An apologist for the business sector. So is your voice for sale? You could sell yourself!

Well said! I’m in my mid-sixties, and things have never been as good as they are now, in my lifetime.

People don’t appear to even know what ‘personal responsibility’ is these days. It’s always someone else’s fault, or it’s the government’s responsibility to look after them.

There was a report in ‘The Australian’ recently with an alternative view to the housing “problem”, suggesting that the whole thing was the creation of the avaricious housing industry and ALP spin doctors. The latter don’t really believe the polls, and are getting desperate – to the point where they are trying to deny the self-evident economic triumph of the Government.

The author writes: “In seeking a particular lifestyle or a new house while still maintaining the life the mortgagor had before taking out their loan, the household budget has just been stretched too far. People have bitten off more than they can chew.
That says it all!

Home ownership is not a right. If you want your own house, try going without plasma TV, more than one car and the many other unnecessary things. When the house is paid for, then you can have the luxuries.

And let’s not forget the dills who will always be losers – because of their own inability to budget and save – no matter how good things are. Nobody can help them

I am 30, Leigh is 60 (something), and we both agree.

Everytime I hear someone say "I have a right to..." I shudder because of the downstream consequences that may occur, some of which the author has more than amply demonstrated.

One wonders whether a correction and/or crash would actually make people think about these things. In todays climate, it's hard to imagine that it would...

Yes, I agree that in some cases, borrowers have 'bitten off more than they can chew' but when Government leaders lie their way into power by spreading deception about how much better "they" are at running the economy and promising all kinds of utopian views for our future prosperity under their leadership, it's no wonder people rush out and commit themselves to a lifetime of punishing work regimes in order to keep up with mortgage repayments.

Now, throw in "workchoices" and watch the fur fly. People decided that with both of them working at the same rate of pay that they can afford the mortgage, then suddenly one of them is "tapped on the shoulder" under the guise of "restructuring" and they're in the deep end of the financial pool and drowning in debt.

Adding to this, an explosion in immigrants is pushing the price of inner city homes out of the reach of ordinary working Aussies. Too many people, too few homes which sets in place a rental position where there is a huge shortage of rental accommodation making a mortgage in outlying areas attractive. Sometimes there's little difference between paying off a mortgage and paying rent. I hold the Government, both past and present, to blame for that situation. It is, after all, their policies that create the illusion of continuous growth on the back of higher immigration levels.

It's the Government of the day in recent times that have fooled people into unrealistic expectations of continuous wealth, an ever rising economy and continuously rising rent. I believe the Government has a lot to answer for.

I really dislike this generational divide that seems to dominate discussions. The behaviour of home buyers is similar to the classic investor behaviour. Investor decisions tended to be clouded by either fear or greed. This was exactly the same 30 years ago as it is today.

I bought my first home in 1981 at the peak of the market and shortly afterwards interest rates rose sharply. My housing investment didn’t look so good for the first two years but then inflation saved the day. Interest rates stayed high but both wages and house prices kept rising with the inflation. Inflation meant that my mortgage costs were an ever decreasing portion of my income.

The reason that home buyers today have it so tough is that there is not enough inflation to cover up their mistakes.

I agree with the gist, but Felicity, you might want to research your pieces a bit better next time:

You wrote:

"Today, however, there has never been a better time to borrow if you’re a young family, or a single person aiming to get into the property market. Housing affordability might be up - that’s just the consequence of high demand in a booming economy flush with money - but the ability to get into the market as a borrower due to lower rates has never been easier. Why, then, is it such a struggle for today’s borrowers?"

Que? I had a severe case of cognitive dissonance trying to process the above.. it just isn't true. Housing affordability is, by all measures, DOWN, not up - i.e. it is harder to buy, average house prices are a GREATER proportion of average wages. Even if this is what you meant, how is it helpful to go on to explain that it is easier than ever to borrow through more lax credit requirements from lenders? That is the whole problem, right? I agree that people are borrowing excessively and are heavily exposed to small rate hikes but to say it has never been better is patently false.

You wrote:
"It’s a nice argument. It makes some sense, and explains much of the grumbling around the time the Reserve Bank of Australia meets each quarter to make its decision to change (or leave) the official cash rate."

The RBA meets monthly to assess monetary policy (11 times, no meeting January), not quarterly.

The central point about personal responsibility is valid for sure but you could have expressed your view better.

And as for Aime, you are a perfect example of the problem. As for the 'blame the immigrants' angle, I am pretty sure Pauline Hanson has a party for people like you...

I would agree with Leigh, the environment is good for anyone who wants to take control of their life. Unfortunately a lot of folk prefer to have someone else to blame for their self-inflicted misery.

One of the effects of taking control is the government do not control for us. We cannot blame government for our mortgage debts or credit card debts. Government did not go out and force us to buy the articles we freely decided to rack up with debt.

My experience has been – when government does spend on our behalf, the value of the transaction to me has always been less than if I were spending based on my own parameters of value and merit.

Typically, Medicare, Hawke introduced it and the health service fail to provide the service promised, yet I am still forced to pay it and without right to negotiate “performance standards”.

