Share on Facebook Share on Twitter Share on Reddit + - Australia: Playing with fire By Unconventional Economist in Australian Economyat 11:43 am on April 2, 2012 | 80 comments Login to access MacroBusiness Members special reports. If you are not a member, sign up here. Please fill in the following form to login Username: Password: or Please fill in the following form to subscribe * Username * Email * Password Share on Facebook Share on Twitter Share on Reddit + - YOU MAY ALSO BE INTERESTED INUK pops Australia's Indian international student bubbleIt is fair to say that India has becomeYouth underemployment hits all time highYesterday's ABS labour force release for AugustGovernment needs a lot more jails for bossesA lot more. Via Domain: Attorney-GeneralUnemployment has much futher to riseSome charts from Damien Boey at Credit Suisse Comments The Lorax April 2, 2012 at 12:06 pm You need to fix up the formatting Leith. Lots of words joined together. Copied from a PDF was it? a63 April 2, 2012 at 12:12 pm +100 The risks to Australia are played down almost always by the government. On top of all that’s discussed here I’ll be amazed if we don’t see a further contraction due to the carbon tax. Also, if we manage a surplus it will be some small figure IMO, and what will be the difference be in having a deficit in reality? Furthermore, I’m reading the returns from the MRRT might be small anyway, so this is all sounding very scary. AB April 2, 2012 at 12:21 pm “Also, if we manage a surplus it will be some small figure IMO, and what will be the difference be in having a deficit in reality” Tiny in economic reality. Huge in political reality (unfortunately). a63 April 2, 2012 at 12:26 pm Agreed. It was a rhetorical question, but IMO we need to educate the public on some basic economics. UC … here’s a mission for you 🙂 General Disarray April 2, 2012 at 12:48 pm Yep. If they don’t deliver the surplus they’ll get hammered by the opposition. If they do the sensible thing and delay, they’ll get hammered by the opposition. A pox on both their houses. MattR April 2, 2012 at 4:22 pm Hardly a pox on both their houses. The ALP have wedged themselves well. You can’t blame the opposition for using the wedge to full advantage. Not only that, if the Coalition took power tomorrow they wouldn’t need to deliver a surplus or even claim they were going to. They could simply blame it on Labor and keep things as they are. Like I said, the ALP have wedged themselves well, very well. drsmithyMEMBER April 2, 2012 at 7:19 pm Hardly a pox on both their houses. The ALP have wedged themselves well. You can’t blame the opposition for using the wedge to full advantage. I can and I do. These people could be doing what is supposedly their job, and working together to find the best solution for the whole country. Instead they act like selfish children to promote their demonstrably broken idealogy. Much as it pains me to say it, the only politicians that act in a remotely mature and honorable fashion are the Greens. V April 2, 2012 at 9:56 pm Surely you jest …. fellow earthians. gfrench April 2, 2012 at 11:54 pm you just lost all credibility. drsmithyMEMBER April 3, 2012 at 8:37 am Surely you jest …. fellow earthians. If the worst thing you can accuse the Greens of is some flowery and idealistically optimistic language, I think you’ve made my point for me. PhilBest April 3, 2012 at 10:13 am The Greens ideology is the single most culpable factor in the whole racket. If it wasn’t for “save the planet” racketeering in land for urban development, there would been no property price bubble at all. Imagine Australia today with a shallow curve for house prices going back 20 years, and median multiples hovering between 3 and 3.5. It ain’t rocket science; this is how it worked in approx 200 out of 260 cities in the US in the “Demographia” surveys. PhilBest April 3, 2012 at 10:15 am I sincerely hope the QLD election result was the well deserved repudiation of Green policies that prevent any progress whatsoever that is good for humans, whether dams for water supply or flood protection, forest management to prevent firestorms, or new subdivisions and housing affordability. drsmithyMEMBER April 3, 2012 at 12:33 pm I sincerely hope the QLD election result was the well deserved repudiation of Green policies that prevent any progress whatsoever that is good for humans, whether dams for water supply or flood protection, forest management to prevent firestorms, or new subdivisions and housing affordability. I’m not really even a Greens supporter, but even I know this is a massively inaccurate representation of their