The detailed interview below with David Flint on ADH TV’s “Save the Nation” explains how dumb policy is setting Australians up for a bleak economic future.
One of the topics discussed was how the big run-up in house prices has been detrimental to Australia’s welfare, despite launching us to the top of the global wealth rankings.
Edited Transcript:
Consistently, Australia has been ranked among the very richest in the world. But when you actually break down those surveys, you find out that Australia’s wealth is dominated almost exclusively by housing.
Australia’s housing is ridiculously expensive. The median house price in Sydney, for example, has topped $1.4 million. It is absurd.
According to the Australian Bureau of Statistics, the average home value in Australia is almost $1 million, with the total value of Australia’s dwelling stock approaching $11 trillion.
When you have expensive housing, that gets counted as wealth. And because Australia has one of the most expensive housing markets in the world, our households are considered incredibly wealthy.
What those surveys don’t show is that Australia actually has a relatively low proportion of its wealth in the form of financial assets that are liquid.
I believe that Australians would actually be wealthier if we never had such strong house price appreciation and our median home price was, say, $380,000 rather than $760,000. And as a result, Australia’s household debt wasn’t 140% of income but was instead 70% of income.
Australians would be a lot better off and we would be “wealthier” as a nation, even though the statistics would say we’re less wealthy, if our housing cost half as much as it does and we never experienced this massive run up in house prices.
I think we would have a much more egalitarian society and we would be better off financially if we weren’t carrying so much debt and our housing wasn’t worth as much…
A home has the same function, whether it’s worth $5 million or $500,000.This house price appreciation has also come at the expense of our children, who, when it is their turn, will have to pay a lot more for their housing than they should. That is going to make them poorer…
Most of Australia’s household wealth isn’t real. It is locked up in expensive housing. And this house price appreciation for the vast majority of people who just live in their homes and don’t own investment properties is useless.
It is also detrimental for recent purchasers to have to pay high house prices or future Australians who will need to buy a home. They will carry bigger debts or they’ll be locked into the rental market for the rest of their lives…
Australians would be better off if we had never experienced this house price boom and we weren’t at the top of the league tables in wealth because of this house price boom.