Inner-Sydney based transsexual, indigent outcast progeny of merchant family, “An apologist for the business sector.“

One wonders what OLO’s token tranny is an apology for?

Regarding “So is your voice for sale? You could sell yourself” –

I am sure those are words are coming from an authority on the topic.

Felicity, I think that you fail to consider that Howard's policies have clearly had a detrimental effect on house prices. There is unambiguous evidence that average house prices are now around 6 times the average wage (up from 4 times). This proves that the housing affordability situation has worsened. Young people have reason to complain.

Howard's decision to halve capital gains tax has definitely contributed to the housing affordability crisis. Together with the negative gearing rules, this is a key reason why investors choose housing as opposed to more productive investments. This has pushed up demand so much that many first home buyers are squeezed out of the market while wealthy investors have numerous properties in their portfolio.

And who halved capital gains tax, which largely benefits the rich and makes no economic sense whatsoever?

Consider the incentives that your party has introduced which have led to the situation we have now - rather than blaming those who have no real power.

Stickman said......"And as for Aime, you are a perfect example of the problem. As for the 'blame the immigrants' angle, I am pretty sure Pauline Hanson has a party for people like you..."

Stickman, I do hope you're not daring to allude to the suggestion that I'm a racist are you?

If you go to the general section and look at a comment I posted just a few minutes ago in the "What's wrong with the Democrats" section, you'll find that nothing could be further from the truth!

I am not a racist. I simply disagree with flooding our country with people through immigration and the baby bonus. The entire world is facing an ever increasing problem of diminishing resources and over population. In some countries, the over population problem has gone too far to be effectively halted, but it's not too late for Australia.

Then again, I don't suppose it's any use lobbying our illustrious Prime Minister on this issue. It's becoming ever more clear that he only takes his orders from the US. It would seem that the other major parties are all cast in the same mold.

It’s not the luxuries and extras that are blowing out household debt – it’s the necessities.

As house prices in the inner and middle city suburbs skyrocket through artificially low interest rates, speculative unit development and superannuation property investment trusts, younger people are forced to buy in the outer and far outer suburbs, where shopping facilities are either inadequate or zilch. Hence, the second car becomes a necessity.

Ditto, the sacrificing of public transport as government expenditure is increasingly channelled into mammoth car-friendly building projects and corporate welfare for the overpriced oil sector.

As the welfare state is dismantled, no one can expect to look forward to a pension as a buffer against aged poverty or disability. Retirements have to be funded. Superannuation payouts are usually not enough to live on – so at least one investment property and/or investment portfolio is needed and must be financed from the household budget.

Ditto, income insurance, one of the most expensive premium types, is now a staple part of most already overstretched family incomes, where families face considerable hardship if a breadwinner is disabled or incapacitated.

Confidence in the public health and education sectors have been gradually eroded as public funding moves increasingly to the private sector. Hence, many households are faced with monthly private health insurance premiums of $250 plus for an average family of four. Plus, the total education bill for three children over a six-year period at an average private high school is at least $200,000 plus.

With the second highest university debts in the developed world, those ‘selfish’ baby boomers are now obliged to part-finance their children’s university fees ($40,000 to $150,000 per degree) - quite possibly in addition to their children’s first-home deposits.

As two incomes are needed to finance increased household debt, childcare has become a major part of household budgets (unless you have a ‘selfish’ baby boomer grandma willing to do it gratis).

I could go on and on … but my word limit approaches. Unlike household debt in a user-pays society, at least I can stop.

I bought a particular brand of shampoo because it said on the tele using it would make me beautiful and I would be envied. I bought my car at three times my salary because I will be noticed and envied. I bought my five bedroom 3500 square foot brand new home so I'll be envied. One day I might have children and well, everyone says real estate is a good investment.
I have a new girlfriend now. I use a different brand of shampoo, she wants me to by her a car, some shoes and dresses, a few items of jewelry. She says she needs to look good for me. I don't know what I was thinking because I bought all the wrong furniture last time and everything has to be replaced, and anyway it won't match the new paint and drapes theme. We can't afford children.

Oh man. My friends are totally jealous of my success. I think. We only get to see each other once in a while now.

IT'S NOT MY FAULT!

As a 26 year old and being in the generation in question, i will give it to you all as straight as i can. It is not the death of personal responsibility, i refute that, it is the fact that most people have limited knowledge of the consequences and most often by the time many get into this situation, then and only then do the realise the importance of avoiding it at all costs.

Unfortunately, young people especially do not get forgiven for their credit mistakes, and most are not realy aware of consequences.

The following is why this has happenned:

1. Gen Y'ers were brought up in a consumer society which began in the 80's and thanks to their parents, where taught to keep up with the joneses and with rising technology and the like including mobile phones, have had much of their income eaten away so in effect, real 'running' costs have increased for every consumer in this time, and young people are at the forefront with the uptake of these items.

2. The fact that rising credit availability including mobile phones have put many young people in Default situations before they have even got started in life. Many are not aware of the dire long term consequences which shut them out of future credit, including the opportunity to buy assets such as property which are the cornerstone to wealth for Australians. Your credit rating is the single most important thing that you own, as it is the difference between being able to get ahead or being stuck in a rut for the rest of your life living week to week. This is not taught in any schools though.

