The above headline can’t have escaped the attention of many Australians yesterday. It sat at the top of the SMH, The Age, Brisbane Times and WA Today websites all afternoon. I can’t remember the last time I saw 500 comments on a Fairfax story (I literally can’t remember so it may not be that long).
I have been aware of the buyer strike campaign for a couple of weeks but haven’t moved to support it. I haven’t moved against it either because I’m seriously ambivalent.
I can imagine how the powers that be view it. If they bother taking note at all, they probably conclude it’s some renegade act of economic vandalism.
But it isn’t. And I’ll tell you why. Australian housing doesn’t have anything to do with economics. It long since ceased being a “market” at all.
Rather, it is a political complex – a quango – that represents the single largest page in the socio-economic contract between the government, the Australian financial system and an ageing baby-boomer population.
Why do I say this? It’s bloody obvious.
When the baby-boomer generation first took power and reshaped Australia in the 1980s, the promise was for a new kind of meritocracy. The old “Australian Settlement” described brilliantly by Paul Kelly in the End of Certainty - a protectionist social contract between unions, industry, government and the people – was swept aside in favour of a neo-liberal vision. The new world demanded an open, more dynamic Australia. An Australia that rewarded entrepreneurial effort and flexibility. A productive Australia.
For a while it worked. Australia dropped its tariffs, deregulated government enterprise, most especially the banks, and after a false start at the end of the eighties, embarked on an historic productivity boom.
But at some point a distortion began to grow at the heart of the new vision. It’s dark seed was sown by the original architects of the new world when they back-tracked on the removal of negative gearing tax policy for housing in the 80s.
By the late 1990s it had become a cancer eating away at the achievements of the baby-boomer generation and a second wave of bipartisan supporters of the new vision took power only to further deregulate finance and install fabulous capital gains tax privileges on property investment.
As we entered the 2000s, the new vision threatened to stall and the same baby-boomers that had convinced us all to embark on their neo-liberal journey deployed new, more direct subsidies for houses, in the form of first home buyer grants that sought to co-opt the baby-boomer’s children in the same now rapidly distorting vision.
Through the 2000s, the neo-liberal vision became virtually unrecognisable. The dynamic and open Australia mutated into a speculative abomination based almost entirely on houses. Our precious capital, freed in the 80s to find the most productive outlets possible became instead the key stone in a system of offshore borrowing and asset inflation.
The final death knell of the new vision surely came in 2003 when the old national good luck arrived in the nick of time. As the housing quango lay dying in 2003, along came a commodities boom the likes of which nobody has seen in century. The transformation was complete. The entrepreneurial vision of those pioneering 80s baby-boomers replaced with happy-jack dirt salesmen and a bloated entitlement state that now had the money to keep its most hideous progeny, the great, quivering housing sack that hung from its belly, alive.
In 2008, when the world woke up and the mutated vision was revealed in all its horrible form, the government deployed every available mechanism to keep the thing alive. Unheard of guarantees across the financial system, moral hazards like leaves in the wind, wholesale immigration, massive direct subsidies, huge general stimulus.
This might be forgiveable if it was at least honest and openly declared. But it wasn’t and isn’t. Instead, those that had sat outside the system, hoping for a house or sagely planning to swoop when the bubble burst, are insulted with blandishments about how robust the system is, how they missed out on the “market”. Even though this so called “market” long since ceased to bear any relation to laws of supply and demand.
Rather than let it be a market, and fall, authorities insult them again and again with “affordability” programs. Just yesterday, a reader sent me a link to a Victorian government program that is running a lottery for first home buyers to win a new home at 25% off. The discount is used as equity capital to finance the project. A lottery. For a home. For younger Australians, that is beyond insulting. It’s insane.
I feel sympathy to my bones for those that are running the buying strike campaign and those that participate in it. I understand completely where they are coming from. A buyers strike is an entirely appropriate and justifiable response to the Australian politico-housing complex. It is a political act targeted at a political system that lies to their face.
Yet, I can’t bring myself to support the campaign.
The reason is simple. I don’t think two wrongs make a right, and the buyers strike, if it were to succeed in bringing about a crash, which can surely be it’s only goal, would cost the nation very dearly.
In my view, it is a near certainty that Australian housing will lose value in nominal and real terms for the next decade. Either the China boom continues and rates stay very high or China stumbles and…well… you know the rest.
While the hope of a steady deflation remains, at a pace that the nation’s banks can handle, then I will embrace it, albeit uncomfortably.
Disclosure: I own a home but am not highly leveraged. If house prices fell I would benefit because the next bracket up would be within my reach.