Ask this obvious question :

Q:
Why has the now historic situation of borrowing overcapacity been ignored for so long by successive Governments?

A:
Governments simply “ignored” borrowing overcapacity. The evidence shows governments and official bodies have recognised pieces of the problem for many years. The more defensible criticism is that recognition did not translate into sufficiently effective structural correction while rising property values remained economically and politically attractive.

Q:
At what point does housing affordability cease to be an economic problem and become a question of social legitimacy — particularly when a growing proportion of working Australians can no longer obtain secure housing through ordinary employment and saving?

And, How long can a democracy maintain public confidence in a housing system in which those who already own property are protected from substantial loss, while those who work and save increasingly cannot acquire it?

A:
??

An excellent article, well-written and clearly argued.

But … it rather begs the key question. It shows pretty clearly that the core problem is not monetary policy but housing affordability, specifically house prices. Many factors have been blamed for the rise in house prices in recent years, and all have probably played a part – record population growth, over-regulation reducing supply and pushing up costs, government failure to build or support social and affordable housing or the infrastructure for new private housing, skill and materials shortages in the building industry, and historically low interest rates, to name a few.

On the face of it, this could mean the recent decline in house prices in most capitals is a good thing. But that decline seems mostly due to choking off demand due to higher interest rates, the government’s budget tax changes and weakening purchaser confidence. Declining house prices might be a good thing for society, but only if driven by increased supply not suppressed demand.

I’d be interested in Anish’s views on that.