3. Credit availability has never been easier, especially for out of control short term loans which interest is 50% and can cost you thousands, your assets and a default on your rating.

It comes down to teaching children financial sense. If not, we will be the first generation to be less secure than the last one.

Deleted for attempting to subvert the word limit.

At the risk of boring lola 11:55 AM, negative gearing of property has been around for as long as I can remember (at least since the 60s) except for a brief period when the Hawke/Keating Government tampered with the rules with harmful results for renters in 1985 and quickly re-instated it in 1967.
Capital gains tax did not exist when I bought my first property in 1973 (introduced by Hawke/Keating in 1985), the house was in a dilapidated condition and the price was four times my annual salary at the time.

Who says everyone ought own their own house?

What is so wrong with leasing when the $$ numbers and regulations are stacked in favour of tenants?

From reading property owners forums, most owners would welcome long leases where tenants are reliable, especially where the tenants are prepared to take care of minor maintenance (usually specified in leases as the tenant's responsibility anyhow).

Many financial advisers recommend leasing in lieu of owning and putting the investment money to work elsewhere.

Social change (smaller households) and migration have contributed to the boom in housing that has been going on for many years. Arguably, home owners are much more prepared than investors to escalate prices because the latter expect some economic return (and yes that is taking into account the overstated benefit [or wisdom] of negative gearing).

In banking on future price inflation to cover historically low rental returns, property investors are taking very high risks, especially where these investors have been encouraged by spruikers to use the equity of their own home as security.

Although rental demand is presently high and this is reflected in property prices, interest rate hikes can easily produce a downwards spiral in demand overnight. Tenants represent a highly mobile population and there is a sizeable rump of young tenants and solo tenants who will move home or into group housing when higher interest rates have a cumulative effect on their various loans and credit card debt.

When this happens again, I think that institutional investors will achieve a greatly increased share of the market and tighter lending criteria will prevent intending home owners from entering the market.

All in all I would have to agree with the thrust of the article and say that the onus is very much on the individual to obtain informed advice and manage risks. Any government tinkering in the market however well-intended, will lead to tears as it always has done before.

Col Rouge, just a small correction. CGT was originally applied to the whole of the indexed gain. Later on, the indexing was dropped and the CGT is now only applied to half the gain. The result is similar, but the calculation is less complex.

I bought a block of land in 1980 for $16,700 and had a house built on it in 1983 for c$57,500. The house cost three and a half times the land. Victorian male average earnings were about $14,300pa in 1980.

I bought another block of land in 1999 for $88,000 and had a similar house built on it in 2001 for c$142,000. The house cost just over one and a half times the land. Victorian male average earnings were about $43,400pa in 1999.

Equivalent blocks of land in that second area now cost about $200,000. To build the same house as in 2001 would cost about $165,000. The house now costs four fifths of the land. Victorian male average earnings were about $60,000 in January 2007.

It costs less today relative to average earnings to build a house than it did c25 years ago, but the prices of decent-sized blocks of land have gone from just over annual earnings to more than three times average earnings.

There is great demand by those who want to live in flats and tiny houses with pocket-handkerchief gardens near the city. Why people do this when they could have a lovely third of an acre garden in the Shire of Nillumbik is beyond me, but it is nonetheless a fact. This demand for a limited range of properties pushes the price up. People compete for what they can afford. If they want to waste $600,000 for a two-bedroom flat because it is called an apartment, so be it.

Negative gearing applies to all investments, not just property. There is no reason for distorting the market by removing one investment from this arrangement, any more than there is a reason for banning other deductions necessary to the production of income.

The halving of capital gains tax, which also applies to all investments, is a different matter because it favours those who earn money by investing over those who earn money by working and is thus a distortion of the tax system.

Not everyone who has a mortgage has or wants a vulgar McMansion. It is not at all "irresponsible" to expect that if you have an above-average income that you can afford an average, or even above-average, home.

The big cities have, and Sydney in particular has, always attracted migrants. The idea that a growing population is a freakish aberration that needs to be stomped on is silly, Aime, and if extra people are the problem then there's only two words to say to you: bye bye!

The current government is in office because it made people feel that this aspiration was not unreasonable. Now that it appears to be unreasonable, we can be disappointed at being misled. It might be a mistake to believe that the Opposition will deliver cheaper housing without an economic collapse, but it's silly to blame people for not exercising whatever options are available to them - including a new government - toward realising their goal of affordable housing.

The Liberal line of the moment ? This nonsense echoes Abbott's whining on about why the people are wrong and why Howard and Co deserve to be re-elected etc etc.

Always a winning formula to tell the punters they are dumb mugs who have never had it so good. Stop your whining you oily peasants and get back to work on an AWA.

Maybe the people believe Kevin is closer to the centrist maintsream than Howard who has spent the last few years stooping to the Right.

elMaybe they want someone other than John Howard as PM ? I thought in politics perception was reality ? Of course we can all agree that personal responsibility is a good thing

"...a staggering number of Australians blaming the Howard Government for their home mortgage problems."

