PM throws money at economy…

The PM has just announced some new measures aimed at stimulating the economy. Specifically:

– A $10.4 billion “economic security strategy” in response to the global financial crisis.

– December payments of $2100 to pensioner couples and $1400 to single pensioners.

– A $3.9 billion in support for low and middle-income families.

– The $7000 first-home buyer grant will be doubled – and in the case of people purchasing newly-built homes – tripled. 

Now it might just be me, but if house prices in Australia are already grossly over-priced, isn’t doubling and tripling the first-home buyers’ grant only going to maintain already artifically high prices and effectively maintain the bubble?

In addition, I expect that this move will serve to drive prices higher, as more people take adantage of the buyers’ grant, in an environment where there is already a shortage of housing, and in particular “affordable housing”.

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40 Responses

  1. Bugger – I only got the $7000 and my house only settled at the start of August – I don’t suppose it’s backdated?

    I don’t think that this is likely to inflate prices all that much – the purpose is to stimulate the housing sector again and the triple for new houses is probably a better idea than the doubling for existing houses although we don’t want a situation with young people being forced to choose between new pokey apartments closer to the city or a real house with some lawn in the outer suburbs – this would result is a really weird social situation.

    With people’s housing prices dropping, an increase back up near where they were will probably improve consumer confidence which is pretty much what they were after.

  2. It is great news all round however they need to ensure that builders do not simply add $7,000 to the price of a new house to be greedy.

  3. TB – any criticisms of the pensioner and carer payments? Rudd said they equate to around $36/ week for singles and $27 per week for couples.

    IMO this was probably a smart political way to do this – it delivers more for all pensioners and carers than the $30/ week proposal for singles that the Coalition came up with and removes problems with their bill still sitting before the Lower house – they can vote it down now confident that they won’t cop a hiding from the pensioners because they will introduce a bill that offers more. By giving it in a lump sum, it also negates some of the rent increase issues and allows the government to continue with their reforms next year. Real reform is what is needed and this has been delivered in a way that doesn’t pretend to be reform or an answer but doean’t prevent reform in the future either. It also shuts up the critics to a degree.

  4. Housing prices need to fall. They are already over priced, and this decision pushes the pressure in the wrong direction.

    Falling house prices might cause a little difficulty in the current economy, but unless there is a significant correction the next generation will all rent, or will buy their first home with the inheritance of their parents. This will be at about the age of 60.

    Good public policy would support a correction, not support inflated prices.

    By the way, what’s our Nicole up to today?

  5. On the face of it, and I understand the political realities, it was policies like this that I think led to the great depression. As Tom pointed out, I think the problem has gone beyond these sort of short term fixes. Someone is going to have to hurt in all of this, and I agree it probably won’t be the deserved. I think we will need to get ready for some major tax reforms, probably in super, in a Northerly direction.

  6. Tom,

    Fair point, however it would probably work better if house prices simply stagnated for 5 or so years rather than decrease significantly. The only way house prices are going to stop going up is if there is smarter housing relief and increased supply in desirable areas and adequate supply in the more affordable areas. Possum did some stuff on the earlier in the year that was quite good.

    The problem is that the desirable areas are themselves in short supply – accordingly, the best way to address this is to increase their supply by effectively moving them closer to the employment areas via better transport systems, preferably via public transport. Another way is to make some of the larger regional areas more attractive to big investment and remove some of the pressure on the major cities.

  7. Check out the me me me rants over at http://www.news.com.au/comments/0,23600,24494397-2,00.html

    My deity, is this the culture that gets created after 11 years of conservative rule?

  8. Can anyone tell me if the payment also goes to those who are not seniors but are on the disability pension. I have a friend on the disability pension due to manic depression.

  9. Shane, I’m pretty sure it’s all pensioners, including disability pensions. Full press release with details of all pensioners and carers getting the payments here:
    http://www.pm.gov.au/media/Release/2008/media_release_0550.cfm

  10. Thanks Dave55 for that site it answered everything perfectly.

  11. I would prefer to have these tax cuts that the governments have given to be revoked and the people on all forms of government assistance receive it on a fortnightly basis than these people being dependent on extra payments at the whim of the government.