policies and objectives. PhilBest April 4, 2012 at 8:32 am If it isn’t the Greens and their ideology causing this nonsense, who is it? Is it just that contemporary Aussies are too thick to build dams, so they won’t run out of water and get flooded out periodically; are contemporary Aussies too thick to manage forests so they don’t have firestorms every few years; are contemporary Aussies too thick to allow new subdivisions to simply be built without years of costly wrangling and delay, and housing to be affordable? I really thought better of the Aussies – I said “contemporary Aussies” because their forefathers were not this stupid. I have always thought that anti-democratic machinations of Green ideologues (stacking local buraucracies, doing devil’s bargains with Labor in every State) was primarily responsible for all this nonsense. Try and give me a convincing counter explanation. Revert2Mean April 2, 2012 at 12:49 pm Colour me stupid, but I don’t get the main thrust of this article. How will loose government spending avert a disaster occasioned by a Chinese contraction? If China stumbles, Australia will suffer a broken spine, whether or not we have a tight or loose fiscal policy. Revert2Mean April 2, 2012 at 1:23 pm In any event, the government could abolish negative gearing if they get into a tight corner. That’s worth about $5 billion to the public coffers, according to various experts including Saul Eslake and Schwab. interested party April 2, 2012 at 4:13 pm R2M, you reckon the banks will like that? Neg gearing is supporting the investment housing to a degree. If NG were taken away, how do you see the housing market? It may put a lot of supply onto the market. [email protected] April 2, 2012 at 4:47 pm Should be able to massage the withdrawal of neg. gearing over 5 – 10 years. It’s gotta happen. interested party April 2, 2012 at 4:52 pm Agreed. david collyerMEMBER April 2, 2012 at 5:01 pm The ‘gearers are Australia’s version of the US NINJA borrowers. These predominantly middle-income earners aren’t making a cracker with this profoundly flawed tax minimization strategy. They will wake up when some bright spark in the MSM tells them the truth. Then they will swarm all over the lifeboats. Wealthy people do not take the silly risk of sacrificing current income for possible capital gains. Nor do they invest in residential RE, which is madly over-priced and offers chronically poor returns. Sure they gear on commercial RE – to an interest burden of say 85% of rents. top post,UE. Don’t Buy Now! RickW-MB April 2, 2012 at 5:21 pm Once the belief that houses prices never fall is dispelled the incentive to negatively gear disappears. So the tax “incentive” is moot. Reading this article it is no wonder Steve Keen is getting world-wide attention. It is as if he wrote the script. PhilBest April 3, 2012 at 10:20 am Cjeck out California, on “DrHousingBubble” blog, to see what happens to an absurdly over-inflated market once the belief flips to “house prices have a long way to go before they reach bottom”……. Sweeper April 2, 2012 at 1:40 pm Yeah I agree. Australia’s strong fiscal position would be about our only asset in the event of China hard landing. Why flush that down the toilet as well? poid April 2, 2012 at 1:56 pm If you focus on GDP then the article makes perfect sense; to prop up GDP you want more govt spending (and if China goes all hard landing it would require an awful lot of govt spending). Of course if you look at the wider economy then such a policy is counterproductive, and GDP growth doesnt mean economic prosperity. Excessive govt spending and debt is exactly why so many countries are now very screwed. Personally i think that while the govt is going for a surplus for the wrong reasons it is in fact the right thing to do. And yes it will almost certainly lead to recession; the other day i noticed the same thing that Macca discusses, in that turning a $40bn deficit (2.5% of GDP) into surplus basically wipes out GDP growth. 