Maybe they wouldn't if the Howard Government hadn't promised to keep interest rates low...

Maybe they wouldn't if the young home buyers grant didn't inflate prices...negative gearing, capital gains tax...

Maybe if the government's only control on inflation wasn't to suppress wage growth, it wouldn't be so much of a problem?

The concept of responsibility - personal and otherwise - died long ago.
A milestone in the decline would be the Iraq war. All responsibility for pre-empting this spurious conflict has been elided, though in this country rests squarely with the Coalition government.
Of course people have overcommitted when in a growth obsessed economy people are expected - then expect - to buy at any cost. Informed consumers make informed choices. Responsibility lays with both the consumer to research and the seller to provide the correct information.

Oh come on you bleeding hearts take on some personal responsibility. Do you need a house the size you have? Do you need a car, let alone two cars or three cars? Do you need all that pre-prepared food from the supermarket, the meal out, the alcohol, the cigarettes, the tickets to the concert or the footy? Do your kids need the designer gear or the constant child minding via an endless range of activities designed to keep them amused and apparently out of harm's way? DO you need the outsize television set and home entertainment centre?
What do you do for entertainment and what does it cost you? (Our local library is paid for through the council rates - and it is a great source of entertainment.) Can you garden (grow a few vegies perhaps?)
It's like the sob story in court, "I did it because I was abused as a kid or because I never had enough of this or that or I was not loved..." etc etc.
We expect too much, want too much and demand too much. Advertising tells us we have a right to it - and so do the politicians and the unions and the civil rights activists...no wonder we are so discontent.
Get out and do something creative...It can make all the difference!

The simple fact is that the average spent on housing as a proportion of average income has risen. Omitting the plasma screen telly and trips to the Gold Coast don't make a lot of difference to this.

In my household, we have a combined before-tax income of about $52,000. We own one car which uses 8lt of petrol a week. We don't have plasma screen telly, we have two weekends away annually. Our food bill is $50 a week for the two of us. We use 6kWhr of electricity a day and 140lt of water. And so on. We have $100,000 saved, and are saving another $20,000 annually.

We can't afford a home around here in Melbourne, where median house prices are about $350,000; stamp duty and other charges would add another $30-50,000 to this. Really, we can afford it, but any change in our circumstances - loss of a job, extended illness, interest rate rise, baby arrives, etc - would make us lose the house. Places cheaper than $350k are available, but as a rule each $2 cheaper means the place needs $1-$1.50 in work on it, so there's little net gain in money saved, or no net gain if the place is sold and capital gains tax paid.

We could try for a place further out, but then the money we save on the mortgage we'd have to spend on transport to work, so there's little or no net gain.

The mortgage we'd pay would be a $250-$350k debt, payments of $1,800 monthly and up - that's our entire discretionary income, basically. Any extra expense would hit us hard, there's no wiggle room in the budget. It's just that house prices are so high, driven high by low land availability and the tax breaks given investors. It's not because young couples are lazy and greedy.

But I guess it's always easier to blame the victims.

My wife and I, both in retirement, have built a home in delightful Portarlington, Victoria. We have not had to borrow, having had all those years in Sydney with a mortgage.

Felicity should perhaps consider the $31,000 in GST that we have paid to our builder, and the diverse other GSTs (eg $900 on floor coverings). In all, we will pay $40,000 in GST on our new home.

That money would be better employed in our self-managed super fund at say 8.5%.

It has been a keystone of Republican policy in the USA to encourage home ownership in a low interest rate regime because the GOP strategists believe that propery owners tend to vote conservative. 'Aspirational voters', 'asset rich' etc have become trite phrases. Now that the US mortgage market is going belly-up (my wife was in Boston a few weeks ago and was astounded at the number of forced mortgage sales, compared to last xmas when she was there before).

The tsunami is coming, comrades. Get out of debt if you can.

Oh please, give me a break from this pile of the steaming proverbial!

The simple facts are:
Federal tax breaks have been favouring investors over owners for sometime.
The real cost of housing has risen far more compared with wage increases in the same period.
A greater proportion of (2!) average wages are required to pay off the average home today compared with even 10 years ago, let alone 20 or 30.

This kind of garbatorial is insulting to the 20-30 year olds who havent reaped the spoils of the tax-fuelled investment housing boom but have to pay 50-100% more for the same house as 5-10 years ago. No one's expecting everything to be given to them on a platter, but they dont expect a government to be kicking first home buyers, and pretending to help with a paltry $7000 distraction.

This is the forum of the have and have-nots.
As a father of 2, supporting a family I take my responsibilities very seriously. I dont own a credit cards, a mobile phone, a flash car or plasma telly...and have a family income of around $75000 a year.
I just bought my first home (its small and modest) and costs me 40% my monthly income.
What was my choice, pay $350-380 a week in rent and get moved on for the 3 rd time in 2.5 years. Not because I'm a bad tenant, just that the owners decided to sell at such a good time.
Why dont the government assess the effects of negative gearing on the property market, wipe that out and I'm sure the baby boomers may find other places to put their money. Of course it wont get a sideways look, too much for the 'haves' to lose.
I feel sorry for my kids, at this rate they wont be buying the Aussie dream, this may be the sad reality. But please dont blame the 'have-nots' for over borrowing and pushing up prices,how can you begin to blame new home buyers for this, when they are struggling for years just to get a decent deposit. Responsibilty should lie with everyone, and the government should mediate it fairly.

