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Costello's housing bubble-trouble continues.



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AUSTRALIAN LABOR PARTY

HON. SIMON CREAN MP Federal Labor Shadow Treasurer

3rdJune 2004

Costello’s housing bubble-trouble continues

Today’s deceleration in house prices revealed by the Australian Bureau of Statistics today continues to highlight the housing bubble-trouble that Peter Costello has engineered in the Australian economy.

Yesterday’s 1.3 percent decline in housing in the Australia’s national accounts highlighted the softness in the housing market and its risk to Australia’s economic outlook.

Figures today reveal that house prices rose on average by 2.5 percent in the first three months of 2004 and are up nearly 18 percent in the year (Chart 1).

! Brisbane house prices rose 6.2 percent in the quarter to be up a record 36.6 percent in the year.

! House prices fell by 1.3 percent in Melbourne in the March quarter.

! In the year, house prices are up a record 25.3 percent in Canberra; 15.8 percent in Sydney; 8.9 percent in Melbourne; 22.8 percent in Adelaide; 19 percent in Perth; and 18.6 percent in Hobart.

At a time when Australian families have never been under greater financial pressure with a record debt burden, today’s figures reinforce the dangers of the housing bubble that Peter Costello has engineered

! According to the Reserve Bank of Australia, Australians now owe more than they earn, with mortgage interest repayments now chewing up more of the family budget than ever before (Chart 2).

! Yesterday’s figures revealed that Australians are spending more than they earn with a record low household saving rate of minus 3.4 percent.

! First home buyers as a proportion of all home buyers has fallen to record lows under the Howard Government.

Peter Costello’s complacency and denial of the housing bubble spells trouble for Australian families.

! Indeed, Peter Costello should come clean and release the advice he received about the impact of the First Home Owners Scheme and tell Australian what actions he took.

Instead of just telling Australian families that they’ve never had it so good, he should take his eye off his Prime Minister’s job and get on with doing his.

The trouble for Australian families is Peter Costello’s housing bubble.

Chart 1

Costello's housing bubble House prices outstrip inflation

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

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M a r .

19 90

S e p.19

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19 91

S e p.19

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19 92

S e p.19

92

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19 93

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19 94

S e p.19

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19 95

S e p.19

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19 96

S e p.19

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M a r .

19 97

S e p.19

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19 98

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19 99

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20 00

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00

M a r .

20 01

S e p.20

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M a r .

20 02

S e p.20

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M a r .

20 03

S e p.20

03

M a r .

20 04

Year

on

y e ar (%)

Inflation (YoY) House prices Source: ABS 6416.0; 6401.0

Bubble trouble

Chart 2

Mortgage Interest repayments chew up more of the family budget than ever before

3.0

3.5

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Ma r -7

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3 G r os

s h o

u s e h

ol d mortgage

in teres

t p aymen

t to d

is p osab

le in

come

(%)

Source: Reserve Bank of Australia

Record high