2.5% of GDP also happens to be the number that Spain is attempting to cut govt spending by BTW; but in their case they dont get to surplus, they just cut the deficit. we dont want to be in that position a few years down the track. Recessions should not be avoided after periods of credit-fuelled growth and malinvestment, and in fact are necessary and cant be avoided (you either have it now, or kick the can and make it worse down the track). Trying to smooth out cycle and create linear growth trends over time is far less responsible. Revert2Mean April 2, 2012 at 3:08 pm Recessions should not be avoided after periods of credit-fuelled growth and malinvestment, and in fact are necessary and cant be avoided (you either have it now, or kick the can and make it worse down the track). Shades of Paul Keating’s “recession we had to have”. “The sun shone, having no alternative, on the nothing new”. (Samuel Beckett) Lighter Fluid April 2, 2012 at 3:23 pm +1 R2M This place needs more Beckett, t’is the only thing keeping me sane (debatable) these days… MattR April 2, 2012 at 4:25 pm +1 Good post. Hagrid April 2, 2012 at 6:11 pm poid: Trying to smooth out cycle and create linear growth trends over time is far less responsible. FWIW I agree 100 per cent. The only way to avoid the effect of the collapsing bubble is not to create it in the first place. Goldilocks April 2, 2012 at 6:53 pm + 1 Poid & Hagrid. Velociraptor April 2, 2012 at 7:51 pm Then the banking sector won’t be able to make 10 figure profits through the populace’s debt peonage camouflaged as wealth. PhilBest April 3, 2012 at 10:26 am EXACTLY. There is NO tactic to avoid LOTS of pain from these insane house price bubbles. We have been utterly betrayed by all the so called experts and responsible people who let it happen. If anything has turned me into a lukewarm believer that there IS a nefarious bunch of powerful people somewhere setting up the conditions for financial instability for the sake of their own fat profits, it is this episode in the economic history of the world. It helps to have learned that the Rockefellers were promoting “smart growth” back in the 1970’s – the 1970’s, for Pete’s sake. Now what interest would the Rockefellers have in “conserving the environment around cities”…..? Nothing at all to do with creating bubbles in urban land values? No? And George Soros funding conservation activist groups big time? These people care about the environment? I am wetting myself with laughter. PhilBest April 3, 2012 at 10:32 am I can claim to have been a house price bubble alarmist since the first Demographia report in 2007; and I can also claim to have been convinced even back then, that “supply” of urban land being strangled by local government, was responsible. Everything I have learned since then only confirms my belief. There are bubbles either bursting or inflating in every OECD housing market right now. These things only tend to hit the headlines once they have burst. Watch France. Watch Sweden. Even Germany, Austria, and Switzerland, once zones of sanity, are blowing house price bubbles right now. China is the mother of all property bubbles – Asian Crisis II in the making. In China, and India, the problem is blatantly corrupt urban land development permission processes. In the 1st world, we dignify the racket as “urban growth containment”, but it is the same thing. PhilBest April 3, 2012 at 10:45 am My own suggestion for “best way out”, is to abolish all restrictions on urban fringe development, to bring real prices of new developments back to where median multiple house prices are around 3 again; at the same time, “inflate” via monetary policy, to 15 to 20% per annum (while interest rates remain low due to central bank rates) so mortgagees exposure is quickly inflated away. And people with savings should actually be the recipients of the “new money”, so their responsible behavior is not penalised. This new money will still end up in banks “reserves”, only the right people will have the ownership of it. Gifting “new money” to banks is the central immorality of the whole system as it stands, and also guarantees that the monetary policy is rendered ineffective during unpredictable times, such as right now. Look what is happening to the money from “QE1” and “QE2” in the USA – it’s sitting on banks balance sheets and not doing any good in the real world economy. V April 2, 2012 at 10:04 pm Indeed, and I think NZ would be a case study, where the tradeables sector basically was in recession well (years) before the GFC, but the economy seemed relatively bouyant due to a)Equity (mate) withdrawl and b)Proliferation of public sector jobs. Both of which were unsustainable trends. Can’t see how govt spending on nonsense will fix the problem, now if it were to better target existing spend to drive productivity that would be something, but the pollies are too slow for that. Although Julia looks to have middle-class-welfare in its sights, so hold the phone. PhilBest April 3, 2012 at 10:56 am +100. We need a lot more people who know exactly the stuff you are saying. Serenco April 2, 2012 at 2:11 pm I’d really like to see the governemtn use our (relatively) low debt levels to enact some actual reform in the taxation department. Sure these