Realist made an interesting point others seem to have missed or ignorned. Young people these days are often in debt to the eyeballs long before they even think about buying a home.

When were credit cards introduced? Was it in the 80s? Mobile phone plans with massive bills young people just don't see coming. 24 months interest free purchases of quite expensive items. And a lot of finance companies are happy to keep upping the credit limit regardless.

None of these finance options were available 30 years ago. You turned up at the local bank every week with your bankbook and whatever deposit you made was entered by hand by a teller with a full time job and a familiar face.

In the middle was a generation who grew up with bank books and gradually got used to credit. Now we're seeing the first generation come through since easy credit has been around all their lives.

It's not just a matter of personal responsibility. There's a lot more complicated stuff going on.

Mmm Chainsmoker I knew there was a damn good reason that I have never had a credit card or a mobile 'phone - and given the very limited amount of telly I watch I sure don't need a plasma screen....
I feel sorry for the father of two who is spending 40% of his income on his mortgage - he says his house is modest. (I do wonder though whether our ideas about 'modest' would be the same.)
This mortgage bit...how much do the young save beforehand? Or is one of the reasons they need to borrow so much that they have not learned how to save?

"She is a member of the Liberal Party."
More to the point she is a right wing demagogue practising the well worn subterfuge of absolving the Howard government of any and all responsibility by transferring blame onto those who are victims of Howards policies: policies many of which are outright criminal. Or to put it into actual real living context- the governments are waging economic terror and everlasting uncertainty into peoples lives. Howard and his ilk have transferred billions of dollars into the banks, corporations, real estate, financiers and Petrol/Oil monopolies whilst actively intervening to suppress and drive down living standards for most. Living standards for most have gone backwards! The Howard government came to power in 1995 with the pledge that they were for "the battler, the little man." Labor and Liberal are instruments of the rich to bleed the poor.
A well known cowardly and devious ploy the governments use is to deflect attention outwards or away by blaming the very victims, or to scapegoat immigrants, aboriginals, workers and lately anyone of Middle Eastern origin. The right wing create the troubled waters then fish them.

I forgot to mention in my post that in my household there is zero debt. No credit cards, no personal loans, nothing. We're even in credit on our bills (we do weekly partial payments of an amount slightly larger than what we expect the bill to be, so when the bill comes, we're in credit and don't have to pay anything - if we're short of cash for a bit, we'll be okay).

When a couple is saving 40% of their income, has a 30% deposit, and still doesn't dare take out a mortgage, that tells you something. Again - we could afford it today, but if our income dropped for some reason, or our expenses increased, we'd lose everything. And since we can rent for half the amount our mortgage would be, it's just not worth it.

But I suppose this must be our fault for being such crazy big spenders. Yeah, right.

It doesn't help that house prices don't count as part of inflation, and that there are tax breaks for investors. Those prudent 50 year olds the 20-35 year olds are being asked to emulate, it's them keeping the house prices up. A person buying their third or fourth property will naturally be able to bid more on it than someone buying their first one.

The baby boomers are making Generation X homeless.

Some interesting posts, some ridiculous with no concept of a free economy and some that have been given some intelligent thought. Unfortunately we live in an imperfect capitalist society. The main tenet being supply and demand. If you start manipulating this to any great extent, the results have ongoing effects that often have damaging results in other areas (abolish negative gearing in investment areas has ramifications elsewhere - in the case of property, a lack of it for renters) It is so easy to vilify governments, but unless you want some kind of centralised system such as existed in the Soviet Union .....and we know that doesn't work, we are unfortunately stuck with the type of economy that is often unfair, but at least there is room for initiative and hard work being rewarded and is far superior to the alternative. I suggest some readers read Adam Smith's work on economic matters written in the nineteenth century which is still relevant today.

julatron, at the end of the day you have to realize that all home owners are actually investors, so there is no logic in suggesting that they should be treated any differently to other investors. They actually don't pay capital gain's tax if they sell the family home after they have lived in it for a few years, so they are being treated favourably compared to other investors.

The main problem as someone else has pointed out is the ridiculous price of land not helped by the supply/demand paradigm. As well as that, most people want everything new to start, whereas our parents made do with what they could scrounge.

You will not find the answer unless you are prepared to ask the right questions.

Equity is not an easy thing to explain nor to achieve when the divide is based on political denials and proactive statisical invisiblities.

http://www.bsl.org.au/main.asp?PageId=5054

Felicity McMahon, you obviously have a wealth of support ("social capitial" which is good) however; I do hope you seek more depth in your future academic experiences.

Life (for individuals or populations) is not a competition, it is about humanity as it exists for each of us, in everyday life...

Our understanding one another is a "responsibility", and the only way toward education, real productivity and WORLD PEACE.

