Joe Hockey's Fury

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Juddism said:
how long before the RBA puts an end to this madness and starts to raise interest rates?
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It will be at least 2 years before interest rates are over 3%, let alone 4 or 5% that will start causing stress in significant people. And we won't be seeing 8% probably ever again.

Edit: I should clarify I mean the cash rate.
 

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Juddism said:
what's money got to do with it? everything..Hockey opposes minimum wage increases, and he also complains that our wages are too high. If they're not high enough, how can you buy a home? I'm not just talking about his opposition to minimum wage rises, but his opposition to higher wages, period. Why would he be out there advocating lower wages yet telling prospective first home buyers to get a good paying job?

it makes no sense at all.
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because increased wages by itself is actually the problem!

hear me out........


house prices are a multiple of the average wage (8x seems to be a standard rule). So if wages increase by $1 all that happens is house prices go up $8. Meaning the people rewarded now have to work for 21 more years to pay of the 8 dollar increase. The maths is $8 for the vendor of the house and $8 more for interests costs and the government wants $5 in tax.

So wages alone is not the solution by itself. Sure I want everyone to earn more but increased purchasing power is more important otherwise you simply line the pockets of land owners, the banks and the government!
 
Ripper said:
Governments of all persuasions are going to do everything possible to stop the bubble bursting. They are snookered. If the bubble pops then the banks would be insolvent if property prices fell 25% , which would mean bailouts by the taxpayer.

It will end badly , think wool stockpile times 1 million.
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or devalue the currency and house prices will go up in $ terms but not real value. Thus people won't ever see the slight of hand but purchasing power will be reduced by the face value will remain high.
 
Ripper said:
Governments of all persuasions are going to do everything possible to stop the bubble bursting. They are snookered. If the bubble pops then the banks would be insolvent if property prices fell 25% , which would mean bailouts by the taxpayer.

It will end badly , think wool stockpile times 1 million.
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All those families not spending any unnecessary money because they owe $700,000 on their $500,000 home, all those small business owners needing to shrink their outlays to pay off their own debt in an environment of reduced spending.
 
Power Raid said:
because increased wages by itself is actually the problem!

hear me out........


house prices are a multiple of the average wage (8x seems to be a standard rule). So if wages increase by $1 all that happens is house prices go up $8. Meaning the people rewarded now have to work for 21 more years to pay of the 8 dollar increase. The maths is $8 for the vendor of the house and $8 more for interests costs and the government wants $5 in tax.

So wages alone is not the solution by itself. Sure I want everyone to earn more but increased purchasing power is more important otherwise you simply line the pockets of land owners, the banks and the government!
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What if relationships started having three or four contributors?

The big economic boost after world war two was the women into the workforce adding a significant amount of extra income to the households, more money means more competition for property, now two are required to afford where it used to be a one income responsibility.

Perhaps inter-generational mortgages are on the horizon.
 
Power Raid said:
or devalue the currency and house prices will go up in $ terms but not real value. Thus people won't ever see the slight of hand but purchasing power will be reduced by the face value will remain high.
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That is the plan I think. The side effect is that it make property better value to overseas people.

I should have said "Governments of all persuasions and the RBA".

We have to stop thinking that Housing is an asset when really it is a consumable.

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/2802e3a8-f77c-11dd-81f7-000077b07658.html#ixzz3cihjWxTQ“A dwelling-house, as such, contributes nothing to the revenue of its inhabitant,” Smith said in The Wealth of Nations. “If it is lett [sic] to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue.” Therefore Smith concluded that, although a house can make money for its owner if it is rented, “the revenue of the whole body of the people can never be in the smallest degree increased by it”. [281]*
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Lebbo73 said:
Those days will return!
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You're right but we have a twenty to thirty year pain period coming up with low growth. I'm predicting it will also be a low inflation period so we may not need to pump up interest rates.
 
Ripper said:
That is the plan I think. The side effect is that it make property better value to overseas people.

I should have said "Governments of all persuasions and the RBA".

We have to stop thinking that Housing is an asset when really it is a consumable.
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hear hear

I prefer to think of houses as consumables and cities as infrastructure or better still a production line.

If you were building a production line would you design your factory the way we "did" our cities? we once had our jobs in the city, surrounded by our wealthiest but mostly retired and our young workers in the outer suburbs. We have decentralised our cities and built lower cost inner city living but we still have so much to do.
 
Tayl0r said:
What if relationships started having three or four contributors?

The big economic boost after world war two was the women into the workforce adding a significant amount of extra income to the households, more money means more competition for property, now two are required to afford where it used to be a one income responsibility.

Perhaps inter-generational mortgages are on the horizon.
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or better still co-operatives or well structured trusts to consolidate purchasing power


Some people wouldn't like living with others but personally I like it and do. Personally I can't understand why people would want to live in a $400k s**t box when they could pool their resources and live in a $2m luxury home. The cost of course is having to live together.

but hey, each to their own
 

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Tayl0r said:
All those families not spending any unnecessary money because they owe $700,000 on their $500,000 home, all those small business owners needing to shrink their outlays to pay off their own debt in an environment of reduced spending.
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you could imagine the carnage if people declared bankruptcy and just handed back the keys to the banks who had to then on sell the properties into a falling market to maintain liquidity ratios?

That's why I don't think it will ever happen
 
Power Raid said:
you could imagine the carnage if people declared bankruptcy and just handed back the keys to the banks who had to then on sell the properties into a falling market to maintain liquidity ratios?

That's why I don't think it will ever happen
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It might start, then the banks will turn to the government and hold out their hand.
 
Dry Rot said:
A different perspective from Germany - worth a read

http://www.forbes.com/sites/eamonnf...ts-what-home-prices-are-supposed-to-do/print/
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despite being a capitalist by nature I agree with this principle on housing. Personally I don't like the mechanism of direct interference, as I would prefer a proper property tax as the value tool, but the principle is right that housing should be cheap.

Our issue as Anglos is we fought so hard to become Landlords rather than serfs, that we will struggle culturally to accept we were wrong.
 
Tayl0r said:
It might start, then the banks will turn to the government and hold out their hand.
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yes but don't think about it as banks being bailed out for the benefit of shareholders. think of it as banks being bailed out to save the nation.

the alternative would be starvation, looting, riots and bloodshed.

Look how the Germans behaved in the 1930s and 40s
 
Power Raid said:
yes but don't think about it as banks being bailed out for the benefit of shareholders. think of it as banks being bailed out to save the nation.

the alternative would be starvation, looting, riots and bloodshed.

Look how the Germans behaved in the 1930s and 40s
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The baby boomers getting put into camps for hoarding all the wealth?
 
Power Raid said:
yes but don't think about it as banks being bailed out for the benefit of shareholders. think of it as banks being bailed out to save the nation.

the alternative would be starvation, looting, riots and bloodshed.

Look how the Germans behaved in the 1930s and 40s
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I think you mean post WW1 & through the great depression. Hitler got the place moving in the 1930's.

Then in 1939 they moved a bit further, over the Polish border in fact:(
 
madmug said:
I think you mean post WW1 & through the great depression. Hitler got the place moving in the 1930's.

Then in 1939 they moved a bit further, over the Polish border in fact:(
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32-34 was pretty colourful and I seem to remember something happened between 39-44
 
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