The multiples they refer to are ratio verses annual average wage. I live in a country town with a multiple of 7!!!. The model for sustainability is a multiple of 3, so based on these [proven] models the whole country would have to look at a devaluation of property values in the tune of 50% or do we increase wages by 100% to protect current values, either way it is not sustainable.I would suggest that we in Australia have a very rough ride coming soon, i also feel that we have until 2010 to readjust our living standards [shed liabilities]Those that minimise there exposure now are likely to prosper in the future. Good Luck!!

I think you touch on a really interesting point towards the end of your article that I suspect had a big impact in the marginal seats at the last election but which has received little attention:

"If you can't increase your income through higher wages,......"

My sense is that the mortgage belt does not see itself as having pricing power in the labour marketplace and being able to command higher returns in the face of rising costs. This anxiety doubtless translated into support for Rudd's assertions about feeling empathy with rising living costs in terms of groceries, energy and housing costs.

This is quite an extraordinary turn around for a country that had habitual wages cost breakouts through the union movement and arbitration courts delivering favourable decisions for decades.

So in a sense, the macroeconomic success of the Coalition in breaking down the power of the old industrial relations club didn't translate into electoral success because the punters quite logically seek some sort of re-assurance that they are going to be protected from going financially backwards.

Which unfortunately suggests populism will dominate future election campaigns, barring some crisis, and calls for politicians of whatever hue to take 'courageous' ( read unpopular ) decisions will fall on deaf ears.

Which perhaps also raises the question of what the RBA can really do ? Anyone reading your pages knows that prices for soft and hard commodities are rocketing upwards, the cost base of producing these commodities is going up, and sooner or later it will translate to rising energy prices, grocery prices and homewares prices for joe shmuck consumer.

But is that cost pressure really going to translate into a wages breakout - even with our tight labour market ( which demographically may well remain tight in the future even through the economic cycle ) ? The punters in the mortage belt apparently don't see much prospect of serious income rises outside of further government redistribution through the tax and welfare system.

There has to be a thesis or two for somebody in all this.

So why are houses so expensive. Simple there less people per house. 20 years ago it was 2.4 people per house (dwelling to be precise). Now it is 1.6

What would it take to drop house prices by 20%-30% Credit to dry up and more and more people to share house or live with there parents because rent and house prices are too expensive. Every .15 increase in that 1.6 people per house will equate to a 10% drop in house values.

I refer to those television-land geeks who speak of consumer indexes, confidences, sentiments, likelihoods, of whether gold is up or down, or oil is up or down, along with their constant vaccuous ramblings and wafflings in telling us of the how and why of the arcane nonsensicals ever rampant in the US of A.
These pumped-up Blarney Spielers should all now be on the Centrelink payroll for all the irrelevent crapulatus and crapulatum that they regularly report to the people of Australia.

Thank you.

William Boeder.

Excellent article. In last 7 - 8 years people seem to have forgotten that real debt needs to be paid back with real money, cheers