May we ALL become more ALERT.

http://www.miacat.com/
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If Felicity McMahon is the future of the Liberal Party, then I look forward to a Liberal Party that will actually deliver on their hectoring rhetoric about "personal responsibility" because the current one are running the biggest government we've ever seen, taking taxes from the middle class and putting it back into the pockets of the middle class while putting a cut into public servants' pockets along the way.

Great election-winning platform, Felicity: "We promise to do less. It's all up to youse."

So, the creation of the artificial housing bubble through cheap credit reflects on the borrowers rather than the printers of all this funny money? The banks and the politicians that are desperate to deflect attention from the bogus nature of the system are angelic bastions of personal responsibility?

What part of the fiat currency system don't you understand Felicity?

Pretty much all of it I'd say. This is the sort of diatribe we'll see more often from the central bankers' useful idiots as the house of cards built on junk loans and hedge fund naked shorting topples. We have a Weimar economy and the bankers will be partying like its 1929.

And felicity and her ilk will be screaming "THE LEFT DONE IT!"

Don't believe a word. The monopoly capitalists will convert their paper mountains to real assets and whole charade will start again.

Hard times are a'coming.

The “Death of Personal Responsibility”, eh? In recent years I’ve read various articles announcing the Death of Common Sense, the Death of Civility, even the Death of Indicating When Changing Lanes. Sic transit gloria mundi….woe is us!

Despite the rhetorical exaggeration and blatant party-line promulgation of Felicity’s article, the main point is probably valid. Many people *are* living beyond their means, and there does seem to be a tendency for some to blame the government whenever their expenses seriously eclipse their incomes.

But what else is new? This phenomenon has been observed many times in the past, and will probably be noted again in the future (along with similar observations along the lines of “kids these days are a bunch of lazy, selfish good-for-nothings who think the world owes them a living”).

Cheers!

It just seems that because a few stupid people bite off more than they can chew that we all have to be painted with the same brush.

We have a big new house, we have a couple of cars, we have a couple of plasmas, we like our kids to dress well and we like to live comfortable. We work to afford what we enjoy and desire. There is nothing wrong with wanting to have material things that make your life pleasant and easier - you just have to be able to afford it.

When we bought our house we considered what would happen if interest rates went up, we considered what would happen when we had children, we considered all the variables and we upgraded in stages to suit our situation at the time.

There are many like us. Not all people are stupid.

If politicians are not there to look out for our welfare and protection, what earthly purpose do they serve?

Voters be warned: electing a politican who preaches from the gospel of "personal responsibility" is giving them a mandate to s*it on you from a great height.

I wonder if Felicity has fully thought through the contradictions between her espousal of "personal responsibility" and her presumed interest in a political career, which is (or should be) all about public service.

I hope Felicity is in a position to clarify what role there is for a public sector - for an army, a health or education system, for roads or water or sewerage, in a world where "personal responsibility" is the watch-word.

If she wants to throw in her lot with the survivalists and head for the hills with a shotgun and can of beans, she will be the very epitome of "personal responsibility", and I for one would applaud her ethical stance.

But to lecture us about "personal responsibility" while seeking the spoils of a public career - it does not smell sweetly to me.

So let me get this straight. In 2004 John Howard asked "Who do you trust to keep interest rates low?" Other quotes from Howard included "The reality is that Labor governments over the last 30 years have always delivered higher interest rates," "the likelihood of a greater risk of higher interest rates under a Latham Labor Government." etc etc. The interest rate scare was the central plank of the Coalition's election campaign.

Now according to the polls, a lot of punters want to punish Howard for rising inflation rates, because they "trusted" him. Talk about ungrateful, eh Felicity? You promise something, don't deliver it, then people want to blame you for it.

Ironic really, Felicity bangs on about the death "personal responsibility", as cover for a Federal Gevernment that wants to avoid being held to account for their election propaganda. Priceless.

Of course it is the government that causes the interest rates to rise. It has nothing to do with the amount we spend. It has nothing to do with the luxury goods we must have.
Er...not sure that I actually have that right.
Seriously blaming the government for the fact that we want a four bedroom home on a nice block and bigger car than we need to say nothing of the other things some people believe they cannot live without - well, it's nice to blame the government but it is not fair or reasonable or even accurate. We push interest rates up.
Or rather the rest of you do because I don't own a four bedroom home, don't own a car, don't own a plasma tv etc etc. Oh, forgot - I do own a computer...but then I do need that because I do international voluntary work from home.

Communicat says "well, it's nice to blame the government but it is not fair or reasonable or even accurate. We push interest rates up."

The government do not push interest rates up nor do we. Communicat who alludes to be "fair reasonable and accurate" should know that interest rates are decided by the international monetary markets and finance swindlers. A lot of money becomes available with high rates of return. Howard is their servant, an instrument and he was lying through his teeth (and playing on peoples fears) in the last elections that his government controls interest rates.
Communicat absolves the Howard govt. and high rents by blaming the people. This is deviously turning reality on its head. Governments do not play some passive role as if they are just sitting in space twiddling their fingers. The land too plays a fairly large role whereby a market is created with significant profits for land swindling. The largest developers receive parcels of land at very very cheap prices after giving the government their requirements. The release of land in small parcels is designed to keep prices and profits very high. The banks at times lend money knowing forclosure on house and land is a very likely. But the banks do nicely after receiving deposit and payments, as well as, house and land. Another large factor is that the rich constantly intervene to make workers poorer.

