How Big Were The Housing Tax Breaks In OZ?

In response to Pool of Greater Housing Fools in Australia Finally Runs Out; OZ Dollar, Where to From Here? I received an email from "GT" explaining that I was off by almost 200% on the size of homebuyer tax credits.

Hi Mish,

Your piece on the Australian property market was interesting and timely, but you understated the impact of the first-time-mortgaged-to-the-bank grants by a significant amount.

The Federal component, the bit over which our spendthrift accountant Rudd has control, was indeed $14k. However there are also state-based grants. In debt-serf in Victoria, the grants totaled $40k.

Yes, that's right, our dimwitted bureaucrats threw forty thousand of our "Strayan Shekels" at any new home buyer who would take them. With State budgets dependent on property taxes, stamp duties and a share of our national sales tax, the State component will wither away if there is any hit to consumption spending (since our goods and services tax is levied on final purchases of new goods, and collected by the Feds).

Any downtick in property prices will have massive secondary effects on state budgets. Of course the political parasite class will simply hike tax/stamp duty/speeding fines etc.

Steve Keen lost the housing collapse bet only because he failed to see how much effort the political parasite class would put into supplying heroin addicts with more heroin.

Cheerio

GT

Wow. 40,000 is a lot of clams. More importantly, Australia's housing crash will be a sight to behold.

New Zealand Chimes In

Pete from New Zealand writes ...

Hi Mish,

Finding New Zealand House prices up there as being unaffordable did not surprise me. Out Government is now looking at a land tax and couple of other tax changes that in my view will change very little. Our average wage being NZD $28,000 and 40% of families are paying no tax effectively as we have a family tax credit system. This system in my mind is ludicrous as tax is taken at source and is then returned to families pending their household income levels and the number of children in the household. The tax should not be taken at source thus lessening the government paper shuffle but what would I know.

How will the housing affordability be rebalanced? The cost of building a house here is NZD $1,500.00 per square meter so increasing the number of houses will not solve the issue as our low wage economy does allow for people to afford to build a house. There is a shortage of housing currently in the Country thus keeping prices high. A land tax could, pending it’s structure, destroy our housing market and our agriculture based Industry thus causing a massive amount of capital to head to Australia. This is the long term would be a disaster for young New Zealanders and the Country as a whole.

The only feasible solution I see is to educate our kids and then encourage them to go and work in high wage economies to earn the enough money to see them right for life. Easy said than done but it appears this is a pattern that is emerging. This is self defeating for a country such as ours it appears to me. There is also plenty of down side living an ex pat life style.

What is the solution to this madness how can the so called “middle classes” survive in your opinion? Where and why are our so called leaders failing us in this world of populace democracy.

In stating the above I know we have it way better than many in this world.

Best regards
Pete

Hello Pete
Education is indeed the key. I will write about education tonight.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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