Australian politics really is a swamp. On Friday, we got the following from NSW Planning Minister Anthony Roberts:
…new Planning Minister Anthony Roberts… has given a robust defence of the strength of Sydney’s housing market and the need for those who do not own property to get their foot in the door…
“This is about fairness, and this is about enabling people to get into the Sydney housing market”…
“Once you are in the Sydney housing market you are pretty well set then for the rest of your life,” said Mr Roberts…
…he rejected the call made by his predecessor in the planning portfolio, Rob Stokes, for the federal government to reform negative gearing.
“Sydney is an international city,” he said.
“And as such we are paying international prices for homes. Negative gearing, a massive change like that across the Commonwealth is going to affect states where, quite frankly, housing affordability is not a problem”.
…the minister also stressed that he was focused on providing ways to allow people to enter the property market as buyers, so they could benefit from higher prices.
“We are not dealing with a bubble in the Sydney market,” he said. “There is no bubble here. There might be a slowing down of growth. But the way the population is moving, and the population trending, which is upwards, you will find house prices will continue to rise.
“What I want to do is to get people into the market place and then they can be beneficiaries of the increase in the value of their property.”
Anthony Roberts must honestly believe that he has discovered a perpetual motion machine. That is, all the government needs to do is: 1) encourage more buyers into the Sydney market to 2) increase property values so that 3) everyone can generate wealth. Rinse and repeat.
Nobody loses and everyone is a winner under this genius plan. Houses will increase in value permanently, but it won’t matter because whenever you buy, you will benefit from rising values and enjoy a comfortable retirement. It’s a magic pudding formula that will just keep on giving.
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. Australia’s household debt loads are already the third highest in the world, and soon we would take out first spot:
Second, offshore borrowings and net foreign debt would blow out:
Third, the current account deficit would blow out as mandated high immigration to feed people into the bottom of the world’s first official pyramid scheme sucked in imports while hollowing-out exports.
Fourth, Australia’s 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 would continue her rise towards the prime ministership.
That the Coalition can even mull this preposterous notion, and the media take it seriously, shows that Australia has collectively drunk the Kool Aid and descended into some kind of weird ‘end of empire’ delusion.