changes are gonna cost in the short term but they will make us more competitive and prosperous in the long term. But I’m sure there’s a snowflakes chance in hell of a politician thinking further than 3 years ahead The_Mainlander April 2, 2012 at 8:10 pm Think Henry Review +100 Goldilocks April 2, 2012 at 2:29 pm Great post, thank you It looks like a catch22. Gov debt imploding would not help either. Like someone wrote last year, the bed has been made. Yesterday’s decisions define the future. Let us hope for some luck. ceteris paribus April 2, 2012 at 3:10 pm If a poorer China scenario eventuates, the Government might still frame and project a budget surplus for 2012-13 but delivering that surplus may be another matter entirely. AB April 2, 2012 at 7:09 pm I think they are going to struggle anyway. Every budget assumption I’ve seen assumes that capital gains and corporate taxes are going to start returning to “normal”. Anton April 2, 2012 at 4:10 pm “In recent weeks one of the world’s largest equity investors (Blackrock), sold down its BHP position heavily because of fears that BHP was continuing to invest capital in expansions in the face of a looming China slowdown.” I read that a blackrock source had corrected this wrong impression. Blackrock had increased the purchase of other mining assets so that BHP as a % of their mining investment had decreased. They did not sell down their BHP investment from 7% to 5%. MattR April 2, 2012 at 4:16 pm The ALP won’t deliver a surplus. They will show one in the budget, but it will have massive assumptions based on increasing revenues that simply won’t eventuate. There will be little, if any, genuine cutting of spending. The biggest tragedy is that they spent so much money on nothing when they panicked about the GFC that they have little room politically (or fiscally) to move now. Yes, you can argue that we have low debt by world standards, but that fails to note that world standards of debt are mountainous. Yes, we can afford to run a deficit for a little longer, but we should still be looking at ways to pay down the government debt we have either way (even if it’s not for another few years). However, we shouldn’t be doing this by huge increases in taxes, as the ALP seems to want to (which explains Wayne Swan’s “bash the rich” nonsense recently), for all the reasons stated in the article. Increasing taxes right now could be disastrous. If they want to cut the deficit there are plenty of wasteful programs, subsidies and welfare they could cut. It wouldn’t get us back in to surplus, but it would help and they are things that simply won’t be missed anyway. Like I said, they won’t deliver a surplus. It’s all bluster. Raising taxes will hurt the economy and won’t increase revenues the way they want and there is a snowballs chance they will cut spending in any major way. At the end of the day, you are right. The only reason they are trying to do it now is for purely political reasons. The ALP haven’t delivered a budget surplus for decades (anyone one when the last one was), it’s hurting them in the electorate and they know it. The irony being, even if they do deliver one, they will still lose the next election in a landslide. littleguy April 2, 2012 at 5:23 pm A couple of points. It’s not just government debt that’s a problem, it’s all foreign held debt including private debt which is much bigger than the government debt. Second, cutting all the “wasteful programs, subsidies and welfare” would increase unemployment and reduce taxes and therefore also increase the deficit. PhilBest April 3, 2012 at 11:00 am Yes, the economy has been getting “Keynesian” stimulus for years already from households borrowing and spending; it is a great pity all this stuff is not better understood, incumbent governments have basked in glory as the economy hummed along and the debt mounted up…… Hagrid April 2, 2012 at 6:20 pm MattR, As Treasurer Paul Keating delivered the first annual surpluses since Federation (3 if memory serves). None of the occupants in the Canberra clown cars have a track record to brag about. Curious April 2, 2012 at 8:16 pm My recollection of Menzies era 60s includes 2% budget surpluses annually invested on infrastructure. But yes the current lot on both sides are not inspiring. Alex Heyworth April 3, 2012 at 12:26 am Pretty sure we also had substantial surpluses through the 40s and 50s to pay off the substantial government debt left over after WWII. In 1946 Australia’s gross Commonwealth government debt (domestic plus external) was 190.4 per cent of GDP. This was reduced to 4.5 per cent in 2008, its lowest point. In 