Forum

 
  Back to OzPolitic.com   Welcome, Guest. Please Login or Register
  Forum Home Album HelpSearch Recent Rules LoginRegister  
 

Pages: 1 2 
Send Topic Print
Housing subsidy pushes prices up (Read 12463 times)
freediver
Gold Member
*****
Offline


www.ozpolitic.com

Posts: 38420
I like fish
Housing subsidy pushes prices up
Dec 3rd, 2007 at 10:07pm
 
This topic came up in this thread:

http://www.ozpolitic.com/forum/YaBB.pl?num=1196117899/5#5

All subsidies end up increasing the price of the product they are supposed to make more affordable. The first home owner's grant is no exception to this. Such schemes are universally discouraged by economists, yet keep getting promoted by people who have no understanding of economics and who refuse to learn the lessons of history. They keep rearing their ugly head, because they sound good to those who do not understand their true impact. The frequency with which subsidies are promoted in Australian politics is the strongest argument in favour of more economics in high school education.

In addition, they are bad from an economic perspective because they drive inflation up. They are also a waste of taxpayer funds. They take money from those who earn it and give it away on a fairly arbitrary basis. For example, houses are not necessarily a better form of investment than shares, yet the federal government's grant takes money from those who invest in Australia's industrial capital and gives it to those who invest in unproductive assets. In doing so a lot of the money is wasted on bureaucracy.

Any government expenditure needs to be justified with more than just 'wouldn't it be nice if we gave these people a pile of cash...' The first home owner's grant, and most other subsidies fail this test miserably. The only situation where subsidies may make sense from an economic perspective is where they internalise a positive externality.

The $7000 grant increased the number of people buying houses and increased the house price. The grant is a huge burden on taxpayers and the price increase it caused swallowed up a significant amount of the grant, while making it even harder for those who don't have access to it to purchase a house. Economic theory predicts this. Experience backs the theory up. I have read many statements from economists in The Australian and elsewhere saying the same thing. I have not read a single contrary claim, except here. To anyone who knows what they are talking about, it is a no-brainer. Anyone who claims otherwise is either lying, or hasn't studied and doesn't understand economics. I can only imagine it based based on the old 'Howard is a good economic manager' mantra, therefor anything he does cannot be bad for the economy.
Back to top
 

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man - George Bernard Shaw
WWW  
IP Logged
 
IQSRLOW
Gold Member
*****
Offline


OzPolitic

Posts: 1618
Re: Housing subsidy pushes prices up
Reply #1 - Dec 3rd, 2007 at 10:26pm
 
Do you get some sort of perverse thrill out of spamming your own forum?
Back to top
 

Political Animal has little moderation. It is the forum for free speech and free thinkers to converse passionately without the threat of being banned. It is a forum for adults.
 
IP Logged
 
deepthought
Gold Member
*****
Offline


In Defence Of Liberty

Posts: 2869
Re: Housing subsidy pushes prices up
Reply #2 - Dec 3rd, 2007 at 10:51pm
 
We've already debunked that myth - in fact you did it yourself when you proved yourself wrong.
Back to top
 
WWW  
IP Logged
 
freediver
Gold Member
*****
Offline


www.ozpolitic.com

Posts: 38420
I like fish
Re: Housing subsidy pushes prices up
Reply #3 - Dec 4th, 2007 at 10:36am
 
Deepy you seem to have a lot to say on the matter for someone who knows nothing about economics, for someone who openly rejects the rigourous study of economics.
Back to top
« Last Edit: Dec 4th, 2007 at 10:48am by freediver »  

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man - George Bernard Shaw
WWW  
IP Logged
 
deepthought
Gold Member
*****
Offline


In Defence Of Liberty

Posts: 2869
Re: Housing subsidy pushes prices up
Reply #4 - Dec 4th, 2007 at 6:45pm
 
freediver wrote on Dec 4th, 2007 at 10:36am:
Deepy you seem to have a lot to say on the matter for someone who knows nothing about economics, for someone who openly rejects the rigourous study of economics.


The only people who believe in the output of an economist is the economist's family and those gullible ones for whom the economist makes a noise which sounds like their truth.

