that you refer to, are trying to achive the great Australian dream of owning their own home.  My children have little hope of saving enough for a deposit as it is - yet I don’t think they are stupid for trying!!!
Very easy to throw stones from a fibro cement dump that has been passed down through generations of Labor voters….

persephone says:

11:23am | 28/02/11

Dissedent

yes, that’s normal for Australia.

Japan has been offering 0% interest rates for nearly a decade, which means that for all that time it’s been ‘normal’ for Australia’s to be considerably higher.

And, btw, the reason our interest rates are higher is a good one - our economy is ticking along very nicely, attracting new investment.

Low interest rates are a panic signal - it means your economy is stagnating and you can’t get people to invest.

Dissident says:

03:55pm | 28/02/11

Seems the moderators missed my last comment…

Perse, I have a pretty good understanding of interest rates and their economy-wide effects (if I do say so myself!). I also appreciate that the rates are normal domestically, but the massive variance with the rest of the world is quite unusual, isn’t it?

I don’t understand why somebody wouldn’t just borrow $50mil from Japan at say 3% (let’s give the banks their margin) then put it in risk free government bonds in Australia paying 5%. This is a return of 2% (or a lazy $1mil a year) with NO RISK.

Surely if our risk free rate is lower than international lending rates, money should be pouring into Australia. Banks certainly should be able to offer us the historic standard 190 basis point margin instead of the 300odd they have been taking of late. That would help me (a lot!).

But though it is not easy for me as an owner and hard for First Home Owners - spare a thought for a prospective buyer trying to save a 20% deposit on a median $500k house. It would take years of saving while inflation eats into the funds only to see that the houses are more expensive by the time you have the money. The incapacity of people to buy their first home is largely caused by banks with unrealistic lending criteria. 5% deposit should be plenty - $25k on a median home gives the borrower plenty of slack.

Pabsmiller says:

08:23pm | 28/02/11

Dissendent
I agree with your thoughts in regards to affordability. I have just moved to Perth from NSW country with what I thought was a very sizable deposit of $100K. On a $600k home, this equates to a $60k deposit, 35k in stamp duty and fees and then mortgage insurance of $15k. So now apparently I donot have enough….

WTF..

Robert Garven says:

10:30am | 28/02/11

Just a reminder Rob yes their was gullable fools who jumped on board the stimulus from the ALP Kevin Rudder spenderthon.  They increased the first homer buyer grant to double and also trippled if you bought land and built on it.  Then the reserve lowered interest rates historicaly low at 3 percent another pump primer.  all pushed by the banks and then followed up by builders offering incentives to first home buyers. This inturn inflated prices higher so as the poor old First Home Owner got screwed even further before the stimulus money was thrown at them.  No wonder they are now struggling after borrowing to the max & using the grants as deposits.  Yes Rob The ALP have done a fine job.  So how about opening your one eyed support look and actually look at the facts.  Get ready for more increases in interest rates later this year.  They only stopped because of Global turmoil at the moment because Gillard can’t stop spending but keeps taxing everything she can get her hands on.

hmm says:

12:56pm | 28/02/11

Robert, not sure if you’re aware but the first home owners grant was first established in the early 80s and was then approximately 3-4% of the average price of an established house.  There has been absolutely no change in percentage terms.  Actually I think the media’s built up the grant increase to be something it’s not, as it’s always been around 3-4% of the average price of an establish house.  This does not differ by area either.  So you failed on that point.

Camille says:

11:56am | 28/02/11

I totally agree, when you get a home loan you have to budget for interest rate increases. Blaming ‘the government’ is a copout, these people simply weren’t prepared.

Ironside says:

11:59am | 28/02/11

KH the point of the article is that because of reckless government spending interest rates are higher than they have to be.
Take for example the current cash rate of 4.75% as the normal level which is what you claim in an earlier post. With the rest of the developed world sitting at between 0.5 and 1% that would mean that as the world economy improves their cash rates will increase to say 5%, does that sound reasonable. That means that as we are linked to the world economy through our heavy export focus our rates will rise accordingly. Even assuming a matched rate rise as the rest of the world gets to their ‘normal’ cash rate of about 5-6% that means that Australia’s cash rate will be pushed up to probably close to 10% which would put actually mortgage rates at between 13 and 14%, that’s getting right up there with the 17% from the last labour government, only this time it will be worse. 17% of 90 thousand (the average loan price in the mid 80’s) is significantly less than 14% of 350 thousand (the average loan price now)
Governments do not set interest rates its true, but government fiscal policy has a big impact. If the government are spending more than they are earning that puts upward pressure on interest rates. Not to mention the carbon tax. If that comes in the price of everything will increase to compensate…do you think big business will just absorb the cost.
Since the reserve bank sets interest rates based on inflation what do you think they will do when the price of everything goes up (which is inflation) they will raise interest rates.
You are quite right the government is not responsible for the decisions of individuals, and I have not a lot of sympathy for people who didn’t budget for interest rate rises when the purchased a house, but the government is responsible for sound financial management of the Australian economy and they are not doing it. They are increasing tax’s and increasing spending and we are in more debt than at any time in the last 10 years.

Kika says:

12:55pm | 28/02/11

Remember the old spin ‘rent money is dead money’ and people advocated that paying a mortgage was like renting & saving all together at once. ‘Forced’ savings was another. Plus don’t forget your mortgage was like a equity bank where the more money you pay off, the more you can use towards other things like holidays and things.