1975, our total external debt (private plus public) was only 5.6 per cent of GDP. It peaked at 102.7 per cent in 2009 before falling to 87.0 per cent the following year. Source: http://www.reinhartandrogoff.com/data/browse-by-topic/topics/9/ PhilBest April 3, 2012 at 11:08 am The spend on infrastructure is an important point. Our forebears regarded progress, highways, roads, dams, new subdivisions, as good things, and investments in their children’s future. These investments actually pay off, contrary to the lunacy emanating from our neo-pagan Gaia worshipping establishment. We are actually starting to pay higher and higher prices now, for having NOT invested as wisely as our forebears. drsmithyMEMBER April 3, 2012 at 12:57 pm These investments actually pay off, contrary to the lunacy emanating from our neo-pagan Gaia worshipping establishment. You seem very conflicted. I’m struggling to understand how you can write something like the above, then something completely different (and diametrically opposed) like this: “If anything has turned me into a lukewarm believer that there IS a nefarious bunch of powerful people somewhere setting up the conditions for financial instability for the sake of their own fat profits, it is this episode in the economic history of the world. It helps to have learned that the Rockefellers were promoting “smart growth” back in the 1970′s – the 1970′s, for Pete’s sake. Now what interest would the Rockefellers have in “conserving the environment around cities”…..? Nothing at all to do with creating bubbles in urban land values? No? And George Soros funding conservation activist groups big time? These people care about the environment? I am wetting myself with laughter.” PhilBest April 4, 2012 at 8:44 am Ah, it is a question of “Baptists and Bootleggers”. The Baptists support prohibition and the Bootleggers make a killing. The neo-pagan religion Greens support urban growth constraint and conservation of nature, and the biggest property speculators make a killing. The “Green” activist groups being funded by big business, are mostly too economically ignorant to see that they are acting as these people’s useful idiots; either that or they are taking Lenin’s famous dictum that a capitalist will sell you the rope you use to hang him. It is no secret that Green ideologues regard the end of global capitalism as their chief objective (founding member Patrick Moore famously quit Greenpeace in 1986 over this). So they won’t mind helping global manipulators dig global capitalism’s grave through their sheer greed. AB April 2, 2012 at 7:12 pm “Raising taxes will hurt the economy and won’t increase revenues the way they want and there is a snowballs chance they will cut spending in any major way.” Agreed but at least they are talking about introducing more means testing for middle-class welfare. Our household will be effected by nearly any means testing that they introduce but I support it. Historically of course that would have been a Liberal policy position but Abbott seems dismiss any means testing as class warfare. Goldilocks April 2, 2012 at 7:20 pm Same here but would support means testing regardless. Bipartisan agreement would be needed though, as neither party would want to take he blame. In terms of negative gearing which was mentioned higher up the chain, I don’t see how they could cut it now. They could have cut it in small increments over the past decade but probably not at all now, as the BBs are alredy contemplating whether to sell up en masse and slow melt is obviously a preferred scenario. V April 2, 2012 at 10:13 pm Not sure if BBs will initiate a huge sell down. As far as rental properties go if IR go lower the cash from the property is more than useful. If BB’s sell what are they going to do with the cash, give it to some sharemarket monkey or bond manager to lose? ceteris paribus April 2, 2012 at 8:01 pm Yes, means testing of welfare and also equalization of tax expenditures (concessions) across income cohorts is the way to go. Congratulations in recognizing the public interest, even though its disadvantages your own hip pocket. You are an honest citizen. flawse April 2, 2012 at 4:44 pm Good post UE However…. The only way we can afford to run a Govt deficit which results in a higher CAD is to either borrow more foreign money or sell more foreigners our assets (or more of what’s left). That is the stark choice and the argument needs to be framed properly. A Govt deficit is not just free money as some in this forum (not here today so far) seem to think. If we are to go down the Govt deficit higher CAD road how long do we have? Govt