5 ms·

I agree the cause can be made to go away overnight. However the impact of doing the wrong thing could be disastrous. In Australia we have a housing bubble, but

by jlawer 5y ago

I agree the cause can be made to go away overnight. However the impact of doing the wrong thing could be disastrous. In Australia we have a housing bubble, but the problem is woven very deep. Our tax system favours property investments. Our top tax rate (45%) kicks in at extremely low levels of income compared to globally ($180,000 AUD which is around $135,000 USD). The system provides all kinds of tax deductions to investment property owners, and ways of making paper losses to offset income tax. Much of our economic activity is banking, retail and construction. Much of which is fuelled by the churn in property with ever increasing prices. This economic cycle kept Australia out of recession until Covid hit. Now that the average house is over $500,000 AUD, we have large swaths of the younger population leveraged to their eyeballs in debt at a 2% interest rate. If housing prices fall or interest rates rise there will be a collapse, and a good chance of an extended recession we have avoided. The best case is they slowly the market down, we have a moderate rate of inflation which allows the real value of houses to drop. At the same time reduce the tax benefits to property investment. Unfortunately this won't happen. The political class knows that the median voter is a home owner, and its in their interests for housing prices to keep rising. They are just hoping that it can keep going until after they are finished. Totally not jaded about not being able to afford a house in my late 30s due to being wiped out in the 2008 GFC and then starting a family.

airbreather 5y ago
There's more to it, like migration of between 100k and 300k a year, to flatten the curve on the retirement wave and ratio of workers to non-workers, but also to keep the housing construction market going. In Perth, when the government grants were being handed out, at some stage there was hardly a single property less than 400k, now in some of the less desireable areas you can get detatched houses down to as low as 200k. Just this week, the bank stress test on mortgage lending increases from 2.5% to 3% tolerance to rate increase, lessening the amount that can be borrowed. It's all over the place, but as y say the tax system has created the concept where a dwelling is an investment and it skews the whole market. Renting looks pretty attractive at times, but the nature of tenancy agreements in Australia is 6 to 12 months terms with invasive property inspections on a regular basis, nothing like the european model with 10 year terms and decorate at will. This also drives a desire for home ownership for families as if they don't want to pay for private schools then there is competition to get into suburbs with the better government schools, and even without this they want sme long term certainty such that if they move suburbs they won't have to change childrens schools.
- jim-jim-jim 5y ago
  Thank you both for replying with so many salient data points that underline how fucked things have gotten. Immigration is an interesting variable. I'm an immigrant myself, but I'm also coming to question the wisdom of shipping in a cheeky hundred thousand people every year. It does seem like a bid to keep a scam economy running more than anything else. The supposed dearth of skilled employees is most likely another politically manufactured "shortage."
  - rsj_hn 5y ago
    There really is a dearth of skilled people. The US has no trade school system and our educational system produces remarkably unskilled and incompetent people. We would not be able to survive without grabbing most of the world's skilled workers. Of course, there's no reason why we should mistreat the native population and then depend on foreigners for everything from auto repair and electricians to tech workers and scientists. We should actually care about our domestic population and about our own working class. But if you are a business and you want to hire a skilled worker, you do really rely on the foreign labor market quite a bit.
    - bumby 5y ago
      What’s your opinion on the theory that reliance on foreign skilled labor is a mechanism for deliberately depressing skilled wages?
      - rsj_hn 5y ago
        Well, by definition increasing supply causes a decrease in price. You could also say that homebuilders are a mechanism for deliberately depressing the price of houses. But that tautology is not very illuminating. If you look at skilled wages in the U.S., they are really high. Compare them to Europe. They are high enough that skilled workers all over the world come here - the U.S. outbids the entire planet for skilled workers, which tells me more about our inability to produce skilled workers domestically rather than anything else. It's like we've turned our back on our school system, abandoning it to ineffective utopians that are busy cancelling advanced placement courses while insisting that it's unfair to track people into trade schools, and instead we just import workers from countries with more functional educational and trade school systems. Go to any top-tier graduate program in STEM, and the majority of grad students, post-docs, and professors have been born overseas. Take a look at how little an American college graduate knows compared to a German college graduate in the same major. Just a huge competency gap for the average graduate. Now compare what a "college prep" high school graduate knows in the U.S. with what a graduate of a gymnasium knows in Europe. Enormous difference. Go and look at the local auto mechanics, electricians, carpenters in your area and count how many have been born overseas. Because where would you learn those skills as an American? You have to get lucky, there is no system in place to route students towards learning these skills, they have to pick them up on their own, after going through high school -- where they learn virtually nothing -- and at their own expense.
TimonKnigge 5y ago
> Our top tax rate (45%) kicks in at extremely low levels of income compared to globally ($180,000 AUD which is around $135,000 USD). Huh? That's not that low. In the Netherlands the highest bracket, 49.5%, kicks in at ~€68k EUR (~$78k USD).