    I’m all for asistance to low income families too, but middle income families???

    Don’t they get enough welfare as it stands?

    The welfare recipients, especially the pensioners have been doing it hard and the government said at one stage that they will have to wait to next year, then this?

    The tactics employed do not sit well with me.

  12. Dave, I don’t think 5 years of price stagnation in real estate adequately corrects the over pricing. It needs to fall, and this government should not artificially prop up the price, which is the effect of this policy.

    I agree that adequate public transport is a problem for real estate development.

    But Australian cities are far flung, and employment for most is generally not in the public transport hub. Travel is time consuming, and it is difficult to imagine people that work in Botany, live in St Marys (Sydney) or live in Ringwood, work in Dandenong (Melbourne) ever getting a public transport system that will allow them to use it to travel to/from work. Many start work at 7am, many work shifts, many work irregular overtime. Private transport is the only form that is practical.

    The form of private transport that I’d like to see more strongly supported by the government and the public are the battery operated motor scooters. Trains should be reconfigured to allow then to be taken on board, housing estate development should have scooter/cycle lanes. Road planning should accommodate a significantly greater volume of this form of usage.

    Get enough of them on the roads and cars will become more aware. Dedicate lanes to their usage. The technology is advancing quickly, and I think this form of transport is the only alternative to petrol driven transport that is remotely practical. Pedal bicycles are very limited is demographic access, they’re no solution.

  13. Tom

    I was wanting to say that you “segway”ed nicely into transportation – but I thought bette. Oops – I just did. Damn.

    But I am also not comfortable with these “one off” payments. I did not like it when the former government did it, and do not like it now.

    🙂

  14. Ah good we disagree! (Just like old times)

    I don’t think that more road transport is the answer Tom, even if it is pedal pwer or scooter.

    What we need is a decent Mass Transit public transport system like the MTR in Hong Kong, or SkyTrain in Bangkok.

    Fast, frequent, affordable – hence everybody uses it. The public transport system in Australia is archaic by Asian standards.

  15. We need standard rail guage, removal of corners in rail lines to be the first things. Our existing trains can reach speeds of over 130kmh but it is the track and the bends that prevent efficiencies for speed.

    The most efficient transport is rail with metal on metal.

  16. Re – stuntreb October 14, 2008 at 3:14 pm

    “Ah good we disagree!”

    Yeah, finally. I was agreeing with you so much that I was starting to think I must be wrong. In my experience everyone that agrees with you is wrong!

    “Fast, frequent, affordable – hence everybody uses it. The public transport system in Australia is archaic by Asian standards.”

    I just love train travel in India, and the buses of Pakistan.

    Our history has determined that we live in the most highly urbanised country in the world. It is entirely unsuited to hub based public transport. This is effective only for the minority that work in the city.

    As a consequence of the development and structure of our cities, we will have to come up with a unique solution, and I don’t think that the form of public transport of Asia will be able to be replicated here.

    By all means develop and invest in railways etc, but this will be about 10% of the solution. Technology development will provide battery operated, low congestion, accessible private transport. But I wish I’d come up with the “segway”!!

    Electric scooters – that’s where I’m putting my money (as well as fake tanning studios and peroxide futures).

  17. Tom of Melbourne.

    Rail can solve the problems of each city if planned correctly especially as our urban sprawl continues. buses are ineffective as they compete with private transport for road usage.

  18. You have it. It’s all good except this blood stupid and irrational handout to 1st home buyers.

    Bloody hell, hasn’t anyone been listening!!! It just bungs up the price at the lowest end of the buying scale.

    Trying instead: Instead of FIRST home buyers it is Low Income Home Buyers.

    For example, try MEANS TESTED.

    Originally a FIRST home buyer equated with someone struggling. Obviously now times have changed and a first home buyer does not necessarily mean needy.

