COVER STORY: by News WeeklyNews Weekly
House prices, mortgage rates to decide next election
, June 14, 2003
To the surprise of everyone, perhaps including himself, Simon Crean has managed to do just enough to keep the Beazley backers at bay - at least for now.
Despite continuing to languish in the newspaper opinion polls, Crean has at least steadied the ship for a while in the knowledge that Beazley does not yet have the numbers to unseat him.
The Left remains solidly behind Crean and the serious players such as Robert Ray and John Faulkner have not yet shifted allegiance.
However, Crean's fate and that of the Labor Party as a whole now depends on one factor alone - the price of the bricks and mortar that house the millions of Australian voters who have a mortgage, or two, or three.Irrelevant
Put simply, whatever Crean (or Beazley) - or whoever else is leading the Labor Party - attempts to do will matter not at all while Australians are comfortable and relaxed with their homes gaining wealth.
Barring any surprise challenge, Crean appears to have placated his critics by putting out a few new policies (none of which are particularly notable), and delivering an important landmark post-Budget speech.
The speech was strong on old-fashioned Labor policy ideas such as Medicare and education-for-all, and threw in a few visionary plans including a noble if unlikely proposal to clean up the Murray-Darling River system.
Even Beazley had to concede the speech was "well said" and it showed that, if all else failed, there were at least some Labor ideas which could form the bedrock that any ALP leader could fall back on.
Since then Crean has announced some constitutional plans for four-year terms and simultaneous state and federal elections. This is hardly a vote grabber, and may have been payback to Gough Whitlam (who first proposed the idea) and who had also backed Crean against a re-emerging Kim Beazley.
Finally, Labor has promised not to raise taxes. This is a political stop-gap to put pressure on the Government more than anything and to stop scare campaigns.
In short, a few policy morsels and no big mistakes. Certainly Crean is not doing enough to become Australia's next Prime Minister and it would take an almighty and rapid collapse in the nation's financial position to force people to dump the conservatives, particularly now that John Howard has decided to stay on.
Australia is enjoying a unique if not unprecedented boom in housing prices the likes of which no estate agent, valuer or bank manager can remember. Perhaps the heady days of the land boom in Melbourne at the end of the century before last is the only economic event to compare with the current one. And before that? Perhaps, the gold rush days.
But the bricks and mortar boom has given most of those fortunate to own their own home in partnership with the bank, even those with a colossal mortgage, the impression of increasing wealth.
It has fuelled a retail spending spree, including record car sales all bought on housing interest rates, and it has allowed the accumulation of assets of (no surprises here) more housing.Sydney market
The epicentre of the boom has been Sydney which has seen house price rises more or less without serious falls for two or three decades. Ordinary Sydney people sitting on million dollar assets have been encouraged to build on their equity by buying more property, often investing in Melbourne or Canberra or along the coastal fringe, creating a flow-on effect of rising property prices.
Together with low interest rates and absurd Federal Government policies such as the first-home owners scheme, house prices have risen around the country even in places where there can be absolutely no justification based on population growth, economic activity or the wealth of the residents.
The boom, like all in history which have preceded it, will end. When? Nobody knows, but while it lasts everyone wants it to keep going, including the politicians, the people who vote for them, the banks and the bank which is supposed to supervise them, the Reserve Bank of Australia.
This is no conspiracy, but the truth is no one wants the game to stop because there will only be pain for everyone.
There are indications that the housing boom has already reached the end stage of mania, where even low income earners are getting "on board". In fact, the Liberal Party, through its recent Federal Council meeting in Adelaide, was even proposing to provide government money for low income earners who get into strife with their mortgage payments.
This is nothing other than a classic case of propping up a gigantic pyramid selling scheme by protecting those at the bottom from losing their pants just to keep the game going.The Economist
recently predicted a downturn in property prices in the order of 20 per cent - enough to cause serious pain to the economy, but probably an underestimate of the falls in some areas.
However and whenever it ends it will not be pretty. On current trends it will not arrive in time enough for Simon Crean.
It may sound far-fetched now, but the next Labor Prime Minister is likely to gain power like several notable Labor men before them - during a depression.
Perhaps not even Simon Crean would want that honour.