23 Apr 2009

"All good things must come to an end"

This is the incredible comment made by KRudd in relation to the bonus first homebuyer's grant (SMH article), despite the unwillingness of Rudd and the rest of the Australian political class to acknowledge this in relation to the broader economy.

Pulling the plug on these grants as of 30 June will cause two things to happen. Firstly, it will further overheat the housing market, as thousands upon thousands of buyers scramble to get on the property ladder. Sensible sellers will also be scrambling to sell at the same time. In fact, if you want to move, make sure to sell your house before 30 June and buy after the 30 June, because for once we have advance warning of the date on which a property bubble will collapse. The collapse in value we will see starting on 1 July will exceed the value of the first homebuyers' bonus. It will be an implosion of property prices across Australia, probably unprecedented, since this will occur exactly as the global depression really starts to slam into the country. That is, it doesn't make sense to buy a house before June 30, only to sell one.

The use of a homebuyers' grant as a form of economic stimulus only works if it is supposed to keep values up throughout a recession - yet Rudd is abandoning it exactly as the recession starts to take hold. The obvious conclusion is that that I made as soon as the grant was announced: this is not a stimulus package at all, but rather a bailout of petty bourgeois 'buy-to-let' property speculators, which includes most of the political class itself.