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The Forum > Article Comments > Costello has nothing to brag about > Comments

Costello has nothing to brag about : Comments

By Damian Jeffree, published 17/10/2008

The Howard government did nothing as house prices spiraled out of control powered by a debt binge that will haunt us for years.

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Another warning sign of housing price bubbles is the number of new loans created to buy "old houses" versus the number of new loans to buy a new dwelling. When we create a loan to purchase an existing asset that does not increase the supply of assets it creates debt and gives someone some money to spend elsewhere - probably on conspicuous consumption.

When we build a new house we create a new asset. The problem can be solved by not allowing banks to give loans for "old houses" unless the money is already on deposit. Take away the privilege given to the major banks where they can create loans for old assets before there is money on deposit. Only allow them to create loans without money on deposit for the construction of new assets and require the interest rate on new money to be zero plus the banks margin.

Over the past few years 90% of the 20 billion dollars per month of new loans have been for old houses. It is a miracle that we are as well off as we are. The only reason is that we have been fortunate to have enough money from selling resources to fund the increase in house prices. How much better we would be if the money had built new houses, built renewable energy plants, saved the Murray, etc.

It can be fixed but the Reserve Bank has to take a lead and require "new money" to be spent on new assets. Only allow "old money" to be used to purchase old assets. People will say we can't do this but we can do it and I have pointed out one way at http://www.onlineopinion.com.au/view.asp?article=7973
Posted by Fickle Pickle, Sunday, 19 October 2008 6:21:53 AM
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Damien,
Some of what you have said has merit. However here in Queensland the acceleration in housing prices seems to be a function of
Lack of land releases for development and overseas investors capitalising on the weaker Oz $ in the earlier 2000's. Perhaps the federal govt (read Costello) could have applied restrictions on the latter although that would be very contrary to the conservative philosophy, the former is very much a matter for the State Govt and local Authorities, both of whom seemed relish in imposing their own excesses on housing price increases through their huge "development cost' increases.
Some of the private debt growth was associated in the private sector expansion from which the nation benefitted through huge decreases in the unemployment numbers. I doubt that any govt would have interfered with that.
Howard and Costello did give us the fiscal strength that Mr Rudd can now use to trade us through this difficult time so if anything at least give them credit for that
Posted by Sid, Monday, 20 October 2008 12:38:48 PM
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Let's see,
Flogging off most our National Gold Reserves as well as almost all significant Public Assets, introducing a widespread regressive tax system, accumulating a huge Commonwealth Superannuation Fund debt by deliberately not funding it for years, losing a billion or so on currency swaps - all while in the midst of a huge resources boom -which one of those is worth any Drover's Dog Greatest Treasurer bragging about?
Posted by wobbles, Monday, 20 October 2008 2:01:09 PM
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it is worth noting inflation figures dont include housing [and petrol etc] thus the nice numbers costello created from poor numbers facilitatyed the elite to increase their income [plus tax cuts] and the poor effectivly inflated further into poverty and five year fixed contracted terms and conditions for their labours.

we wont get into the extra tax on smokers and all dinkers [except wine drinkers]or state colusions for their masters ,that has further increased the burdon on the poor ,even such measures such as rent assistance only increases the cost of the rent [maximising income for the elite owing the rental or more usually rentals]

plus tax and depriciation of the inflating govt bennifits to these favoured elite ;[depriciation on an increasing asset ?] the same group is again favoured upon by the boys club of rome , the bankers and those it favours with special terms and conditions ,favour and protection ,

special nominations into power and control over the public? service ,super top ups , credit availability ,special pensions ,healthcare ,board appointment's ,land [water ] grants ,stock manipulations , cooperate welfare and dominion[

the list is endless ,and the wage slaves [let them put their fixed income on a floating rent]
bah
Posted by one under god, Wednesday, 22 October 2008 10:01:24 AM
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In my experience smug self-assuredness in people is inversely proportional to their work ethic. So when Peter Costello comes on the TV, looking fresh as a daisy and saying what a great job he did while in office, something doesn't add up. The people making the big gains for Australia have sweat on their brow and no time for indulgent introspection, unlike our Peter.

PC's all smug about his ability to put down Labor in Parliament. But extrapolating that to the Howard Government's record of reform in office ain't fooling me. Hopefully it doesn't fool the public either.

I reckon if PC was riding in the Tour de France, he'd be the one that tucked in behind the lead rider for the first 200 kms, only getting out of the slipstream when the finish line was in sight. It would be the only time he did any real, original work.
Posted by RobP, Sunday, 2 November 2008 3:01:43 PM
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RobP,

You assumptions on Costello's work ethic based on how he looks on TV is absurd.

I hope you allow your partner / mother to make all your big decisions, such as what to wear.
Posted by Shadow Minister, Monday, 3 November 2008 6:45:58 AM
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