I saw the GFC coming years ago when people I knew where struggling on their mortgage and were never ever going to see the end of it with their endless dipping into their “equity”. Or when someone I knew got a loan approved with no savings, no assets had recently quit his job as a plumber/gas fitter and began his own business (the same day he got his loan). He was threatened with foreclosure unless he sold. He did. And his business went belly up not long after.

I would like to own eventually because I am sick of having to deal with real estates and tight landlords (even getting a leaky toilet fixed is a nightmare). But renting is actually ok if you can save your money and invest in other things like shares and super. But I’m not going to until I am well and truly satisfied I can afford it + any increases to the interest rate.

Jane says:

01:37pm | 28/02/11

A friend of a friend of mine is a good example of the sort of person you are talking about. Bought a Mcmansion on a 110% loan, got into trouble, sold it to a investor on teh condition tehy could rent it for now and buy it back later (they didnt want to admit to their parents they had stuffed up) got very unhappy went the rent went up and left that place but instead of then renting a smaller place to get their finances back in gear they have gone an rented a Mcmansion. They are a couple with no kids and teh dog is a tiny lapdog. Its all about giving the image of wealth. Oh and they have just gone and got a new car as well. People who will never learn and naturally its all “the banks fault” that they are in this position.

Factual says:

11:34am | 28/02/11

Actually delraiser, the rate of increase in property is steady, and has been for a long time. It appears to be higher because of the values involved. eg. 30k to 40k is a 33% gain. 300k to 400k is still a 33% gain. one is 10k, the other 100k. the 300k to 400k appears more steep but in reality isnt.

I recommend you look at some charts of median house prices or the housing index using a logarithmic y axis. which will show the true rate of change. The market isnt actually any more steep than it was 30 years ago.

StefanR says:

12:49pm | 28/02/11

@Factual: I did that, and noticed a distictive kink in the graph around 2000, when the capital gains was halved. The market is steeper since 2000.

KH says:

08:03am | 28/02/11

I thought I was nuts calculating on 10% interest (before deciding that I really can’t afford it)!!  Your relatives are right though - you should be considering all possible scenarios.  I remember, sadly, the time the interest rates went over 15%.......I would consider that extraordinary - not the current rates which are perfectly normal.

Brett says:

10:31am | 28/02/11

I was told to calculate on 10% and always pay 10% to the bank, so imn good times you are paying off a whole heap of principal and giving yourself breathing room, and in bad times you will be on par, or only have to tighten the belt a little. My parents paid a home loan in the days of 18% interest rates!

As for first hime buyers seeling up and not “being told of the rate rises by the government”, are you serious? Is it the governments job to inform everyone of inevitable rate rises? That’s condescending to anyone with even half a brain. Everyone knew it would have to rise from 1%, and once the economy stabilised it would go up. If you didn’t know this, or bought at your maximum at record low interest rates then you are a retard and deserve to have to sell.

berbu says:

10:47am | 28/02/11

well, 12% is too much, i would say around 9 % and have some saving to carry you if your partner is out of income for 6 months or so.  If you are really scared you can fix the interest rate for 5 years.  I don’t blame one liberal or labor or the people.  They are all to blame.  We keep competing and pushing up prices with the help of the FHBG as buyer over fear of missing out or making money from the captial gain, instead of waiting. and at the end the country will lose out, specially the once who are stuck with two properties.

Drunk Guy says:

09:43am | 01/03/11

At the end of 12 months, when they are renting out their FHOG purchased property, they will become an investment owner, have the ability to lower their weekly tax obligation, claim depreciation on fittings and fixtures and also the costs of repairs and non capital replacements making it possible to have a reasonable rent, a good long term tennant, and holding a property for around $50 a week. I hate to bust the bubble of the open mouth shoot first and think later brigade, but they obviously know very little about how home loans are approved, the fact is that lenderd apply a rate around 2% higher than the standard variable rate when assessing the borrower’s ability to repay along with a premium cost of living for all members of the household. So in real terms hardship has been factored in when a loan is made and borrowers have to service or they get a polite NO.
The real truth is that there are not many first home buyers who are struggling or very unhappy about their situation, but there are enough to be concerned that rate rises on the strength of international exports of raw materials or cash dumped into the economy as a stimulous are haveing an undue adverse effect on those near their borrowing capacity. I’d advise anyone who is struggling to seek help, and by the way most Mortgage brokers are free to assess your situation and help you manage your finances before you default, that makes it easier for them, I know I just used one.

AdamC says:

08:54am | 28/02/11

Even the numbers quoted in the article aren’t that damning. In reality 10% of first home buyers are thinking of selling after successive interest rises is quite a low number.

However, I don’t think you can deny that the government pulled the fiscal levers too hard during the height of the GFC, which is one reason why rates have risen as fast as they have.

KH says:

08:18am | 28/02/11

No government will do this, as it would almost certainly be electoral suicide, and as you should know by now, winning the next election is the only real policy any political party in this country has and will stick to these days.  All their decisions are governed by this policy, and therefore we are going to get nothing but a series of short sighted, self serving governments that throw money around like confetti at election time, knowing the pavlov dog response of the electorate used to middle class welfare and their own selfish existence will be to put their hands out and give away their vote in return. 
Ironically, a new government probably wouldn’t reverse the decision, as the dirty work will have been done for them.  Australia is one of the few countries that has negative gearing - most others abolished it.

