Wednesday, July 04, 2007

Treasury's Warning to PM on House Prices

Channel 7 television station has obtained documents from treasury under FOI legislation. The documents consist of Treasury reports to the Government about Housing affordability. The documents are available on-line at:
( )

What the documents show is that:
  • housing affordability is lowest in Sydney (no surprises), compared to other state capital cities
  • the number of mortgagee sales has increased
  • Treasury discusses the whole household sector, although it mentions areas of western Sydney ie it concerns itself with macroeconomics, but little microeconomic planning.
  • (Federal) Treasury tries to lay the blame on states: state taxes are significant, but it the Federal Government has indicated it would not change the first home owners scheme to improve affordability.
  • the paper tells the Federal Government that the effect of changing state & local land policies is overstated
  • one paper from Treasury advises the Federal Government to look at the "10-point plan" proposed by a newspaper. (are they THAT short of policy ideas in microeconomics?)

The Labor Opposition has, understandably, adopted those parts of the documents that advise the Federal Government that its own policies could be contributing to falling housing affordability. The Federal Government, of course, rejects this, and attempts to lay the blame on the states.

Politics: if it's good news, it's because of 'MY' policies; if it's bad news, it's not the Government's fault.

The Reserve Bank has recently signalled its belief that interest rates are more likely to rise at the end of 2007, an the beginning of 2008. Just about the time of the Federal election, and just after. I think the Reserve Bank will NOT raise interest rates after September, if it has not done so before, but will wait till February/March 2008. Perhaps the Federal Government's economic management is not as good as it would have us believe, and the economy is soon to be affected by internal and external influences.

The Analyst