On Thursday April 15th at 1pm, Steve Keen will begin a walk from Parliament House to Mt Kosciuszko, to fulfill the famous bet with Rory Robertson over house prices.
Keen claimed that, just as Japanese house prices had fallen 40% since its Bubble Economy burst in 1990, so too would Australian house prices. In October 2008, Robertson challenged him to a bet that this would never happen at a debate in the Parliamentary Library, where the loser would have to walk from Parliament House to Mt Kosciuszko.
Since then, Australian house prices have rebounded from their biggest ever quarterly fall of 3.8% in September 2008 to their biggest ever quarterly rise of 7% in 2010. In December 2009, house prices were 8.3% higher than the previous peak in March 2008, and 14.5% higher than the low they hit in March 2009, just nine months earlier.
Keen is therefore doing the walk, but he has turned it into a protest at government policy that has deliberately pushed house prices higher.
“This latest house price bubble began when the government doubled and even tripled the First Home Owners Grant,” Keen observed. “Along with the decision to allow open slather purchases of Australian properties by overseas buyers, the Rudd Government lit a fuse under house prices.”
“These policies reversed the GFC inspired trend for Australian households to reduce mortgage debt, and played a major role in reducing the GFC’s impact on Australia. But they did so by reproducing the conditions that led to the GFC in the first place—Australia has taken the “hair of the dog” approach to curing a debt hangover, by borrowing yet more money,” Keen said.
Keen and over two dozen supporters will set off from Federation Mall at 1pm this Thursday, wearing Tshirts emblazoned with the words “I was hopelessly wrong on house prices; ask me how”, as required by the bet.
“The Tshirts also carry answers to that question,” Keen noted, “with graphs highlighting how the First Home Owners Grant has caused house price bubbles, the historic level of private debt that Australia now carries, and how Australian house prices compare to Japan and the USA.”
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Keen plans to complete the 225km trek to Mt Kosciuszko by Friday April 23rd, running roughly 15km each morning and walking 15km each afternoon. “Supporters will generally walk, but some are coming on bicycles, and even stilts! I’m the only one who is required to do the whole distance on foot,” he said.
Keen notes that Roberston may one day have to follow in his footsteps. “My call was always over the longer term—when house prices fall, they fall a lot slower than share prices. The government has simply delayed the inevitable by engineering this latest bubble.”
ENDS. For further information, contact Steve Keen by email (debunking AT gmail DOT com) or phone on 0404 464 523 or 0425 248 089. Visit www.keenwalk.com.au for daily bulletins from The Walk. The T‑shirts are available for purchase for $35 each including shipping in Australia. Click here for the E‑Shop (T‑shirts will be delivered first to those on The Walk or attending the opening; other orders will be filled after The Walk finishes on April 23).