No one else takes them seriously.  Here's a couple of quotes you'll enjoy.

"Economists and political leaders not only miscommunicate, but each accuses the other of incompetence, obfuscation, self-serving motives, and anti-social behavior"   Rivlin

"Issues of economic policy are necessarily issues of politics. Even in theory it is difficult to distinguish between the economic and political aspects of the problem.... Even if the economist tries to distinguish between the economic and political elements in his argument, the public is unlikely to recognize the distinction. To the public an economist is an economist, and most people are not usually able, even if they were willing, to distinguish the political from the economic. ... The need to distinguish between the economic and political element in any prescription is emphasized in academic economics, but when economists debate in public they frequently ignore this distinction"  Devon

"Economists have no reason to be so full of themselves as they continuously contradict each other, speak gibberish and have a miserable predictive record"  Gijselaers
Back to top
 
WWW  
IP Logged
 
freediver
Gold Member
*****
Offline


www.ozpolitic.com

Posts: 38420
I like fish
Re: Housing subsidy pushes prices up
Reply #5 - Dec 4th, 2007 at 8:52pm
 
I can find similar remarks about scientists, mathematicians, doctors, engineers, lawyers etc. You can criticise any profession, but when you don't understand what you are criticising, it's kind of hard to claim you know any better. However, I do agree that those ignorant of the field are often incapable of distuinguishing economics from politics.

Perhaps you'd like to demostrate your grasp of armchair economics by explaining the so called 'proof' you referred to earlier. At the very least, it should be good for a laugh.
Back to top
 

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man - George Bernard Shaw
WWW  
IP Logged
 
deepthought
Gold Member
*****
Offline


In Defence Of Liberty

Posts: 2869
Re: Housing subsidy pushes prices up
Reply #6 - Dec 4th, 2007 at 9:10pm
 
freediver wrote on Dec 4th, 2007 at 8:52pm:
I can find similar remarks about scientists, mathematicians, doctors, engineers, lawyers etc. You can criticise any profession, but when you don't understand what you are criticising, it's kind of hard to claim you know any better. However, I do agree that those ignorant of the field are often incapable of distuinguishing economics from politics.

Perhaps you'd like to demostrate your grasp of armchair economics by explaining the so called 'proof' you referred to earlier. At the very least, it should be good for a laugh.


Yes, I certainly chuckled when you provided the proof which blew your economist's theory out of the water.  But as you are willing to spam your forum with repetitious posts I may as well join in and re-post the graph which had us all rolling in the aisles.

...
Back to top
 
WWW  
IP Logged
 
freediver
Gold Member
*****
Offline


www.ozpolitic.com

Posts: 38420
I like fish
Re: Housing subsidy pushes prices up
Reply #7 - Dec 5th, 2007 at 8:48am
 
That doesn't prove anything at all.

This reminds me of 'backyard mechanics' who come up with ideas for perpetual motion machines, then can't figure out why no-one will give them a pile of cash to build one and end up trying to dismantle modern science just to keep their idea alive.

If you really are interested, maybe you shoud try to udnerstand the economic s before you reject it.
Back to top
 

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man - George Bernard Shaw
WWW  
IP Logged
 
deepthought
Gold Member
*****
Offline


In Defence Of Liberty

Posts: 2869
Re: Housing subsidy pushes prices up
Reply #8 - Dec 5th, 2007 at 5:48pm
 
freediver wrote on Dec 5th, 2007 at 8:48am:
That doesn't prove anything at all.

This reminds me of 'backyard mechanics' who come up with ideas for perpetual motion machines, then can't figure out why no-one will give them a pile of cash to build one and end up trying to dismantle modern science just to keep their idea alive.

If you really are interested, maybe you shoud try to udnerstand the economic s before you reject it.


It proves that after the introduction of the scheme the number of finance commitments merely returned to the pre-GST level.  It proves the grant did what it was supposed to do - no more and no less.  It proves you are wrong that the grant created an artificial demand for houses.