Bruce says:

08:55am | 28/02/11

Paul Keating tried that on in 1987 and it back fired, we ended up with a dried up property market. Negative gearing was soon fixed up again. Like negative gearing or not, its what keeps the merry go round turning.

BT says:

09:34am | 28/02/11

Bruce, that may be the case but that was during a time when rental increases were capped by law at 10% per annum. Negative gearing was not as attractive then because speculators couldn’t gouge every cent out of renters like they do now.

Tom says:

12:45pm | 28/02/11

Just to take the Orwellian Newspeak stupidity and the envy b/s out of the discussion:

1. Providing rental accommodation is a business. You wouldn’t expect your local baker to sell you bread at a loss. Don’t expect your landlord to do it. He is not a charity nor is he the government. He has no obligation to starve his children so that boof-heads like you can rent at the stupidly low price you reckon you are entitled to. Housing returns are pretty low which makes words like “gouge” plain stupid.

2. Negative gearing is a business principle not confined to the property market. You are legally entitled to off-set losses against profits of another business. Get over it.

3. PresqueVu, “middle class welfare” is the new bleat word for the “me-want” class. Get over your puerile envy. Better still, work as hard as your landlord.

BT says:

01:08pm | 28/02/11

@Tom, there’s no need to resort to insults to put your point across.  Housing is not “a business” as you put it, it’s a human necessity that must be affordable for people. And your comment about PresqueVu not working hard enough…please! It’s got nothing to do with being lazy (don’t you just love it when moral judgments of people in poverty enter the debate) It’s to do with lower wages, higher costs of living, government taxation and immigration policy.

mark says:

01:30pm | 28/02/11

work as hard as your landlord eh Tom? How is taking advantage of loose credit actually working hard?

AdamC says:

01:33pm | 28/02/11

BT, many ‘human necessities’ are supplied by businesses. Most of them, actually, and there is no doubt that providing housing is a commercial activity that has to provide adequate returns to be viable. Rental yields are indeed unsustainably low in Australia. It is part of the problem.

Tom is right that there is actually nothing special about negative gearing for property. PresqueVu isn’t ‘subsidising’ anything.

Also, I love the ‘me-want’ class terminology. I am so taking that.

BT says:

02:15pm | 28/02/11

@AdamC, those businesses will ultimately suffer though if there’s no one there able to afford the product! Anyway, housing is by law a right of citizenship. The ICCPR, ICESCR and even CRC cite the right of Australian citizens to an adequate standard of living, the right to education, the right to liberty and security of the person, the right to privacy, the right to social security, the right to freedom from discrimination, the right to vote. So by turning it into a commercial excercise the government are essentially breaking their own law.
Also, the thinking is so short sighted. If you neglect a citizen’s right to housing and keeping them in poverty, taxes are raised to support them through places like Centrelink. That is, eventually YOU will have to pay to support the demands on social services. This extends beyond housing and into the demands on health. If people must live on the street, their health suffers so they drain the hospital resources. There are far more knock on effects to the broader community that no one seems to consider.

StefanR says:

03:31pm | 28/02/11

@AdamC, the only reason rental yields are low is because prices are too high. Prices are too high because of taxation policy encouraging rampant speculation.

Negative gearing on its own is not the problem, being able to claim losses against an asset is sound policy. The problem arises when this is combined with the capital gains reduction.

@Tom, The slave does not envy his master, he sees a situation that is unfair. Drawing attention to government policy that (in your view) unfairly advantages a group does constitute ‘puerile envy’.

AdamC says:

04:06pm | 28/02/11

StefanR, I agree with rescinding the CGT 50% discount. I say bring back the old system of indexation.

I agree that yields are low because prices are high, but prices are higher relative to yields than to other fundamental drivers, like incomes. Any stabilisation of the market will involve falling prices and rising rents, probably in the context of high interest rates.

Lastly, I don’t believe high accommodation costs can be likened to slavery.

BT, you are conflating a lot of issues there.

LindaT says:

04:08pm | 28/02/11

I agree negative gearing is one of the main causes of the rapid increase in property prices but unfortunately the horse has bolted. Maybe a limit of the number of properties for which negative gearing can be claimed or only on new properties. It’s ridiculous that people on average incomes can barely afford to buy a home any more.

Tom says:

06:50pm | 28/02/11

@StephanR, “slave”? “master”?, so the bloke selling you your Ipod is your master? Every time you consume an apple, the fruiterer has you as his slave.? Where do you learn this juvenile drivel?

@Mark, if you reckon getting a house is so easy, do it. Go ahead. Take advantage of all that “loose credit”. Harder than it looks? Such words are cheap.

@BT, Don’t use insulting terms like “gouge” if you cannot take a few insults back. That’s the way the game works. ...

@BT, So its everyone’s right is it? And everyone is keeping you in poverty are they? “The ICCPR, ICESCR and even CRC”? Shucks, I am so impressed. Why don’t you ask these genius dipsticks from CRC who is going to build the houses, provide the food and teach your “entitled” brats without wanting remuneration for their trouble? I am sure your nanny-state stuffed shirts get paid plenty for all their stupid utterances that they foister on gullible fools such as yourself.

