Tuesday, August 10, 2010

Swan vs Hockey: The debate, the disconnects


The Sydney housing market has slumped to its weakest point in a decade with fewer than 14,000 borrowers signing up for home loans statewide in June, way down the total of 19,000 per month in September before the Reserve Bank began hiking interest rates and the First Home Owners Boost was phased out.


Released as Treasurer Wayne Swan prepared for a lunchtime debate with his Coalition opponent Joe Hockey the seasonally-adjusted figures show the NSW housing market its most bereft of buyers since February 1999.

Asked at the National Press Club whether house prices were too high, too low or about right, neither acknowledged the question.

Mr Swan blamed planning and zoning regulations for a shortage of houses saying "the truth is, not enough are being built". The government had invested in social housing and was working with the Council of Australian Governments to increase supply.

Mr Hockey said government debt was making it hard for builders to get funds.

"It is incredibly difficult for them to get finance, and it is incredibly expensive, and one of the reasons is the federal government is in there competing for funds because we are running a deficit and we have got a debt," he said.

Niether Treasury spokesman accepted the suggestion that tax breaks for landlords were pushing up prices with Mr Swan apparently claiming that remove the tax breaks "would have a dreadful impact on the supply of housing, it would certainly result in further increases in house prices."

Mr Hockey said removing the landlord tax breaks would push up rents... The key point about housing was that interest rates were always lower under Labor than under the Coalition.

Asked to examine a table of variable mortgage rates Mr Hockey conceded that in fact they were higher when the Coalition left office in 2007 than today but said today's rates were "going higher, and I'll tell you why, because market analysts are now saying that you expect to get the cash rate up another 1 percentage point over the next 12 months."

Market analysts do expect such rate rises, enough to lift rates back to about where they were when the Coalition left office, but the interest rate futures market does not, pricing in an increase of less than 0.25 points in the year ahead.

New loans for owner occupiers slid for the eight time in nine months in June slipping a further 3.9 per cent to be down 28 per cent on the peak in September.

The proportion of loans going to first home buyers slid to just 16 per cent, well down on the record high of 28 per cent in May 2009.

Other data showed the ANZ measure of job advertisements climbing at a trend rate of just 1.8 per cent in June, the slowest rate in 10 months.

"This news does little to strengthen arguments for antoher rate hike by year's end," said RBC Capital Markets economist Micheal Turner. "The building stimulus program is winding down. Activity should switch to the private sector in the second half of the year but we are and we are wary of the horizon beyond that."

At the Press Club each Treasury contender declared himself optimistic about the economy. In a surprise concession Mr Hockey said had he been Treasurer he would have allowed the budget to go into deficit as did Mr Swan, although not by as much.

Published in today's Age


Victoria versus the rest

Home loans since September

South Australia down 32%
Queensland down 31%
NSW down 30%
Western Australia down 30%
Tasmania down 25%
Victoria down 16%

ABS 5609.0 June, seasonally adjusted.



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5609.0