debt is 30% of GDP but our Gross foreign debt is already 100% of GDP or thereabouts. (Net debt about 60% but as Steve Keen always points out if something goes wrong you may not be able to collect your debts but you still owe your own debts) 80% of our mining assets are now foreign owned. In the event of further Govt deficit, and in the face of a rapidly growing CAD (in the event of a China slowdown) we ought define exactly what level of Foreign Debt we are willing to go to and exactly how much of our resources of mines, industry, and land we are willing to sell to maintain our lifestyle. If we don’t stop what we are doing we will soon enough owe 100% of GDP (esp, as people like UE point out, when the Govt takes over the Banks’ debt). How much Foreign ownership are we prepared to encourage to maintain consumption? Can we at least get the debate properly framed in terms of where our real debt problems are and what the effects will be of our various alternatives. The (easy?) answer lies back in time! AB April 2, 2012 at 7:24 pm “If we don’t stop what we are doing we will soon enough owe 100% of GDP (esp, as people like UE point out, when the Govt takes over the Banks’ debt).” Completely agree. Irish Government debt: 2006 – 24.7% of GDP 2010 – 92.5% http://bit.ly/HCfUnv Australian Government debt: 2010 – 20% of GDP 2014 – ??? http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt PhilBest April 3, 2012 at 11:16 am +100. VERY good point. The world’s biggest house price bubble can quickly turn into the world’s biggest nationalised debt. It is actually far better to just let the b—-y banks FAIL. Otherwise the interest on the nationalised debt is itself an insurmountable obstacle to progress hereafter. The Irish will NEVER pay that debt off. Their politicians sold them out. The Icelanders actually had a referendum and said “stuff the banks”. Explorer April 2, 2012 at 11:00 pm I don’t think you have bothered to read and understand MMT, fiat currencies and the unique position of a sovereign issuer of a currency in which it borows, taxes and spends. It also seems that you do not understand that the savings of the private sector are held by the public sector and reflected as accumulated government deficits/government debt. I would however like to see more explanation of how the public debt of Japan gets unwound in the face of the dis-saving by post war baby boomers and the impact on the various sectors of the economy. If the bloggers of MB don’t accept MMT it would be good to see a detailed post on why it is not valid. Bill Mitchell, Cullen Roche and others could be invited to present the explanation of MMT. What could be more fundamental to the macro position than understanding how currency and government debt and loan creation really work in a modern fiat based economy? What would be more likely to render economic understanding and modelling invalid than basing it on a an incorrect understanding of currency, government debt and loan creation? poid April 3, 2012 at 7:57 am How about, instead, the MMT theorists explain why it is actually valid in the real world? Particularly how MMT applies in what is an open system (ie currency is not just used domestically), and not just a closed system which the theory seems to implicitly assume. I’d also like to understand how MMT actually applies to the economy as a whole, and not just to increasing or decreasing GDP ie you can print currency and the govt can spend all it likes, but that does not mean the ‘economy’ itself is growing. It just means that GDP is increasing, whether that growth is productive or not. There seems to be a lack of acceptance that govt spending is particularly inefficient and as the govt sector increases the productivity of the general economy decreases. This can be seen clearly on a continuum between the most opens economies that have existed and command economies (MMT effectively endorses central planning). The burden of proof here lies with the MMT crowd. BTW the savings of the private sector and not held by the public sector; the excess of private savings over private investment is. The Mitchells et al seem to understand this but a lot of MMT followers do not. The Lorax April 2, 2012 at 6:10 pm Meanwhile over at Planet Joye things are particularly surreal at the moment. Some snippets… As I expected, the Australian house price action has improved considerably in the first quarter of 2012, with no sign of sustained house price falls. … Today TD-MI reported that headline inflation rose a stonking 0.5% in the month of March … “Risk-on” as China manufacturing booms… … So it turns out that there