On Dec.20, Col Rouge wrote concerning negative gearing: "Thus the tenant is being `subsidised' by the investor for their occupancy of the investment property."

On Dec.22 he wrote: "The period at the commencement of purchase by the investor, when costs exceed income, represents the time when the investors income subsidizes the purchase of the property (negative gearing)."

Eh? At face value, this seems to imply that investors subsidize themselves. But in case it is meant to maintain the original claim that investors subsidize tenants, note that a tenant initially pays PART of the investor's cost of holding the property but gets none of the capital gain, whereas later, when the landlord's repayments are lower, the tenant pays MORE than the cost of holding the property but still gets none of the capital gain. Who's subsidizing whom?

Col then reveals his self-serving prejudices by accusing me of "using those expropriated savings to subsidize the irresponsible excesses of the self-indulgent and profligate."

Oh. So tenants are irresponsible, self-indulgent and profligate, and that's why they're tenants. Nothing to do with the fact that the Reserve Bank deliberately sets interest rates so as to maintain the so-called NATURAL RATE OF UNEMPLOYMENT, which is the minimum unemployment rate that applies enough downward pressure on wages to give stable inflation. Nothing to do with the fact that workers who are consequently unemployed or precariously employed have trouble getting housing loans. Nothing to do with the fact that when wage relativities are widening, those at the bottom of the wage scale have trouble competing in the housing market.

The high-unemployment policy is hidden by casualizing the workforce and classifying everyone who has worked one hour in the last week as employed. This is how the former government could boast of "record low unemployment" while using HIGH unemployment as a Damoclean sword over the heads of workers.

CONTINUED...

...CONTINUED

I do not deny -- indeed some of my writings affirm -- that the land bubble of 1989 was partly driven by flight of money from the stock market. But the reinstatement of negative gearing also helped. In the absence of negative gearing, there would have been a flight to investments that yield current income, not just capital gains. Bubbles, by definition, are inflated by the quest for capital gains.

Col attributes the "recession we had to have" to "extended socialist governmental incompetence". As the government in question floated the dollar, deregulated the banks, introduced dividend imputation, and continued the dismantlement of protectionism, its incompetence was clearly not of the socialist variety.

Then he accuses me of re-writing history to suit my theory, when he has just done the same to suit his theory. Accusing your opponent of using the very tactic that you are using is of course a standard propaganda technique.

Thanks, grputland.

I am inclined to agree that it was not 'socialist incompetence' that we endured in Keating's time. It seemed to me also that it was the rich, rather than workers, whose needs the Keating Government was attending to.

Your point about unemployment is interesting. Whilst unemployment is understated, it still seems to me that unemployment is historically low at the moment, but only due to unsustainable resources and real estate booms.

Yabby, I'll accept that in some suburbs, the house price can be attributed to the 'rich yuppy' or more likely the 'rich empty-nester wanting the city lifestyle' effect (seeing as there can't realistically be that many more rich yuppies than 6 years' ago).
However I don't believe these are the ones under discussion. Find me some proof that suburbs in Melbourne such as Glenroy, Coburg or Preston have significantly changed in their demographics in the last 6 or 7 years (that is the period that has seen most of these suburbs go from being affordable to out of the question for many first home buyers). I also question just how many "rich yuppies" and "city-lifestyle empty-nesters" really would want the sort of fixer-upper's that dominate the bottom end of the market, which is still out of the reach of many young couples looking for their first home.
Obviously what I also want to see are figures showing the ratio of renters to owner-occupiers. If that ratio hasn't changed in the last 6 years either, then it would be unfair to put the house price rise down to a flood of investors. However I would say that if there is evidence that the demographics have changed - say, the average owner occupier in those suburbs is 5 years' older than they were 6 or 7 years ago, then this could just as well be a *consequence* of the housing bubble, as those are now the only people who can afford to own houses in those suburbs, having been themselves pushed out from more desirable suburbs.

Yabby (pretending not to understand my earlier point) wrote:

"If WA can provide welfare housing, so can other states. ..."

This avoids confronting my earlier point with a statement of the obvious. Here is my point again:

"... the housing Trust of South Australia for years made
good quality housing available to all levels of South
Australian society and never cost the taxpayer a cent."
(http://forum.onlineopinion.com.au/thread.asp?article=6697#101896)

What this clearly shows is that the South Australian economy functioned perfectly well for decades without its residents being obliged to hand over vast amounts of their wealth to an unproductive layer of land speculators, landlords, real estate agents, lenders, mortgage brokers, etc.

---

Yabby wrote,

"... I have long ago realised that its pointless to stress oneself over the things that cannot be changed."

You are liar or a fool if you claim to know for a fact that 'things' cannot be changed..

In fact, I think it suits you perfectly for things not to change. You probably imagine that when TSHTF you can use your ill-gotten wealth to shield yourself from the worst effects of environmental calamity that you are now helping to bring about.

If this were not the case, you would at least be more honest about a few things.

You would not repeatedly attempt to prettify the quarry that WA has become as an "export based, globally focussed economy".

You would at least acknowledge the ecological costs in your repeated rants about the wonders of economic growth in WA.

You would not pretend to know for a fact that "South Americans, Arabs, Venezuelans, Nigerians, etc" are uncaring enough to necessarily want to undermine our own efforts to save the planet (see again Yabby's post in "Why the Ruddslide" discussion at http://forum.onlineopinion.com.au/thread.asp?article=6685#100333).

In fact, the selfish uncaring greed you attribute to others is your own.

And you would not spend so much time attempting to disparage those of use who care enough to at least give it a try.

So, don't attempt to shirk your own moral responsibility for the harm that you know you are helping to bring about.

Ok Wiz, I looked up the first one, Glenroy. The median house price has gone
From 260k to 327k in 5 years, or up about 5% a year. Affordability hasn’t really
changed much, except that now interest rates are higher.

But to understand the housing bigger picture, look at the economics bigger picture,
going back some years. Victoria was a disaster under Kirner and Kennet had to
make some tough decisions and swung things back on track. At that stage people
were leaving Melbourne, heading for Queensland. In the last 6 years, your economic
prospects have improved, so have Australia’s as a whole. Low interest rates,
a healthy economy, money from the share market etc, means people can save a bit
and invest. Yup, lots have bought another house, I gather about 1 in 5 people own
a second house. What’s so wrong with people saving a bit for their old age?
Perhaps other forms of savings should be encouraged, with tax advantages.

Look at cashed up expats moving back, they buy expensive houses. So do many
migrants. With Melbourne growing at 4%, all these things together have meant
a strong housing market. But with the global money situation and us borrowing
so much from overseas as we don’t save enough in cash, I’d say the market
could be in trouble this year.

Daggett, with 2 posts a day, I try and concentrate on what matters most. You and
I have quite different philosophies. You want a nanny state, think that Castro’s
housing etc is wonderful. I prefer to make my own decisions and keep Govt
interference to as little as possible. The private housing market has worked
just fine for most people including me, I built my own over a couple
of years and then finished it over the next 10.

Yes the people in various countries will use more oil as their wealth increases.
Where haven’t they?

Yes Australia needs WA ‘s resources-boom, or the Chinese, Arabs and others
with huge cash reserves will own more and more of our country. We need
to pay our bills.