I save 80% of my wage and and vote socialist and dream of interest rate rises.

What explains this phenomenon?

Anyone?

johncee1945 wrote:

"The banks at times lend money knowing forclosure on house and land is a very likely. But the banks do nicely after receiving deposit and payments, as well as, house and land."

Ahh comrade john.. I don't know where to start with the gibberish you post but here is as good as any. Deposit? What is a deposit john? It goes to the SELLER of the property, not the bank, why would the bank get it? Secondly, do you think house lending is risk-free? Do you think house prices can only go up? If so, you have no idea about the reality for people in Sydney's west and south west right now, where negative equity is commonplace - negative equity is where your house is worth less than what you owe on it. It happens when you buy at the top of the market.

That's why lenders get paid - they take risk - risk that the loan won't perform or the asset falls in value. That's why banks (and other lenders) charge a premium over where the capital markets are pricing say, oh I don't know, government debt at, for the same period.. because its RISKIER!!

Anyway, as Felicity mentioned in her piece, borrowers have never had so much access to credit, banks are not the problem john, the assumption that:
1. rates can't go up
2. asset prices can only go up

THAT is the problem.

Any upward pressure on interest rates is due the ALP State Governments' deficits.
The Howard/Costello Government's handsome surplus is the main reason they haven't gone up already:
http://www.treasurer.gov.au/tsr/content/pressreleases/2006/087.asp

So, Admiral von Schneider, Costello is now blaming the states for interest rates?

When rates were going down, Costello was happy to claim the credit. Now they're going up, it's someone else's fault.

Looks like the death of personal responsibility?

What a waste of talent for Felicity to be feeding us such garbage. But then, as one who once knew a family of wealth, I can see the breathtaking hypocrisy and self-entitlement that comes from our upper classes.

Born to rule alright. As for selling herself, well she may get into politics [not much principle there] or get some cushy media job like Bolt, Piers or Janet Albrechtsen.

Let Felicity get her own way. We'll have lots more urban crime from rollbacks of welfare. We will have stacks of gated communities. With our flooding immigration from Asia and rapidly expanding inequality, we will have the extreme disparities of wealth and poverty similar to Bangkok or Manila. Is that what progress means and Felicity's version of personal responsibility means for us. Well my own career prospects will not be altered significantly, they are already somewhat more like them two cities anyway.

Johnj, it's the Reserve Bank pointing the finger, not Costello.

Aime wrote:

"Stickman, I do hope you're not daring to allude to the suggestion that I'm a racist are you?"

Aime, your tortured grammar aside, that was certainly one way in which your post could have been interpreted. Thanks for clarifying that you aren't in fact racist, but merely xenophobic.

I agree with the proposition that the world has enough people and we needn't encourage the creation of any more... but here we seem to diverge. I would have thought that was all the more reason to ENCOURAGE immigration from countries that can't seem to work out how to feed their people rather than discourage it. Shouldn't we be 'sharing the wealth' more than we are right now? There are a lot of children going hungry in the world as you rightly point out, let's try to give them a better life here if we can.

Stickman,
“I would have thought that was all the more reason to ENCOURAGE immigration from countries that can't seem to work out how to feed their people rather than discourage it.”

Stickman, I thought you were a pretty cluey guy -up till reading the above (!)

Your proposition is a sure recipe for disaster. All it will do is encourage the ‘have nots’ to have more unsupportable children.

It’s very telling that Yohane Banda,the father of the African boy Madonna recently adopted-& whom we were told couldn’t afford to support the child - has now decided to have another!

Oh dear, Admiral. Perhaps I'm more skeptical than you, but I'm always suspicious of quotes taken out of context. The full text (I think) of The Australian article may be found here http://www.realestate.com.au/review/aug06/article1.html

McFarlane said, among other things, "To the extent that there are risky aspects of the world economy at the moment, they are the legacy of very low world interest rates during the 2001 to 2004 period," He also said interest rate levels were returning to "normal" after being "too low". You'll note, of course, that Costello didn't quote ANY of this. Fair enough too, a press release from the Treasurer is PR spin, not news. I trust the Admiral will be aware of that in future.

If Costello wants to claim credit for low interest rates (when they were low worldwide), then he has to cop the blame now they're rising (in line with world trends). Anything else would be an evasion of personal responsibility.

