Yesterday we sank to a new low in Australian policy and media. From Peter Martin:
Within the Coalition’s housing work group Alexander has been tossing around an extraordinary scheme derived from the hearings that has the potential to guarantee it the next election.
It’s in three parts: The first would require APRA to continually adjust the rules governing how easily banks could lend to investors, each month; just as the Reserve Bank adjusts interest rates each month. But rather than targeting consumer price inflation as the Reserve Bank does, APRA would target house price inflation. Too much – perhaps more than doubling every 10 years – and it would make it harder to lend to investors, too little and it would be more generous. Home price growth would become predictable rather than scary.
The second part would be to advantage genuine buyers. Right now they are required to pump 9.5 per cent of their wages into superannuation. Instead they could allocate that 9.5 per cent to pay off the principal (but not the interest) on home loans, meaning they probably wouldn’t need deposits and could start buying early. The usual criticism of any measure that advantages first or genuine homebuyers is that it would push up prices leaving them no better off. But this wouldn’t, because of the role of APRA in restraining loans to investors to restrain price rises. It would just tilt the market back towards owner-occupiers…
Which brings us to part three. Because part of the homes would be owned as “superannuation”, that part would count toward the pension means test, keeping a lid on the cost of the pension. And because steadily increasing home prices would be as good as guaranteed, those increases could be borrowed against to fund fortnightly payments in retirement. For someone who bought a house at 25 and then retired at 65, the payments would be big.
…if Turnbull could pull it off, or something like it, he would stand a chance of becoming the greatest Australian prime minister since Menzies.
Commenter Darkmatter summed this brain fart up perfectly:
Has anyone noticed that this proposal is actually just a policy version of the Perpetual Motion Machines from the Middle Ages? These machines were always of the form A causes B which causes C which causes A. Each step in isolation seems plausible, except that as a whole they can’t work because they try and create energy from nothing which violates the laws of thermodynamics.
These dingbats think that if they just put policies in place that individually appeal to interest groups, it will all just work (TM). Houses increase in value permanently and they get more affordable at the same time! And they provide money for everyone in their retirement! It’s a magic pudding that just keeps on giving. Is there no end to the economic genius of this Turnbull fellow?
But let’s just assume that mandating house price rises permanently did work for a bit. What would it do? First, it can’t happen on nothing so the fuel would, of course, be debt and this would blow out:
Second, this would blow out:
Third, this would blow out as mandated high immigration to feed folks into the bottom of the world’s first official pyramid scheme sucked in imports while hollowing out exports:
Fourth, the sovereign rating would be downgraded quickly and repeatedly as Australia failed to heed warnings that its public guarantee of offshore borrowings no longer held water. Thus there would be no infrastructure development to support any of the grand in-perpetuity house price inflation and population growth.
Fifth, as living standards collapsed, politics would descend into even greater chaos and Pauline Hanson rise to the prime ministership.
That the Coalition can even mull this preposterous notion, and the media take it seriously, shows that Australia has descended into some kind of weird ‘end of empire’ brainless twattery.