    There are single parents with no assets and living below the poverty line who are far more deserving of a helping hand. They are not first home buyers but they are non-home owners who are struggling to get together a few $s while trying feed, clothe and school their and maybe also their partner’s children.

    First home owners? You mean that couple with 2 luxury vehicles, a couple of wet-bikes and dirt bikes. They’ve been travelling for the past 10 years, Nepal, South America, Rome and all that. Now they’ve decided to buy a house and we’re going to fork out while the strugglers down the street receive zilch, zip and zero.

  19. MIn

    Could not agree more. Actually I have always believed we have the housing market arse about. In the US the inetrest on your first home tax deductible and interets on investment properties is not.

    Here it is the opposite, those owning investment properties get deductible benefits yet those trying to get their own roof over their head to get out of the rental cycle do not.

    That never ceases to amaze me in a country where home ownership has always been one of our biggest assets compared to overseas.

    Any handout from government should be means tested. Handouts are on a need basis not a greed basis.

  20. See Tom. Shane agrees with me.

    The comparison between Bangkok and Sydney is valid.

    They’re spending billions expanding the sky train’s coverage, and Bangkok as a city is much more sprawled than Sydney – covering some 1500 square kilometres, much larger population with some 9 million residents (however other estimates range up to as much as 17 million due to people travelling from rural areas for work) and a greater volume of commuters.

  21. If there are dual lines both ways the same as dual highways then rail can run express services on the second line which are not reliant on timetables of all stations services. This means rocket fast travel from outer fringes to city centres. As long as rail is planned correctly it is the only true solution to mass transit. 1 train can carry hundreds of passengers no other mass transit can match this capacity.

  22. Min,

    It seems that the economy is more important than a society.

    Will there be any lessons learnt from this economic turmoil?

    Not looking good on that front.

  23. Min

    Having agreed with you on the FHOGs the only problem is so many people are self employed in the building industry due to deregulation and convincing of previous employees by their employer to become self employed and then subcontracted back to their employer.

    If the building industry collapses it truly will decimate our economy and the livelihoods of many families no longer being paid as employees but rather as sub contractors due to the shifty antics of large corporations.

    This includes, brickies, carpenters, electricians, tilers, labourers, plumbers etc.

  24. The first home owners grant was brought in to stimulate the economy viz building New Homes as good old JWH living somewhere between the 60’s and the 70’s could only imagine newly weds moving into a New Home. Ewww, imagine marrying in the 60’s and 70’s and moving into a Pre-Loved, Used home!! OMG!!

    I am hoping for a subtle change around. That current purchasers of pre-loved used homes receive double but purchasers of new homes (thereby stimulating the economy compared with the past decade’s churning) receive triple. That is, encouragement for purchasing a new home (= brickies, plasterers, electricians etc) compared with an existing home.

    As per the Leader of the House Harry Jenkins (and my maiden name is Jenkins)…I am listening carefully. Yet to be convinced, but I’m listening.

  25. Shane | October 14, 2008 at 4:05 pm Yes, I do have it Shane. Hubby is a fitter aka tubie, is 60yrs old and we haven’t been paid over Christmas for the past 7 years. In fact there are also no longer many sparkies either who are other than contract, other than domestic.

    Must choof. Am in full on moving mode. Would you believe that in spite of filling out the form that a certain organisation which relates to phones etc somehow managed to have us moving to Woy Woy!!!! I started 8am and it’s now 4.30pm and I’m still trying to get it sorted.

  26. MIn

    Let me guess does the organisation start with T 🙂

  27. Min,

    My sympathies. there are few things more loathesome than moving house.

  28. Shane | October 14, 2008 at 4:45 pm You have it. I have the number, I have the name. This is the same organization that resulted in 10 months of phone calls because father Je* must have sounded the same to the nice young lass from another country as son’s name Je*d. Son connected his phone in FNQ which resulted in his parents’ phone several thousand kms south being disconnected.

    And now ummm, we’re moving to Woy Woy????

