Housing affordability - get the facts right and the right facts

Wed, 08 Mar 2017  |  

I continue to wonder why the super-charged debate on Australian housing is so devoid of reliable facts and analysis. So much of the debate relies on privately manufactured snake oil, made up of unproven survey results, pretend numbers, factual errors and sweeping generalisations that fit into the "OMG I'll never be able to buy a house" narrative that generates lots of clicks and unleashes pent up anger. The media, or a large part of it, love these 'crises' and report the snake oil without doing any background checking or research to see whether the report they are covering is in any way accurate. 

So little of the news, reporting and commentary makes reference to the comprehensive, in depth, reliable, considered and unbiased research of the RBA.

While house prices are not a direct policy aim of the RBA, distortions in the housing market can have consequences for the marco economy, inflation and financial stability, which is why it spends a lot of time researching the issue and, thankfully for those with an open mind, the RBA published much of its findings.

For those interested in housing and who are eager to understand the issues, can I suggest the following articles, rather that the tosh published by headline grabbing spriukers. It might take a little time to read and take in all of the information, but if you at least read these articles, you will be better informed. 

Opening Remarks to Plenary Panel at the Australasian Housing Researchers Conference – Luci Ellis
https://www.rba.gov.au/speeches/2017/sp-ag-2017-02-16.html 

Housing Prices, Mortgage Interest Rates and the Rising Share of Capital Income in the United States – Gianni La Cava
https://www.rba.gov.au/publications/rdp/2016/2016-04.html 

Submission to the Inquiry into Home Ownership
https://www.rba.gov.au/publications/submissions/housing-and-housing-finance/inquiry-into-home-ownership/ 

Is Housing Overvalued? – Ryan Fox and Peter Tulip
https://www.rba.gov.au/publications/rdp/2014/2014-06.html 

Over to you! 

 

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THE LATEST FROM THE KOUK

Inflation is low and remains low

Thu, 27 Apr 2017

This article first appeared on the Yahoo7 Finance website at this link: https://au.finance.yahoo.com/news/inflation-020818312.html 

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Inflation is low and remains low

Inflation edged up a little in the March quarter – from an annual rate of 1.5 per cent at the end of 2016, the headline rate rose to 2.1 per cent. The underlying rate of inflation, which the RBA trends to place more weight on when it comes to assessments of interest rate policy, was even more muted, lifting from 1.5 per cent to 1.8 per cent.

And recall, the RBA target range for inflation is between 2 and 3 per cent.

Annual underlying inflation has been at or below 2 per cent since late 2015, and has been below 2.5 per cent, the midpoint of the inflation target, since the end of 2014. That is a long time.

The data today confirm that inflation is low and remains low and in isolation, continues to give the RBA plenty of scope to further reduce interest rates. When the recent data on unemployment, building approvals, private sector business investment and wages growth are added to the mix, the case for an interest rate cut is strong.

The Australian budget is likely to confirm this is a big-spending, big-taxing government

Thu, 20 Apr 2017

This article first appeared on The Guardian website at this link: https://www.theguardian.com/australia-news/2017/apr/19/the-australian-budget-is-likely-to-confirm-this-is-a-big-spending-big-taxing-government 

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The Australian budget is likely to confirm this is a big-spending, big-taxing government

While much of the focus of the upcoming federal budget will, quite rightly, be policy issues associated with housing affordability, areas of changes to spending and revenue, there will also be an opportunity to analyse the underlying values of the government.

This will be the fourth budget of the current Coalition government and will show us the ‘big picture’ of government policies and priorities. There will be data on aggregate government spending, taxation receipts, gross and net government debt and the budget deficit.

The most accurate way to analyse the trends in the key budget figures will be to assess them as a ratio of GDP. Government spending, for example, totalled $48.8bn in 1982-83 and this rose to $423.3bn in 2015-16, which is, at face value, an enormous increase. But spending actually fell from 25.8% of GDP in 1982-83 to 25.6% of GDP in 2015-16. It is a similar issue with government debt, the budget deficit and other benchmarks.

Based on the performance of the economy since the last fiscal update in December 2016, the budget is likely to confirm that this is a big-spending, big-taxing government with a strategy for continuing budget deficits and rising debt as it funds some of its pet projects.

It is all but certain that government debt will remain above 25% of GDP in 2017-18 and the forward estimates, meaning the government will be the first in the last 50 years to have spending at more than a quarter of GDP for eight straight years.