BT says:

10:08pm | 28/02/11

Wow Tom, try not to spit all your acid out at once. You seem to be suffering from quite a bad case of Imaginitis coupled with hysteria. Firstly I never said housing should be free, I said it needs to be affordable. Secondly, I don’t have children so please put that assumption to rest. But even if I did I wouldn’t want to take on the entire Australian constitution in order to deny children the right to housing. You may find yourself fighting a one man battle there. Your comments tend to make me wonder if you are even human. Thirdly, the word “gouge”  is not an insult. Labelling people “boofheads”, “stupid” and “gullible” (sic) shows that your argument is weak and that you must resort to insults to try and bully anyone whose opinion differs from your own. I have a degree in Social Science and a diploma of Business, and have studied housing affordability (or lack thereof). As it stands, the situation of a lack of housing contravenes the aforementioned Human Rights legislation and should be remedied. Too bad if you don’t like it.

Tom says:

09:53am | 01/03/11

@BH, “should be remedied”? By who? Lawyers? Social workers?  How? By singing kumbayas and universal human rights? By writing about it in Orwellian Newspeak? By vilifying landlords (“gouge”)?

Sorry BH, your degree in social sciences teaches you nothing except how to pontificate. ... “should be remedied”? Build a house with your own money. Then rent it out to someone. That’s what investors do. They are the solution, your lot are the problem.

Drunk Guy says:

09:58am | 01/03/11

Im sorry,. . . what? Negative gearing, the simple making of a loss being able to be a deduction from PAYG income, or other business income? amazing.

I have to say that one of the huge issues in raising the price of homes and thus widening the affordability gap is foreign investor buying.

When our dollar was around 50c US it was like buying in play money for a lot of foreign investors who were borrowing in their own country at interest rates under half our own, then renting back to us to pay it off, they didn’t need negative gearing the amount of interest they owed made it possible to be so positively geared that with 4 or 5 homes they could make a vey good income from them. Just have a look in 2/3/4 year old project home estates near you and see how many homes are owned this way, i mean in groups of 4 or 5 homes by the same owner, you’ll be surprised.

Negative Gearing is to get mums and dads to reduce their very inflationary disposable income into subsidising the rental market and it worked so well the government now recoups the offsets with CGT when sold. If you do the sums you’ll see it’s given with one hand and taken back with the other.

BT says:

11:12am | 01/03/11

You don’t have much of an understanding of how it works Tom. No, you don’t fix it by singing songs and visiting Social Workers. You need to amend taxation, immigration and eliminate overseas buyers from the market. And your silly suggestion that I “Build a house with your own money. Then rent it out to someone.” is not a solution pal, it’s part of the problem. Clearly you don’t have any clue as to what factors are limiting people’s access to the market. Do some research and then get back to me when you have a better understanding of the issues and are less self interested than you are now.

Tom says:

03:37pm | 01/03/11

BT, There are too many people (demand) and not enough houses (supply). The solution has to be either less people or more houses. On the subject of less people, I am at a loss to work out how you do it. I will leave it to professors such as yourself to accomplish. Perhaps we have a point of common ground that immigration has exceeded our fragile country’s capacity.

Increasing the supply of houses could be through the state or through the individual. Public housing runs at a huge loss, so you cannot argue that government has not tried. Australian states, unfortunately, are broke. For some insights, I suggest you read about Greece. This would seem to leave the individual to increase the supply of housing.

An individual at the moment gets 6.51% return from a term deposit without any hassles or about 4.5% return from an investment house. There are extremely high entry barriers such as stamp duty, legals etc. Even with all the so-called “unfair” perks like negative gearing, investors are not driving an increase in housing stocks. With taxes such as land tax, most are limiting their holdings or exiting the industry.

A potential owner-buyer would be much better off leaving his deposit money in a bank and renting. So much for them driving anything up.

You can shriek about “rights” as much as you want. It is white noise, no more credible than Bob Hawke’s shrill cry “no child shall live in poverty by 1990”. You might try googling the term “thought-terminating cliché”. Then you might appreciate why the real world finds slogans such as “gouging” so irritating.

My understanding is that if you cannot find someone who will deliver a house, there won’t be a house to live in. Your understanding seems to be a little short of this down to earth reality.

Paul says:

10:16am | 28/02/11

Mary, this is not a communist country. In most cases the privledged are privledged because they worked harder than others. Some cases its because their parents worked harder than others.

BT says:

10:43am | 28/02/11

Paul that is a total fallacy. The rich mostly inherit their wealth and pay little to no tax on it when they get it.

TheDoc says:

11:18am | 28/02/11

Hi Mary,

The diagnosis is in, and you have been infect with ‘Tall Poppy Syndrome’. There is only one cure. Stop expecting everything to be handed to you and get out there and make something of yourself.

Your friendly Doctor.

Jane says:

01:48pm | 28/02/11

I would like to see the negative gearing law changed so you can only claim it on new builds. This would see a large increase in the number of houses getting built.

Although teh current market is showing teh true fallacy in the “lack of supply” arguement. If there is this lack of supply, why are houses sitting on the market for months, why is there now more rentals available than there were 12 months ago? Did they appear by magic or was there never really a shortage in teh first place

mary says:

06:45pm | 28/02/11

Of course if there were no shortage the market would fall flat on its face .. and we can’t have that can we?

Ah well ..

http://www.theaustralian.com.au/news/nation/modern-living-two-couples-one-flat/story-e6frg6nf-1226012258475

Tom (smee again) says:

04:51pm | 01/03/11

@BT, you are a sad little “envy” ranter aren’t you. Lindsay Fox, Bill Gates, Gerry Harvey, Steve Jobs. You need to change your mindset and get some facts rather than spouting silly undergraduate slogans.