  29. LOL thats what happens when its sold to private enterprise. Suck the guts out, outsource the work, pay overseas CEOs obscene amounts of money to scak staff and have a shell at the end. With call centres overseas its a wonder they weren’t connection you to Waitangi New Zealand 🙂

  30. Shane | October 14, 2008 at 5:26 pm At least if I was talking to a lovely person in Waitangi they would understand my accent.

    Hubby works with a number of Maori and can understand when they call him Jiff. In fact I have spent the last year or so feeding some NZers of excellent appetite. No probs..any left overs, just take it to work.

    As previous, I was supposed to be choofing and so had better do so and go and set the table ready for dinner. Hope that one and all have a lovely evening…a beautiful sea breeze happening here.

    Nope…nothing definitive yet re the T* organization. I asked for confirmation in writing. Still waiting.

  31. “But I am also not comfortable with these “one off” payments. I did not like it when the former government did it, and do not like it now.”
    joni.

    I definitely agree with this, it would be tremendously hypocritical of me to see it any other way; while also acknowledging that circumstances are markedly “unique” at the moment & as well as being politically opportunistic I think this chumming of the electoral waters is actually aimed at the perceived collapse of economic confidence.

    I can see sense in the thrust of what Tom (quite noteworthy when the anti-union anchor is detached methinks) & James have stated.
    Especially given the blame often attributed to Anus Howard over the FHOG. It doesn’t suddenly become a good idea just because Rudd regurgitates it. There needs to be pain for equilibrium to return doesn’t there?

    I wanted to agree with reb but being wrong all of the time just sux.

  32. Shane,

    Oh well, at least the proceeds from that sale was put into a fund and sent OS to be managed on a return of 5.5% from over 55% that was exposed to high risk investment strategy.

    Could set up a development bank in Australia and earned more than that pathetic rate!

  33. I am sorry, but WTF is the PM doing having an “Address to the Nation” at 630pm tonight?

    It looks like we have another PM that thinks he is a president.

    😦

  34. Yep joni. It’s looking increasingly that way. They are all media whores though.
    How quickly they fall into type.

    I imagine Pious Rudd is just taking the opportunity to publicly pull his tiny todger so that we all know he is “doing something”…for this we can probably blame the slopposition & RW media limpets for perpetually insisting that he “does nothing”; whatever that means.

    He still has a long way to go before sinking to Howardian depths though. Rudd is a little too conservative for my liking.

  35. And I don’t know if anyone has just seen the ad with Bernie Fraser (ex head of the RBA). Good ad, but he could be a bit more enthusiastic!

    And I am working hard to contain my excitement at the prospect of seeing Chairman Rudd in 15mins….. woohoo!!!

  36. Rudd keeps interchanging “we” and “I” to try a make him not looks so presidential.

  37. I will be interested in reading George’s take on this tomorrowat The Australian.

    I would keep an eye on his blog…judging by his last response to my post over there, it will be illuminating.

  38. Check out the me me me rants over at . . .

    That’s what I like about this mob. It’s never me me me (unless Sherlock or Chalks find their way here – God forbid). On this site I can read a balanced argument which considers the pros and cons on most issues, from bloggers who are just as prepared to listen to the arguments of others as they are to present issues themselves.

    I think that makes us unique.

  39. So the Government is relying on the old Multiplyer Effect of spend and it will grow the economy….mmmmmmmm?

    These are one off payments for pensioners et al… I believe…the enquiry and review is ongoing…we all know it was needed for the poor buggars and this a Get Out of Jail card for the Government…win win win

    …when I heard the $21000 for new home buyers I was a little perplexed – I then figured $21,000 of a $300,000 home is just over 14 times – when The Minister and I bought our first home in 1971 for $12,000 we received a $500 grant (however, it was means tested) that was 24 times the price…

    …nothing for us in the Self Funded Retirees Twilight Zone – might have to look for work until I’m eligible for the pension – lot of work around for 61 year olds who ran their own business for 16 years – yeah!

    Just hope they get the pension review over in the next four years 😀

  40. Human Dividend – “noteworthy when the anti-union anchor is detached”.

    The fact is that this is when my opinion is most lucid!

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