Steve Keen, economics commentator and contributor to Business Spectator, is suffering the ignominy of having lost a punt he felt certain would come off in his favour.
Being an economist, one would think he’d know better than to bet on the black magic which is economic prediction, but he did so none the less, having bet a compatriot that Australia’s housing price bubble would burst in the same manner as Japan’s did some time back. A loss of 40% in value, no less. Well, as we all know from near 80% auction clearance rates in ever more expensive markets over the weekend just past, our bubble seems to be much more resistant to popping than the Japanese variety.
Keen’s suffering won’t be only due to his pride either. His feet are likely to not be his best friends by the end of April, given that as loser, he has to walk from Parliament House in Canberra, to Mt Kosciuszko. Not wanting to be seen as a complete loser, Keen claims to have turned his lack of judgement and overly optimistic reliance on his mastery of economic wizardry into a protest walk against government policy ineptitude. Which particular brand, you might ask? The First Home Owner’s Grant kind. Keen seems to believe that the FHOG is solely to blame for the ever increasing size and tenacity of the Australia housing bubble. I cannot possibly see how this opinion can carry any weight, given the size of the average Aussie home loan stands at $368k, which even in the best of times meant a 95% lend against property worth $388k. A required equity differential of $20,000. At most, new home buyers of brand new, freshly built homes could only achieve $24k from various governmental sources and the rate of new building approvals has never supported any such claim. At best, your average FHOG recipient achieved $14k to buy an existing home. Now that the FHOG is back to $7,000 and lending institutions are pulling in intending borrowers horns with ever more stringent lending policies, in combination with three RBA rate rises since January 1, it’s difficult to understand Keen’s basing of the rising Australian housing price median on first home buyers who aren’t in the market .
Further, one would have thought that an economist, who claims to have studied his black art closely for year upon year, would know better than to punt on a concept which rarely returns on expectations. I’d recommend warm foot baths with radox salts, Steve.