@Jane, rents are high and vacancies are low at the moment. There would be other unintended effects from your suggestion. I believe economists would at some stage have put this one on the table.

Chris says:

10:16am | 28/02/11

Negative gearing really has no relevance to first home buyers.

Capitalist says:

11:21am | 28/02/11

I wish all my properties were positively geared. If you only understood that all investors do actually want that…..bring on the higher rents!

persephone says:

09:29am | 28/02/11

Agree, Trish - when we bought our first home, all our friends were taking out huge mortgages so that they could move into exactly the same type of house their parents had - ignoring the fact their parents had worked for thirty years to get it.

We settled for exactly the same kind of home our parents started off in - ‘renovator’s delight’ - paid it off within five years, and then upgraded.

Thirty years on, our friends are still mortgaged to the hilt, despite earning far higher incomes.  We owe about $10k, which we could have paid off about ten times in the past few years but maintain as a sort of overdraft facility.

Martin says:

01:00am | 01/03/11

Trish, either you have very bad memory or you do not know what you are talking about.  21 % mortgage interest rates? In which country? Did you get a loan from cash converters?

BR says:

12:52pm | 28/02/11

David: Let me get this straight, you used $900 as deposit for a house? That’s quite a palatial cardboard box!

Seriously though, if you struggled to find $900 (or let’s say $1800 if you have a partner) to get a deposit together for a house, then you’re really in a very precarious position to own property. I had the fortune to get the FHOG, but it was basically eaten up by stamp duty and legal fees, though 1% of something is better than 100% of nothing.

persephone says:

09:32am | 28/02/11

Must be on a pretty high single income if the flood levy’s an issue. And if you can afford private health.

Suggest you cut the latter, it will help cover the electricity bills.

NicoleG says:

11:04am | 28/02/11

Cut the latter? So you now agree with cutting this ridiculous carbon tax pers? Ahh, finally you see sense.

Liz says:

12:08pm | 28/02/11

No we are working hard, have 4 children, almost died with the stillbirth of our first full time baby, make lots of sacrifices with education and work.

Tom says:

05:00pm | 01/03/11

Liz, keep hanging in and don’t worry about persephone. People like you who work hard are not on his radar.

mick says:

10:32am | 28/02/11

your house would have been significantly cheaper back then, so like when the interest rates were up to 17%, the actual percentage of what you were paying out of your income was lower.

Jane says:

02:16pm | 28/02/11

Mick, houses may have been cheaper in terms of straight dollar value but wages have increased dramatically in that time frame too. In teh 1980’s when interest rates where at 17% the average house was worth about $80,000 but teh average wage was worth about $20,000.

Things are actually cheaper now then they were back then in relative terms. Back then a house was 4 times the average income but to work after the birth of a child was virtually unheard of. now house prices are 6-7 times the average income but a double income family is teh norm. People actually have more money now to waste then they had back then.

So no the percentage they were paying out of their income was actually higher.

Now add inteh fact that we complain about inflation these days but in teh 1980’s everything, when compared in income, was more expensive. A basic Ford was 3 years income (and no-one would have imagined that you could buy a brand new car for less than 2 times the annual amount of money that is unemployment benefits!), clothing and shoes sell for less today then they did 30 years ago. A pair of shoes or a dress today from Kmart cost less than 2 hrs of work for most Australians, not a whole days work plus extra.

We are so much better off now than we were 30 years ago, so much wealthier in every way so stop thinking things were so much easier back then.

Stephen says:

02:51pm | 28/02/11

Mick, it was 3 years ago Dude.

hmm says:

04:51pm | 28/02/11

Jane, you’re deadset wrong there.

I'm with hmmm says:

09:38pm | 28/02/11

@Jane

Just about everything you have written is erroneous to a certain degree!

smarter than andrew says:

11:23am | 28/02/11

I bought 2 years ago and just had my property valued at 150k higher than purchase price. what a stupid decision I made…..

Jade says:

12:45pm | 28/02/11

I am buying now and would hardly consider myself stupid.  I am buying a cheaper house in a boom area with lots of potential.  In a few years its going to be worth way more than it is now (maybe not 150K more, but better than nothing). 

Its about making smart decisions.

Seve says:

02:33pm | 28/02/11

I boght a unit 2 yrs ago against family opinion and its worth 20% more today. Interenst repayments are also $250 less per week then my neighbours who are renting identical units, and still works out cheaper if you include strata, council rates and water bills.
I am so happy i made this decision and can afford to go on annual overseas holdays!

Pop says:

10:38pm | 28/02/11

I agree with you.I worked on the same logic and avoided to buy the house.Pirma facie the prices looked overvalued.But people said that I have lost good opportunity.

Andrew says:

11:48am | 28/02/11

But they are achieving the “$20 billion annually” off an absolute monstrous capital base. If you really dig deep you will realise they are not as profitable as people would like to believe.

steve says:

11:48am | 28/02/11

As a shareholder in a major Bank, I actually consider the returns on my capital to be modest at best. So I don’t understand where you are coming from. Perhaps you have been sucked along by the Media looking for non stories or Pollies looking for cheap points. In my opinion our Banks are underperforming and should have made about 50% more than they did. They are far to conservative in my opinion.

Jane says:

02:23pm | 28/02/11

If you moved to one of teh countries where the interest rate is much lower then you would really complain about the banks gouging. Try and find a home loan in the US for under 5.5% and their official rate is 1%. The same is true all over Europe.

