Aussie house prices fall 0.7% in June 2010
Jul30
on July 30, 2010
at 1:04 pm
The RPData-Rismark index has just been released, and it has fallen 0.7% in the month of June 2010.
I’ll have more to say on this shortly, but for now I can do no better than to direct you to the Business Spectator news report of the fall:
House prices fall 0.7% in June, flat in quarter
and Christopher Joye’s press release on this topic:
I also recommend Rob Burgess’s election blog perspective here:
POLL POSITION: Will Labor fall with house prices?
And I thank Rob for referring in his article to my last post in Business Spectator in June:
Discussion (16) ¬
“Steve Keen has argued a number of times in Business Spectator that the house price turn represents the end of a long-term structural problem with debt (Housing nears the precipice, June 10) – though it’s doubtful either side of politics will want to mention that.” (Burgess)
The silence on this issue has been deafening.
There is nothing funny going to happen if the Liberals win the elections and fulfill the promise of repaying the public debt while skilled migration is blocked.
Yes houses will be more affordable and it will be very cheap to renovate or get the lawn mowed, dog walked or the windscreen smashed in the car with a baseball bat.
I dunno Steve…you’re clutching at straws if you think 0.7% means we are on the way to some type of collapse… especially when the report you link to says this:
“RP Data said its data reflected a “soft landing”, and noted that any arguments in favour of a bursting of the Australian property bubble remained overstated. ”
It reminds me of your “Who’d a thought it? Unemployment leaps 0.5% in a month” post – only for unemployment figures to turn around almost as you were writing the post.
Ak, totally agree with your comments on the Liberals. They seem to think we are out of this mess and want to withdraw too much stimulus. Labor may have made some bad spending decisions but the last thing we need to do is start withdrawing large amoounts of money from the economy (otherwise Steve’s predictions may come true!!).
Borrowing stalls on housing slowdown
http://www.abc.net.au/news/stories/2010/07/30/2969164.htm
“…growth in owner-occupier home loans was the slowest since the series started in 1990″
I dont think either Liberal , Labor or the Greens are terribly comical, it a choice between the lesser of the evils.
My friends that are in SME’s are doing it very tough particularly in retail. One months figures dont signal a trend, sale of properties tends to increase in Spring and Summer. Might be interesting if we get another interest rate rise in Q4, but i reckon it’s unlikly.
Now domething funny for a friday afternoon.
http://www.youtube.com/user/TheBlissfulIgnoramus#p/a/f/0/2bMXVA9qj5I
JACK 5
Brilliant – thanks for brightening or should I say lightening the day.
ak @ 2 – Observation: I think that sensationalist, politically biased and erroneous statements like “windscreen smashed in the car with a baseball bat” and “skilled migration BLOCKED” only undermine the credibility of your other posts and opinions. Having said that I think you could have a fine career in creating political TV adds for the election – don’t ever let the truth get in the way of good spin. Given 30% of people in Australia believe that humans co-existed with the dinosaurs, your stuff should be even easier to swallow.
rb,
I do not agree that the economic and social policies proposed by the Liberars are benign especially in the context of debt deflation.
On slashing immigration – I haven’t invented that issue.
http://www.arnnet.com.au/article/354642/telstra_warns_politicians_against_cutting_skilled_migration/
I made certain direct observations in regards to what happens in a society when unemployment grows to 20%. One of the symptoms is a rising crime. A lot of normal and decent people who no longer can support their families start destroying their lives with alcohol or drugs.
The root cause of the free market illusion comes from believing in incorrect economic theores.
“The second way governments can aid productivity is by lowering the cost of capital and maximizing the availability of capital for private businesses. The Government should not be competing with the private sector for scarce capital, especially once businesses return to the markets. The “crowding out” effect of government borrowings is particularly acute for small businesses. Unlike the large corporate entities, small businesses do not have access to the equity market to raise additional capital.”
http://www.liberal.org.au/~/media/Files/Policies%20and%20Media/Economy/Coaition%20Economic%20Principles%2018%20May%202010.ashx
So for example the Government sells bonds for $1bln and then spends $1bln in order to fill up the gap in aggregate demand. The private sector has exactly the same amount of money and $1bln of bonds.
Could you explain to me based on the example above how exactly the crowding out works, assuming that there are spare productive capacities left?
rb,
This is a summary of a study from Ohio State University which clearly shows a link between low wages and unemployment leading to elevated crime rates:
“From 1979 to 1997, federal statistics show the inflation-adjusted wages of men without a college education fell by 20 percent. Despite declines after 1993, the property and violent crime rates (adjusted for changes in the country’s demographics) increased by 21 percent and 35 percent respectively during that period.