is no “hard landing” for Australia’s biggest trading partner, China, with the PMI released today smashing market expectations for a 50.8 print, coming in at an expansionary 53.1. Is Joye talking about the same economy as Macca is? Alex Heyworth April 2, 2012 at 6:38 pm Strength through Joye. The Prince April 2, 2012 at 6:44 pm Thats how we have a market. Eventually reality catches up to the winning side. AB April 2, 2012 at 7:28 pm Yep. Housing markets may have the velocity of continental drift but they also have the same momentum. AB April 2, 2012 at 7:30 pm (i.e. A huge m in p=mv) energywonk April 2, 2012 at 8:03 pm +10. wicked. MavMEMBER April 2, 2012 at 10:03 pm +100 Eloquent. manfin April 2, 2012 at 9:01 pm It’s quite easy for Joye to make his ‘predictions’ when those predictions are just comments on the raw data he’s seeing ahead of everyone else. What a bloody genius. Terry McFadgen April 2, 2012 at 6:30 pm flawse is of course entirely correct.And I agree that that is how the problem should be framed(but stick with my answer).The basic problem is-all the easy options have gone as flawse says and we now have to choose the least ugly.My vote is for more debt now as an insurance policy.I can understand the counter argument-but the political prejudgement of the answer makes me ill. Alex Heyworth April 2, 2012 at 6:43 pm The question I have, Terry, is more debt for what? If the debt is just so that the government doesn’t have to make hard decisions to trim ongoing welfare entitlements, then I would find it hard to support. On the other hand, if they used debt to build some more sorely needed infrastructure – maybe shorten the queues of ships off Newcastle – then I would support it. energywonk April 2, 2012 at 7:40 pm i take your point but, you would support increasing infrastructure for a 1 in 200 commodity bubble? energywonk April 2, 2012 at 7:45 pm 1 in 200 year bubble that is. Alex Heyworth April 2, 2012 at 9:43 pm Last chance to sell the stuff before the world moves on from fossil fuels! 3d1k April 2, 2012 at 9:46 pm Go baby!!! energywonk April 3, 2012 at 7:39 am thats delusional. we will be consuming fossil rates at, at least the current rates and probably higher for the next 50 years. Alex Heyworth April 3, 2012 at 8:51 am That is why we need the infrastructure. When I said last chance to sell the stuff, I didn’t just mean over the next couple of years. As you rightly point out, we’ll be using fossil fuels for some time yet. But increasingly, it will be gas rather than coal. Steve R April 2, 2012 at 7:00 pm Terry that long term chart on house prices says it all. It’s going to haunt my dreams for some time I think. Terry McFadgen April 3, 2012 at 8:42 am Alex Heyworth-I agree entirely-its the quality of spend that counts. I would argue that the spending should target areas with high employment ratios(jobs per dollar) because rising unemployment is the bomb under the housing couch. Alex Heyworth April 3, 2012 at 9:01 am Agreed. PhilBest April 4, 2012 at 8:49 am “…..rising unemployment is the bomb under the housing couch…..” Exactly. And the mechanism is inevitable: rising urban land costs affects productivity negatively, it lands costs on the productive sector of the economy that are out of proportion to historical balanced norms. Eventually, this has to crash the property market via the rising unemployment factor. pscaturchio April 3, 2012 at 9:14 am getting back to surplus is something that should have been achieved years ago and we should have remained there. We (tax payer) will pay for the property bubble popping as we have paid for its over investment through negative gearing etc and First home “vendors” grant…the reality is that our major banks will fail when this bubble pops…cap in hand they will go to the federal gov and get a bailout….the small surplus that may be there will disappear and the taxpayer will bail the banks out….obviously we should let them fail and nationalise the banks but let’s be realistic, our government policies are lacking at the best of times….we will follow most countries and bail out, and suffer austerity as opposed to Sweden in the 90’s,Iceland recently and to a very small extent, Argentina (The IMF took private pensions and foreign currency out of the country physically before the people took back their country). So the most important step is pressuring the government not to bail out our banks…Australia could turn into Spain overnight….Spain had from memory small government debt, or a small surplus and overnight was a basket case since they bailed out the banks….Australia turning Spainish or Icelandic- our choice!!