Banks are business’. If you think the price they are offering is too much, simply dont buy, just like if you were buying a car or even an apple.

Kyle says:

01:26pm | 28/02/11

Just buy all your clothes and ‘stuff’ from overseas to make up the losses. It works both ways.

Frank says:

12:40pm | 28/02/11

So 2005 was “normal”?

BT says:

12:42pm | 28/02/11

They are simply attempting to escape the constant rent rises that are forced upon them every 6 months, preferring to have at least something to show for their payout at the end of the day than nothing at all. Why is that stupid? They are damned either way. It’s so easy to sit back at your parents place, pay no rent to save for a deposit and buy a place -  then pontificate to others who have tried to save in an attempt to have exactly what you want for yourself rather than see that the problem is with government policy such as tax and immigration.

Sydney another Dubai? says:

12:47pm | 28/02/11

Yes, people shouldn’t borrow up to their limit. They should allow breathing room as you did. As a guide it’s recommended that people borrow no more than 30% of their income. But that doesn’t buy you much in Sydney, so in desperation to stay near family and work - people are borrowing more than they should.

The real issue has little to do with interest rates or self control. Compare the average house price against the average income over the last 20 years and it becomes obvious that houses have become less affordable.

That’s what’s meant by affordability. That’s before you even take into consideration extra taxes, like GST.

The reason houses have gone up in price in real terms, as opposed to what you’d expect from CPI alone, is due to a number of different microeconomic issues. Such as poor city planning, a lack of long term planning, supply / demand issues, lack of infrastructure, immigration / population growth policy, density of employment options, shifts away from regional centres and so on.

Land release has little to do with it either as others have suggested, there are plenty of houses in Sydney’s outer suburbs that aren’t selling and / or are cheap - but there’s no work out there or public transport and the commute to work is for many a four hour round trip daily.

You want an extreme example of this type of city planning look at Las Vegas or Dubai. The wealthy live in the centre of the city, the poor commute in everyday to work in service industries from their share houses and affordable concrete blocks outside of the city. It’s basically economic slavery.

On a personal level, what you say Daniel makes good rational sense and is good advice for individuals. But in terms of where this country should be heading, your suggestion boils down to low income earners learning their place - and that’s not an Australia I like the sounds of. Individuals should take Daniel’s advice, but I don’t think that’s a good enough answer from our politicians!

Kika says:

01:07pm | 28/02/11

For interest sake I checked with a few banks about my lending potential. They reckon I could borrow up to $700K. I didn’t know whether to laugh, cry or spew. If people on my income are borrowing that sort of money I feel sorry for them. I don’t know how they would manage paying the loan let alone any increases to the interest they pay.

Martin says:

02:41pm | 28/02/11

Daniel, just wait for the time when you lose a job and will not be able to get another one.Or you might or your partner willhave a bad accident or illness, or your partnet will leave you and take the house, kids and everything else you have and you will have to pay her and the kids maitenance. There is thousands of things that can completely screw you up financially and without you having any control over it. Your self control will not help you.

Daniel says:

06:29pm | 28/02/11

Sydney another Dubai?: It’s not “low income earners know their place”, it’s “There’s nothing wrong with renting”. Renting is better than scrimping and saving every penny week to week, where the ups and downs of petrol prices determine if you can make a repayment. It’s the “everyone must own!” mentality that lead us here.

Martin: Those are pretty extreme circumstances, absolutely nothing to do with interest rates. I can get out of my debt quite easily if something bad happens: Sell.

Bilbo says:

12:57pm | 28/02/11

Totally agree - A lot of people who obviously do not have any understanding of economics incorrectly blame the federal government. Of course businesses only ever go wrong due to the “government” rather than mismanagement or undercapitialisation.

Drunk Guy says:

10:02am | 01/03/11

Prophets of doom are always proved right if they continue long enough. In case you haven’t looked out the window, we have already crashed (softly) and we can blame the floods(easy) rather than the bubble bursting.

Now we just have to beware of buyiong an uninsurable flood home.

fairsfair says:

05:11pm | 28/02/11

Yep, there are cetainly some interesting comments on here today iMitchy. I take back my suggestion from a national perspective, but it certainly helped me personally. That said, it was not the only factor that got me over the threshold and I think it rediculous that people find themselves in these situations so soon after the big buy. I am torn as to taking a side on this issue. It has been really helpful for me but that is all it was - a help. It did not make of break my decision to buy a home and I think if people solely decided to buy on the back of that they were quite silly. I guess everything is catching up with everyone now and it is likely to get worse before it gets better.

Kirk says:

03:21pm | 28/02/11

Will you be so bullish if your property takes a 25% or greater haircut and still wouldn’t sell? Would the knowledge that you’d lose a lot of money and still owe the remainder to the banks if you sold not bother you? It’s more than just about making the repayments by blinkered first homebuyer friend.

Mike says:

06:02pm | 28/02/11

Got to agree fully with FHB of Brighton Le Sands. 

As a 30ish married male on an average wage, no one pointed a gun against my head and made me buy.  Besides, I am smart enough to realise that all and then some of the Federal FHB handouts are swallowed back up again by the greedy State Government in stamp duty.  I therefore did not count on anyone giving me anything.

It’s not an investment property, so even if it went down by 25%, I wouldn’t care because I plan to live there for a long time.  If it is your own place of residence and you can make the repayments, what more do you need ?  If it is an investment property, then maybe that’s a bit different.

