The Debt Mouse Wheel and Australia’s Housing Affordability Dilemma

Last night’s 4 Corners ABC Broadcast on the state of housing in Australia and a possible debt bubble burst deserves a blog post.  Let’s be really clear on the most important issue. Mortgage brokers, property developers and lending businesses are not financial planners or retirement specialists. This means even if they approach you, you should NEVER take financial advice from them. They are not qualified, they’ve not undertaken any training and in this respect they shouldn’t be trusted to act in your best interest.

At the centre of the story was a focus on debt and its likely impact on home prices in Australia.

Quite simply at an individual level, debt is like a mouse wheel. It keeps going around and around, so long as the mouse is able to keep running. As it spins faster, it helps make the economy grow. When it spins slower, economic growth falls as the debt needs to be repaid. And when the mouse can’t run anymore, they’re a risk to the lender which they borrowed money from, the shareholders of that lender (including superfunds), and of course a risk to their own short and long-term financial health too.

And when economic growth really slows and dare we say the ‘r’-word (recession), those in Government feel nervous about being re-elected while many in our society actually will suffer.

The reality is, the housing situation in Australia is the result of subsequent Government’s inaction on policy. We need a housing affordability target. A housing affordability target isn’t just about planning how many Australians should be able to buy and pay off a home and subsequent social housing needs. A housing affordability target will also help control the debt mouse wheel.

Opponents on this idea might see this suggestion as wildly left wing, where government interference in markets won’t lead to better outcomes. In fact I’d argue it’s quite the opposite. I’d argue that if we really care about economic growth then we need to control the influences that contribute to boom to bust cycles – this includes getting a handle on the debt mouse wheel.

In addition to providing more certainty for first home buyers, a housing affordability target also aids maintaining a sustainable construction industry, infrastructure development and helps achieve sustainable economic growth.

But without that, we now face a housing dilemma.

How do we see debt and what will its impact be on future generations of young Australians who just want to buy and pay off their own home? By 2050 it’s estimated that Sydney will have over 8 million1 residents. Where will these people live and more importantly will they be renters or owners?

Our policy makers have no idea because neither the left, nor the right has had the foresight to set a housing affordability target.  Lenders can benefit from a housing affordability target too. Providing finance to lenders who weren’t going to over extend themselves and end up on 4 Corners makes for happier shareholders. It’s hard to feel sorry for baby boomers who have borrowed to buy seven homes when young Australians would just be happy to buy one. Sometimes people do need to be protected from themselves and we need to remember paying off debt also requires a plan.

Surely it’s time to stop playing politics with housing affordability and set up a non-political entity to provide policy to achieve a housing affordability target.

I’ve written about NHAPO before – a National Housing Authority and Planning Organisation. NHAPO should be given the power to set interim and long-term housing affordability targets for each city with a focus on infrastructure to make the cities more liveable and more capable of dealing with immigration and population growth. NHAPO would also need to have the authority to convert the planning into action, especially for first home buyers who are unable to put a roof over their heads.

At some point our leaders must realise that rising home prices and over-zealous property gearing are not a sign of economic success, being able to house your population is. Is anyone in Government listening?



  1. Squeeze is on as Australia’s populations boom, SMH.
2018-02-23T16:58:03+00:00 August 22nd, 2017|Own It|