by jlawer 5y ago

airbreather 5y ago

There's more to it, like migration of between 100k and 300k a year, to flatten the curve on the retirement wave and ratio of workers to non-workers, but also to keep the housing construction market going. In Perth, when the government grants were being handed out, at some stage there was hardly a single property less than 400k, now in some of the less desireable areas you can get detatched houses down to as low as 200k. Just this week, the bank stress test on mortgage lending increases from 2.5% to 3% tolerance to rate increase, lessening the amount that can be borrowed. It's all over the place, but as y say the tax system has created the concept where a dwelling is an investment and it skews the whole market. Renting looks pretty attractive at times, but the nature of tenancy agreements in Australia is 6 to 12 months terms with invasive property inspections on a regular basis, nothing like the european model with 10 year terms and decorate at will. This also drives a desire for home ownership for families as if they don't want to pay for private schools then there is competition to get into suburbs with the better government schools, and even without this they want sme long term certainty such that if they move suburbs they won't have to change childrens schools.

jim-jim-jim 5y ago
Thank you both for replying with so many salient data points that underline how fucked things have gotten. Immigration is an interesting variable. I'm an immigrant myself, but I'm also coming to question the wisdom of shipping in a cheeky hundred thousand people every year. It does seem like a bid to keep a scam economy running more than anything else. The supposed dearth of skilled employees is most likely another politically manufactured "shortage."
- rsj_hn 5y ago
  There really is a dearth of skilled people. The US has no trade school system and our educational system produces remarkably unskilled and incompetent people. We would not be able to survive without grabbing most of the world's skilled workers. Of course, there's no reason why we should mistreat the native population and then depend on foreigners for everything from auto repair and electricians to tech workers and scientists. We should actually care about our domestic population and about our own working class. But if you are a business and you want to hire a skilled worker, you do really rely on the foreign labor market quite a bit.
  - bumby 5y ago
    What’s your opinion on the theory that reliance on foreign skilled labor is a mechanism for deliberately depressing skilled wages?
    - rsj_hn 5y ago
      Well, by definition increasing supply causes a decrease in price. You could also say that homebuilders are a mechanism for deliberately depressing the price of houses. But that tautology is not very illuminating. If you look at skilled wages in the U.S., they are really high. Compare them to Europe. They are high enough that skilled workers all over the world come here - the U.S. outbids the entire planet for skilled workers, which tells me more about our inability to produce skilled workers domestically rather than anything else. It's like we've turned our back on our school system, abandoning it to ineffective utopians that are busy cancelling advanced placement courses while insisting that it's unfair to track people into trade schools, and instead we just import workers from countries with more functional educational and trade school systems. Go to any top-tier graduate program in STEM, and the majority of grad students, post-docs, and professors have been born overseas. Take a look at how little an American college graduate knows compared to a German college graduate in the same major. Just a huge competency gap for the average graduate. Now compare what a "college prep" high school graduate knows in the U.S. with what a graduate of a gymnasium knows in Europe. Enormous difference. Go and look at the local auto mechanics, electricians, carpenters in your area and count how many have been born overseas. Because where would you learn those skills as an American? You have to get lucky, there is no system in place to route students towards learning these skills, they have to pick them up on their own, after going through high school -- where they learn virtually nothing -- and at their own expense.

TimonKnigge 5y ago

> Our top tax rate (45%) kicks in at extremely low levels of income compared to globally ($180,000 AUD which is around $135,000 USD). Huh? That's not that low. In the Netherlands the highest bracket, 49.5%, kicks in at ~€68k EUR (~$78k USD).