Financial stupidity, greed, whatever - that is what got some of these FHBs into problems.  No, it is not easy to get a first property, but there are some who want everything all at once and are not willing to compromise.  Some of my mates had their weddings, exotic honeymoon and first home all at once and spared no expense - by borrowing it all and then some more.  I never had a honeymoon or a lavish wedding because I put all the savings into the house deposit and still get laughed at for watching the old CRT TV instead of a brand new plasma.

Result is that my mortgage is manageable, unlike some of my mates.  Guess who is laughing now ?! ME :D

Rosie says:

02:55pm | 28/02/11

It is the fault of the Labor Government for their generous offer on the first home bonus scheme. The 10% that have had to sell their homes because they now realize they cannot pay the mortgage wouldn’t have been able to buy the home in the first place if it weren’t for the first home bonus scheme. Thus is Andrew Robb’s title of his article; “Labor lured then betrayed first home owners.”

Like everything that the Labor govt decides on it is never examined thoroughly and in the end someone suffers.

iMitchy says:

05:56pm | 28/02/11

I don’t think it’s just about the interest rates. The government artificially propped up the housing market with the FHBG Extension *even though* interest rates were at all time lows. If anything, houses were more affordable to buyers than they had been in years and people considering buying should have been entering the market anyway, so why add even more incentive to get people to hastily enter the market? Because many people look at the housing sector as a key measure of economic health and the government wanted to restore consumer confidence (which causes them to spend more which raises inflation or *growth*, and puts up interest rates) so that it *appeared* that they had effectively beaten the GFC. But this sector does not have many knock on effects that keeps the money flowing through the economy like businesses do, it just boosts the profits of lenders like the Big 4 banks via loan costs.
A knock on effect it does have though is those homebuyers going out and buying new furniture and new cars to go with the new house. Of course all of their savings went into the home deposit so these purchases were fuelled with more debt.
The government could have let the unreasonably booming property market restore itself to appropriate levels during the GFC and just let the RBA do its job by altering the market with interest rates. But it interfered and kept that market spiralling upwards to avoid upsetting people.
Well, the bigger they are the harder they fall. And it will fall. Hard.
It is already starting to topple…..

BT says:

03:11pm | 28/02/11

I know how you feel Dank. The easiest way for the government to deal with the excessive and continuous rent rises is to regulate the market again. That is, make it law that rental increases are capped at say 10% pa as they once were. People forget that for every action, there is a reaction. Constantly milking renters will result in homelessness which means that their taxes will rise to pay for more social services. It is law that Australians are provided with adequate housing, therefore the government cannot ignore their responsibility to fix this issue.

fairsfair says:

04:25pm | 28/02/11

You assume that landlords are not in debt I take it? They should cap cost of owning a home at 10% then. Far out. I pay $362 a week out of my single wage to pay off my $210k loan on a 2br shit box. When I bought a year and a half ago my weekly payment was $280. That is about 20% already in 18 months and it is rising. If I rented it I would be paying $180 a week. I would rather be renting for immediate gain and a more comfortable lifestyle but I am thinking long term. I bought a POS rather than wait until I could “afford” a bigger home. Factor in council rates, phone, internet, insurance and all the rest and home ownership takes up 73.2% of my weekly wage. I am not destitute but it certainly isn’t a walk in the park - but that is life.

If I owned a second home and was returning $200 a week on my $250k investment that has regular and significant expenses associated with its service and upkeep - how am I gouging you? I am the one with the risk, the rediculous costs, maintenance and in most cases tenants who don’t respect my property (which the bank probably owns anyway). FFS - it isn’t easy owning a home. If you are lucky enough and work hard enough to own more than one you are doing well. Hardly a parasite as they too have kids to feed and mortgages to meet. It takes years to make the jump from renter to owner for most.

If you rent, power and contents insurance costs take up less than 73.2% of your weekly wage you are doing better than a lot of people.

BT says:

05:08pm | 28/02/11

@fairsfair, the whole system worked before it was deregulated. See this is exactly the problem. Those that own property don’t want housing to return to an affordable level because they themselves will be out of pocket because they bought at the height of the boom. This is at the expense of those who can’t even enter the market because their rents constantly rise. Well, as I’ve stated before that is too bad for you. It is law that adequate housing be provided for by the government. This means that the government must address this issue by amending immigration, taxation and wages so this can occur. You have had your time in the sun, now it’s time for others to enjoy a fraction of what you have.

BT says:

03:56pm | 28/02/11

Actually Emma, it is law the government provides adequate housing for all. LAW. It is a right of Australian citizenship. Not an option.

Ponziman says:

04:06pm | 28/02/11

If the government stayed out of it completely then the cost of housing would be much, much lower. People always view the scenario in a vacuum. You have to remember that nothing in the economy, especially prices and values of assets are ever fixed and just the hand we are dealt. For the most part investors are looking for untaxed capital gains and ‘rents through the roof’ in order to cash in on all this loose credit. It’s a massive ponzi scheme and the cracks are beginning to appear.

Richard says:

09:18pm | 28/02/11

Nice analysis of the past, Killian.

But poor cognition of the present situation. The carbon tax must necessarily create inflation, which will result in the RBA raising rates, but that’s just the half of it.

The other half of the 1970’s equation that Labor seems hell-bent on putting together is Stagnation. Labor and the Greens and all the other Multi-Party committee members are cooking up taxes using a recipe guaranteed to produce stag-flation.

