How about some reader mail on housing?
Having lived through the collapse of the Irish property market & returning to Australia after 14 years in Europe I am alarmed that the same blinkered approach to housing and the obsession with home ownership & the use of the asset to purchase consumer items that I saw there is being repeated here – while its highly unlikely that we will see anything like the complete collapse of housing prices that occurred in Ireland since the peak in 2007 the present price regime particularly Sydney is unsustainable – a lot of people are going to be savaged…
I’ve returned to Australia recently, and what I see here is exactly what I experienced living in the US and the UK for thirteen years. The key observations are:
(1) Excessive personal debt with loans and credit cards.
(2) Very large mortgages due in part to the cost of housing.
(3) The belief that housing always goes up.
(4) Main stream media and banks hyping the process.
On the housing front I’ve heard that Australia is different and the immigration is driving the housing, and that was the case in the UK until many found jobs hard to get, and the cost of living forced people to vote with their feet. That is another point as it’s not just Australian homes that are expensive it much more and the cost of living is a key factor. I’m not sure how many people coming now return to their countries due to cost, but it may be a factor here eventually.
While Australia seems to have weathered the GFC better I’m not sure it has if you look at the banks foreign debt to support their lending portfolios. The RBA says that banks are safe, but what would an independent audit find? Who pays for the stimulus packages? What economic risk analysis is going on at the RBA, and can someone show it’s valid if a China pullback occurs?
How many current mortgage holders are under stress, and I suspect that is a lot more than we know, but in true Australian tradition families work harder to pay the mortgage rather than loose the family home.
The danger I see is that there is very little manufacturing or science/engineering companies. I’ve written to the Labour party since I’ve returned but the response showed they don’t understand. I’m not sure if they feel a service economy are all we need, but that failed in the UK. Additionally, if the resources boom slows down due to China punning back then what has the country got to fall back on?
I have worked in Australia and overseas developing mobile phone modem software and there are no jobs for me in my profession here, and in the 90’s there were. I’m sure it’s the same for others. Furthermore, with universities producing students for say Industrial Design, how many can get jobs in Australia? I spoke to an under grad a few weeks ago, and I was told that only two of the hundred students in her year got jobs in that profession. What does that say about the health of the economy and country?
Housing is just one issue that needs a resolution, however, with the Real Estate agents under quoting, and other vested interests in pushing prices up I’m not sure anything sensible will happen, and we will get a correction at some point.
There needs to be urgent government planning/policies to get a bigger manufacturing base here (look at the carbon footprint given that almost everything is imported). Also, develop science / engineering and offer conditions where technology companies will return to Australia rather than always finding the staff outside this country.
Manufacturing can also help balance the economy, and provide valuable jobs for our citizen’s. The tax base needs people to work. What is the real unemployment? Someone is not employed if they are only able to get two days a week outside their profession, yet the statistics don’t show you that.
There are very severe economic conditions outside Australia (UK/US/Europe and others) that we have no control over, and it’s possible the banks will have to pay higher rates for their foreign debt, and that will be passed on plus some to consumers.
The main stream spin says things are getting better, but are they really, and how long will it be before some countries can pay back the stimulus, the bank bail outs, and other foreign debt let alone any maturing debt obligations that we’ve not aware of?