Weinberg said the strongest finding in this new study is a link between falling wages and property crimes such as burglary. However, the study also found a link between wages and some violent crimes – such as assault and robbery – in which money is often a motive.”
http://researchnews.osu.edu/archive//crimwage.htm
Hi ak,
Your statement of “while skilled migration is blocked” was incorrect. Most people would have picked up on this. I was actually hoping for a retraction from you instead of a link which states:
…”Opposition leader, Tony Abbott, recently promised to bring migrant intake levels down to 170,000 per year if elected and analyst firm, BIS Shrapnel, predicts the Government is on track to cut them to 145,000 by 2011-2012″…
“The root cause of the free market illusion comes from believing in incorrect economic theories.”
I take your point and I guess the government should actually sell over $1Tln worth of bonds, no need for the private sector to do anything really as government can make up 100% of aggregate demand and there is no difference here (governments are so great at running things as we’ve seen with insulation, building revolution, myki for those in Vic etc that there would be no issues here)…
Also, we can just sell more bonds in the future in perpetuity to pay interest on issued bonds (as otherwise we would obviously be taking away from aggregate demand in the future as we pay down debt), and this will not impact the bond rates we would pay.
Finally, no future government is allowed to pay down National debt EVER!!! All future governments MUST add to the national debt burden, because it is widely accepted that paying down debt, even while unemployment rates hover near historic lows and terms of trade are at historic highs is bad policy. Borrow more when times are good is the mantra.
Hi ak,
Re your unemployment comment:
If our economy does turn negative, which I do expect to occur in the next year or two, I absolutely would expect the government of the day to stimulate the economy and I would want them to be best placed to do so with lowest debt possible.
Rather than the misguided policies of the current government, I would hope we invest in long term infrastructure for this country which will also be able to give people jobs and be a national asset in years to come (ie. fast rail infrastructure, port infrastructure, city metro/train intrastate, research centres & grants etc.) and not just send checks in the mail, put insulation in roofs that already have it and other rip offs. I do not like short sightedness and waste at any level, something this governemnt has a firm grasp of and I will not reward it.
rb,
I will not use the MMT-based arguments for a while. Let’s assume that I am a debt-deflation aware deficit dove.
The point I was trying to make is that balancing the budget now when the state of the global economy is precarious and the housing bubble seems to be ready to burst is like playing with fire.
Only if we believe in the crowding-out story and a few other extreme monetarist “inventions” the arguments made by the Liberals make any sense. But it was monetarism and inflation targeting which brought GFC about in the first place. Who allowed for the original housing bubble to develop? Kevin Rudd or John Howard?
Developing the housing bubble was not inevitable as it did not develop in these European countries (Germany) which had a different taxation system and different monetary/fiscal policy.
source:
http://www.economist.com/node/14438245?story_id=14438245
Running budget surpluses did not help at all in moderating the growth of the level of private debt. It may have actually made things worse.
Now we are treated with the same old recycled story. Public debt… BAD, private debt… irrelevant. I am not inventing this I am just reacting to the stories invented by the Liberal spin-doctors.
The potential worst-case scenario of servicing the public debt (assuming no tricks advocated by MMT scholars) compared with the most of the Western and Eastern countries is still very low in Australia.
If the Liberals apply the fiscal brakes and at the same time reduce the level of skilled immigration the housing market may crash.
Obviously if there is a recession nobody sane will increase immigration but I am referring to the situation when immigration is intentionally throttled prior to the crash.
Once house prices fall and the unemployment among construction workers picks up (the same scenario which unfolded in the US in 2007-2008) it is already too late to stimulate and the financial cost of the clean-up may in fact be much higher. The banking system may be hit hard with capital losses… Tony will have to print money.
The system is highly non-linear. But I am not sure whether anybody in the Tony Abbott’s team cares about that or even understands what the non-linearity actually means. Ricardian equivalence and crowding-out this is all what they understand from economics…
Do we want to give the children the matches?
Having said that I am strongly against attempting to reflate the housing bubble again (this may be impossible anyway). But the government should avoid plunging our economy into depression in the first place.
I’m still not convinced enough to sell my rental property:)
The world has been living off the future earnings for way too long, now the good times are over for most who won’t understand. From nothing there is nothing. At one point people will have to work to get ahead not just invest/speculate/gamble.