The best a politician can do is prepare an environment that encourages business and investment. They can not control the natural up and down of markets as investors come and go with in the natural supply and demand of natural economic trends [as opposed to forced economic trends]. The Howard government has done that for the most part and is paying off the debt accumulated by Labour, while still trying to have sufficient monies to float their political endeavors and rising government cost via union demands, pay raises, cost of living, and all the other variables effecting government and individuals, that comes with a capital economy. The Howard government cannot control the negatives inflicted on the market by personal debt and bankruptcies. Treasury may raise interest rates to attempt to control the slide but what goes up eventually comes down and vise versa. AND having some vague understanding of a capital economy and if one chooses to live by a credit economy. Take the responsibility for paying 18-20% above cost and the loss of that "disposable" income. Personally, I can't see paying anyone near 1/4 of the cost of an item today that I can buy tomorrow using that same saved 1/4. I see they have special credit cards for teens now to teach them how to live with debt. I suppose there will be a thread soon telling us all what a wonderful opportunity that is?

The Labor states' borrowings put upward pressure on official interest rates, all other things (tax, exchange rate, money supply etc.) being equal, because it causes 'crowding out' by competing with the private sector for funds, something which is especially dangerous at times of full employment when the upward pressure has a feed-back effect.

The negative effects of 'crowding out' can also be compounded when governments waste their borrowings, as ALP governments invariably do.

The Howard/Costello Government's tremendous achievement of paying off the Hawke/Keating Government's $90 billion debt and maintaining healthy surpluses has mitigated any upward pressure on interest rates and will be squandered away (as well as the Future Fund) should Kevvie get in - believe me, I've been there before.

Ahh comrade john.. I don't know where to start with the gibberish you post but here is as good as any. Deposit? What is a deposit john? It goes to the SELLER of the property, not the bank,

The point I was making Stickman is that over the last two decades thousands of working people have lost their houses to the banks - in EFFECT losing everything. In the final costing, surely most people would include the loss of deposit, or that does not matter? In some cases, the process does not end there for there is still ongoing interest to be paid. Perhaps it doesn't happen that its all gibberish?
I will repeat what I said before, the banks and ppoliticians are not passive!
Since 1985 the banks, financiers and global companies through their servants in parliament have carried out a never ending assault on jobs wages and conditions called "restructuring" or "rollback." Stickman implies that has no effect on paying off a house. Realy? It is hard to decipher Stickman whether you have some priviledged position in society but you sure sound like you are gloating in your free of all and any monetary cares and responsibility. The role you play is to cover up or mask the mercenary and exploitive relations in society. Including the abuse of their trusted elected positions of governing. After hours, the bankers and politicians are never reticent at their lavish coctail parties as each tries to oudo the other in self satisfied smugness; never shy on telling how clever they are, nor how devious, always a force to be reckoned with.

Neither personal responsibility nor independence nor individuality nor choice seems to be part of the language of social democrats or the left.

The "right" and responsibility for individuals to accept the consequences of their choices and decisions is denied from the time young people start school. Their freedom is similarly denied. Few really understand or are prepared for life in a real democracy. People easily blame government - they're so accustomed to authority figures controlling, directing and holding sway over their lives, choices and decisions.

People do have rights. Rights are implicit within the freedom that ought to be available to every person in a civil, open, democratic society. Human rights also exist, but they are balanced by the need for individuals to be responsible or at least accept responsibility for the consequences of their informed choices. There is no excuse for an uninformed choice in this information age, if people are educated to ask questions and seek answers.

Unfortunately, we readily accept that it's the government's role to intervene, plan and direct everything. We too often act as if democracy is only about electing representatives every 3 or 4 years, handing over all our authority and responsibility to them.

Borrowers and lenders share responsibility for any overcommitment that arises from rising interest rates. Only the most naive people borrow money on the expectation that interest rates won't change. Borrowers must accept the down and up sides. When things are good people don't say anything. Now interest rates are rising marginally, borrowers and the opportunist Opposition are shouting. What are they saying about continuous economic prosperity that has lifted property values extraordinarily and incomes for 10 years?

This fairly balanced article reminds people we actually do live in a democracy.

We ought to strive for more of the freedoms and independence that democracy ought to bestow, and pass it onto coming generations.

We ought to demand the right to make more informed choices that we accept responsibility for.

Only when there is more freedom, less regulation and smaller government, will Australians truly prosper and our entrepreneurial, innovative, creative spirit flourish.

No doubt there are people who overcommit themselves and would likely get into trouble in any economic environment. However, the price of an average house in Australia has gone from 3.3 times the median wage in 1970 to 7.4 times in 2005, and no doubt considerably more in urban areas. See

www.findem.com.au/factsheets/housingfactsheet.pdf

If this were simply due to people scaling up to McMansions, then you would expect the land component of the house price to be decreasing, especially since block sizes are getting smaller. In the 1970s the land component was about 30% of the cost of a house, but now it is more like 60-70%, and sometimes more.

http://www.afsd.com.au/article/aip/aip35a.htm

It is telling that building costs, which have not increased in real terms, are included in the CPI, but not the cost of the land to build the house on or the cost of buying an existing house.

The government has deliberately created this situation of high land and therefore high house prices by squeezing supply (by abandoning decentralisation, controlling zoning, and alllowing developers to sit on released land) and by increasing demand through government sponsored population growth, both in the form of subsidies for children, such as the recent baby bonus, and, much as Stickman would like to pretend otherwise, through mass migration, now close to 300,000 a year when all categories are included, according to a recent column by Ross Gittins in the Sydney Morning Herald.