As we head towards the federal election, the term ‘housing shortage’ will be trotted out again and again by politicians. Their rhetoric will rely on the deeply ingrained received wisdom that Australia has a ‘housing shortage’, and no politician will want to do the hard work of differentiating between a genuine shortage in housing stock (which we don’t have) and a shortage of ‘affordable housing’ which we do have.
And why won’t they acknowledge this distinction? Simply, because admitting that it is only the prices of houses that are dysfunctional, and not simply the supply, would be too much even for their loyal voters.
After Australian house prices rose 20 percent in one year, everyone’s talking a bubble. Channel Ten’s new(ish) avant-garde current affairs program asked for my perspective on the day the RBA yet again increased interest rates.
After leading in with the news and a feature on Neil Roberston, the 26-year-old Australian snooker player who won the World Championship, the story on house prices began 4 minutes and 5 seconds into the video below.
The news that the Rudd Government was rolling back its changes to Australia’s foreign investment rules on housing came as we were still on The Walk. Just prior to starting it, I received a note from Dr John Daffy, with the following letter from him to the PM attached. I asked John whether I could publish his letter on the blog, and he agreed.
Just as the absence of statistics on foreign purchasers means we’ll never really know the impact they had on the market, we’ll probably never know how many individuals like Dr Daffy sent similar letters to their MPs and the PM; but judging from the rapid backflip on that policy, there must have been plenty.
Edward Fullbrook, the editor of the Real World Economics Review that created the Dynamite Prize in Economics and the Revere Award, has just sent out the message reproduced below.
Voting for the Revere Award for Economics for the three economists who first and most clearly anticipated and gave public warning of the Global Financial Collapse and whose work is most likely to prevent another GFC in the future, will close in a few days. Please vote. So far the number of people voting has been disappointing. To stimulate interest, the poll has now been set to reveal to you the current results once you have cast your votes. You can vote for three. To view a timeline and to vote now, click here . It takes only seconds. By voting you reward the deserving.
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.
The T-shirts have been printed and they look fantastic (if I do say so myself). There are 3 designs:
One highlights the core issue that conventional economics ignores, and Debt Deflation theories take seriously–the ratio of private debt to GDP:
Debt to GDP Ratio from 1860 till 2010
Another shows the relationship between the ratio of house prices to disposable incomes and the First Home Owners Grant. The Grant has been introduced, relaunched, or doubled on five occasions, and each time it made housing less affordable:
I’ll be posting a few links about the Walk to Kosciuszko here, mainly for information of those who will be taking part. They will duplicate posts on the Keenwalk site itself, where the members are largely but not exclusively those who will be joining me for the walk.
This post is largely about logistics: getting to Canberra, and possibly pooling resources to do so. Apologies to those who are looking for analytic content–this post will have none whatsoever. But if you are one of the walkers, please pop over to Keenwalk now and make your comments on this post there rather than here…
“I think it is a mistake to assume that a riskless, easy, guaranteed way to prosperity is to be leveraged into property. It isn’t going to be that easy.” (RBA Governor Glenn Stevens, Sunrise Program March 29 2010)
My Walk to Mt Kosciuszko is no longer a solitary affair: at last count, I will have a dozen companions for the entire distance, and another 16 joining me for at least one day.
One of those coming for the entire trip is the Commentary Editor from Business Spectator, Rob Burgess. Rob will report from and on the Walk on a daily basis, covering it both as a news story, and as the basis for a discussion of the wider issues facing business and economics in the uncharted terrain of the supposedly ‘post-GFC’ world.
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