I am very interested in truth which is why I do not listen to fortune tellers like economists.  I prefer facts.  The link you provided gave us facts - facts which proved you (and presumably your favourite economists) wrong.  I thank you for providing it.
Back to top
 
WWW  
IP Logged
 
freediver
Gold Member
*****
Offline


www.ozpolitic.com

Posts: 38420
I like fish
Re: Housing subsidy pushes prices up
Reply #9 - Dec 6th, 2007 at 9:36am
 
Deepy, It only goes up to that level because that is where the graph cuts out. Did you notice the rate of increase at the end?

It proves you are wrong that the grant created an artificial demand for houses.

Strawman. Read what I posted Deepy.

Taxing an item, then providing a subsidy to offset that tax is just stupid.
Back to top
« Last Edit: Dec 6th, 2007 at 10:44am by freediver »  

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man - George Bernard Shaw
WWW  
IP Logged
 
deepthought
Gold Member
*****
Offline


In Defence Of Liberty

Posts: 2869
Re: Housing subsidy pushes prices up
Reply #10 - Dec 6th, 2007 at 5:42pm
 
freediver wrote on Dec 6th, 2007 at 9:36am:
Deepy, It only goes up to that level because that is where the graph cuts out. Did you notice the rate of increase at the end?

It proves you are wrong that the grant created an artificial demand for houses.

Strawman. Read what I posted Deepy.

Taxing an item, then providing a subsidy to offset that tax is just stupid.


Did you notice the rate of increase at the start?  All that happened is the grant redressed the balance, after that normal growth in a booming market resumed.

I'm afraid you (and your economists) have a very simplistic view of the world.  It does not work how you think and the link you provided proves that.
Back to top
 
WWW  
IP Logged
 
freediver
Gold Member
*****
Offline


www.ozpolitic.com

Posts: 38420
I like fish
Re: Housing subsidy pushes prices up
Reply #11 - Dec 6th, 2007 at 5:44pm
 
You're the one with the simplistic view, and your insistance that that graph proves anything shows it. Even if what you claim is true, it actually supports my claims.
Back to top
 

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man - George Bernard Shaw
WWW  
IP Logged
 
deepthought
Gold Member
*****
Offline


In Defence Of Liberty

Posts: 2869
Re: Housing subsidy pushes prices up
Reply #12 - Dec 6th, 2007 at 5:53pm
 
freediver wrote on Dec 6th, 2007 at 5:44pm:
You're the one with the simplistic view, and your insistance that that graph proves anything shows it. Even if what you claim is true, it actually supports my claims.


I say.  I'm the dude who stated that the reasons house prices rise are far more than a tax offset while you maintain it is practically solely responsible for making houses unaffordable because an economist said so.

I'm afraid you can't change what you said by pretending.
Back to top
 
WWW  
IP Logged
 
pjb05
Gold Member
*****
Offline


OzPolitic

Posts: 1333
Gender: male
Re: Housing subsidy pushes prices up
Reply #13 - Dec 6th, 2007 at 7:50pm
 
The grant is for first home buyers only. Seeing that it doesn't apply to investors or people buying their second or more home its effect on house prices during the boom was probably small. Especially compared to other factors like a sustained drop in interest rates, favourable tax treatment for property investment (halving of capital gains tax while maintaning negative gearing) and investor mania.
Back to top
« Last Edit: Dec 6th, 2007 at 8:12pm by pjb05 »  
 
IP Logged
 
deepthought
Gold Member
*****
Offline


In Defence Of Liberty

Posts: 2869
Re: Housing subsidy pushes prices up
Reply #14 - Dec 6th, 2007 at 8:04pm
 
pjb05 wrote on Dec 6th, 2007 at 7:50pm:
The grant is for first home buyers only. Seeing that it doesn't apply to investors or people buying their second or more home its effect on house prices during the boom was probably small. Especially compared to other factors like a sustained drop in interest rates, favourable tax treatment for property investment (halving of capital gains tax while maintaning negative gearing) and investor maina.


Not to mention the myriad other reasons - lower equity loans, 100% loans, higher rents achievable from rental property investments, flatter stock market etc etc.

Welcome to the discussion pjb, it's incredibly refreshing to get another fellow contributor with two eyes who thinks listening to economists makes you go blind.
Back to top
 
WWW  
IP Logged
 
Pages: 1 2 
Send Topic Print