Thanks to Combet & Co, we are now assured of achieving the awful quartet of: rising energy prices, reduced supply of energy, currency debasement and asset bubbles.

Whallah, except if the 70’s stagflation was like the economy on acid, all warped and distorted, the twenty-teens stagflation will be more like a heroin overdose, and ultimately be fatal to our economy.

Hollow Analysis says:

12:42am | 01/03/11

Dear Richard
Economy looks pretty good to me.
What would the Liberals sell that they haven’t already sold to improve the bottom line?
Empty promises Richards.
Do you happen to believe that there is no such thing as AGW? Sounds like you are a denier.
What is the non denier solution?
Doing nothing I suppose.

Louisa says:

08:11pm | 28/02/11

A bit of a chip on your shoulder there Blake.  Try working for a living mate

Gary says:

08:12pm | 28/02/11

Baby Boomers didn’t get the hand outs from governments you lot get. We worked damn hard for what we have instead of sitting around squealing ‘more for me, more for me’. You should try it some time before whining and moaning about how hard you’ve got it.

Keep in mind also that many baby boomers have lost about 50% of their hard earned superannuation. Something I hope the ‘ME generation’ never has to go through.

In future sonny, try to do a bit of research before making a complete goose of yourself.

St. Michael says:

10:37pm | 28/02/11

@ Gary: maybe you guys didn’t sit around squealing “more for me, more for me” at the time you were earning your money, but Baby Boomers certainly are squealing for it now.  Most of Howard’s changes were to kiss the Grey Guard’s collective ass.

See, I did some research.  And it turns out you Baby Boomers also benefited from very generous and very socialist economic terms of trade while you were supposedly working hard to obtain what you now have.  The dollar was not floated.  Unions were powerful.  Wages were set incredibly high under the award system for the work done.  Import tariffs were massive.  There was no Internet which meant Australian businesses had to compete against overseas suppliers.  Home prices were extremely low compared with the weekly wage as compared with today.  You also had an age pension to look forward to rather than save hard for your retirement, which meant that the vast majority of you haven’t saved anywhere near enough to support yourselves in your old age.

The Baby Boomers are complaining that today’s generation “has it all”.  Actually, that title belongs to the Baby Boomers.  Unlike virtually every generation that preceded it, including the Greatest Generation that had to endure two world wars and a worldwide depression, the Baby Boomers had no such conflict and no such winnowing of their ranks.  Gen X, Gen Y, and the others still coming up will have to deal with something on those scales—when the US finally goes the way of Spain and Portugal, or when it kicks off hyperinflation to pay for its unpayable debts.

You had the world in your hands to change, and then you sold out for the house in the suburbs.  Even then you didn’t take advantage of the blessed conditions you had to either fix things sustainably or prepare for the future.  As a generation you spent more than you earned in your lifetime, and you’ll be the last generation that will be able to do that as a result.  Thanks a lot.  We’ll clean up, don’t worry.

Yours with love,
Your children and grandchildren.

Nexus says:

08:29pm | 28/02/11

What are you babbling on about. Politicians of all colours are participants in the great game of ‘finance capital’ the great economic con game called Monetarism. House price increases are driven by the banks (cheap and accessible debt), property developers, real estate agents and governments whose tax income is driven by property sales so it is in their interest to ration land so it drives prices up and the it suited the Federal Government of both colours to demonise public debt and encourage the massive growth in private debt of all flavors - Liberal and Labor. Guess what - when the crap hits the fan I bet we have excess housing stock.

Bolz says:

09:18pm | 28/02/11

@Nexus

“when the crap hits the fan I bet we have excess housing stock.”

Depends if those houses are used as a dwelling or a as stock piled commodity. The later being the most likely scenario in Australia which current level of overseas investment.

mary says:

07:08am | 01/03/11

Forgotten to mention the tax involved every time someone touches our precious house. oh yeah it’s tax free .. not.

mary says:

07:05am | 01/03/11

Note the naked greed; couldn’t agree more!

mary says:

07:17am | 01/03/11

House is for living and should not be a platform to make money. Are you listening Andrew? All you of there in Canberra in your comfy homes.

House is for living and should not be a platform to make money.

Why don’t you take your politician friends for a drive around Noosa Waters at night and check out all the houses on the canal. And note, surprise surprise, that the multi million dollar houses are not occupied. No lights at night. Funny that .. just investment properties for (overseas?) investors.

Where do the mums and dads with their families live, you ask. Were you asking? Because you should. They live in the back streets in little 2/3 bedroom boxes.

Doesn’t strike me that our politicians are always good stewards of our common wealth.

mick johnson says:

08:35am | 01/03/11

better to live here than where yoy probably came from ol mate….if your unhappy theres plenty of flights that deaprt the country daily.

stop blaming others for your dilema…..........

this is a democracy in australia..if someone wants to own 100 homes they can….........

seems your just jealous to me.

if i can afford a home you can…

perhaps its time you looked elsewhere other than capital cities as theres cheap housing in many regional areas along with plenty of work…

GetOutOfOzWhileUCan says:

12:51pm | 02/03/11

i love how people in australia respond to anyone questioning authority: put up or shut up. i guess that’s how you get stuck paying for a house that costs more than you can sell it for. mate, i’d go back to where you came from not because of the real estate issues, but because of the backwards thinking that has made this the “unlucky” country.