Among the many disconcerting things about the current global economic meltdown are (a) no one is sure how much worse it’s going to get locally or globally, and (b) no one seems sure about how best to respond to it. Most political commentary about it in Australia seems to focus on how various actions will play out politically for the political parties rather than what will be best for the community. But even amongst the policy focused output from various economist blogs and articles, there is an enormous disparity about what is happening and what best to do about it.
Opinions tend to differ even on the impacts of what has been done already, let alone what is being proposed to be done next. Some reports suggest the billion dollars spent increasing the First Home Owners Grants has had a big impact. For example, this article states that November figures show it has created “a surge in first home buyer mortgage applications as professional investors desert the market”. However, it also says November was “the third month in a row in which the number of loans to buy houses climbed after eight consecutive declines” – dating back well <i>before</i> the first stimulus package was announced. It also notes that “the size of a typical first home loan jumped $4700”, which is an indication that increasing the First Home Owner Grant helps to increase the cost of buying a home – this is consistsent with basic economic theory, although it’s impossible to separate the impact of the Grant from the impact of reduced imterest rates.
In any case, while increasing the grant might assist some individual home buyers, it is hard to see how it generates much by way of employment, as opposed to trying to prop up the value of the residential property market. Given this market is overvalued, I’m not convinced about the appropriateness of using taxpayer money to pump air into a property bubble. Granted, it would be bad news for many people if this market was to collapse at the same astonsishing rate as the housing market in the USA, but that seems fairly unlikely.
The federal government latest plan to put up two billion dollars to support the commercial property sector also seems to be receiving wildly varying assessments of what its impact will be. There even seems to be conflicting rhetoric about what it is intended to do – everything from job generation to job protection to preventing the collapse of developers to protecting the value of the commercial property market to protecting the value of the residential property market. Maybe it’s all of the above!
In any case, I am surprised there hasn’t been more people echoing the consistent calls of National Shelter for the government to spend this sort of money on public housing. This would undoubtedly generate jobs constructing new houses, as well as relieving some of the growing pressure on public housing waiting lists – a pressure which is almost bound to increase as more and more people find it hard to afford private rental.
One Comment
Hi Andrew Your right political parties are vocalising how it will play out for themselves, they display the very thing which is wrong with what’s left of our democracy. Politicians are all about self interest and the Party! Excessive reliance on credit is the underlying evil which brought the worlds economy down, it is not on its knees yet. I am not happy that my government is running up still more debt for people like me to pay later, by making promises to pay. The world banks including Australia’s four pillars have exposures to trillions of dollars in bad paper and our and other world governments are trying to address fiscal black holes by issuing billions in promises to pay and guarantees on banks. The world credit based economy is dead, the sooner its buried the better ! When I pay my insurers several thousand dollars to indemnify my business activities and properties. They no doubt invest my premiums somewhere, perhaps the 8.25 on sub prime derivatives attracted then or someone they swapped with. I am waiting to hear from my insurers telling me they are out of business because their investments are gone and they cant indemnify me any longer. And with the expected down turns in tax revenue, hearing government promising to lower taxes is not funny to think about. It is a sad comment on the capacity of governments to actually govern.
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