Sadly, I think Wendell is right. Australian households now have debt at 182 per cent of annual income. This is worse than the debt level of Americam households at 134 per cent. While the Prime Minister's largesse will have some positive impact in the short term, Australian households will be forced to reduce their debt to historically normal levels. This will mean lower levels of retail spending, higher levels of unemployment and a drop in real house prices.

Wendell is right to suggest that Australian house prices have been driven higher by policies designed to reduce urban sprawl, which have had the perverse effect of reducing supply at a time of increasing demand, driven in turn by the easy availability of credit. Australians have spent their increased wealth rather than saving a reasonable proportion of it. We are all now about to pay the price.

'...The International Monetary Fund, predict the worst of the mortgage crisis is yet to come in the United States.'

Fact, try 10 times worse, and my sources hasn't included the IMF.

Kevin Rudd should learn how to say g'day to Paul Krugman the winner of the 2008 economics Nobel Prize with the same gusto he showed Al Gore and his global warming assumptions, before our rental accommodation and home ownership landscape is scorched.

The question is how long can "highly restrictive land use policies" (for most, at least) and high immigration keep the bubble going? Of course, there would be no housing affordability problem were people given greater rights as to how they use their land. As an example, an elderly couple recently found themselves homeless after a fire. Were they restricted solely by health and safety requirements, they would have many options available that would see them remain on their land, or at least part of it. With severe, opaque, and at times highly inconsistent restrictions, it is unlikely that they will be able to rebuild.

Yes Fester,"The question is how long can "highly restrictive land use policies" (for most, at least) and high immigration keep the bubble going?" Alas, this is not the only problem that sheltered state green/labor government workshops fail to admit, as their answer to the equation is un-australian higher density accommodation to fulfill their ideal utopia, as they remould families to fit the old European style housing enclaves.It certainly is not a measure of confidence that the elite have in our ability to solve problems without draconian regulation and puts to the lie any suggestion that public service is a service but an "authority only" staging post.

The Economist has said for years, that Australian house prices are
not sustainable.

Ok, so let them drop 30%. That would make them affordable to
young couples once again. Why should that be a problem?