> More urban sprawl isn't really a solution because traffic will never cope.

I'm suggesting that new business centres be created so that people can live in cheaper areas, and still be close to their jobs. This should reduce traffic since fewer people will need to commute.

But I am not a City Planner. I have no idea what is feasible or not. But there must be lots of industries that don't need to be in the CDB.

Ultimately there should be a string of cities between Melbourne and Sydney, a la the Boston to Atlanta corridor.

Considering the general problem: there has to be a better way to control landlords. Allow them to earn a reasonable living but keep a cap on house and rental prices whilst preventing speculators from inflating prices too. Controls that would keep a lockstep between median wages and house prices without having to rely on a price crash coming and giving a few lower income people a chance.

Is the problem lack of political will to fix this sort of error (capitalism beating socialism)? Or maybe that solutions are applied but are ineffective?

There's a lot of buyers who just keep the property, not even renting it out. Several policies contribute to high prices:

> Negative gearing.

> 1st house exempt from pension assessment. ie, 2 billion dollar house, but can collect pension. Have 100k(?) cash in bank? No pension.

> First home buyer grant. Originally intended to encourage more housing, instead is used to buy existing properties.

Proposed policies in parliament:

> Using super for houses. Yes, people could put their retirement savings in a house in a market that could collapse and lose a lot of money.

Yeah, it hit me recently that every single measure ever proposed to 'help' housing affordability simply propped the market up even further. Making it easier to for more people to pay larger sums for houses is the last thing that'll bring prices down.

At least they restricted the first homebuyer grant to new properties, so there's that.

The last one - super for houses - will obviously and explicitly destroy the lower and middle classes. There's a lot of people who will not see this as a bad idea - and then a lot more who'll be forced to dip into it anyway to have a hope of even owning a house, or any property large enough to start a family in.

Basically people will have to drain their super to afford to buy a house, then when retired they will have to sell (or reverse-mortgage) their house to afford to live.

Yeah, if the government adopted a 'super for deposits' policy it would be unconscionable, not to mention idiotic. The failure of the first home-owner grant scheme is ample evidence that a 'super deposits' scheme is not in the public interest. It's not even in the interests of first home buyers: I suspect it would simply bait marginal FHBs into catching falling knives.

Even with the FHOG scheme, I'm fairly sure the government was advised at the time that it was a stupid idea, but they went ahead with it anyway. The reasons why this 'super for deposits' idea has recently been floated are:

a) Someone at Coalition HQ finally figured out how to read demographic statistics (god help us) and realised that Gen Y (18-34) are now the largest voting block in the country (for our American friends: Australia has compulsory voting). Incidentally, I think this is the reason behind the 'surprisingly' close election last time around (Bowen's negative gearing policies addressed some of Gen Y's concerns around home ownership).

b) They also figured out that housing affordability is a serious issue for Gen Y. You might have noticed how everyone is all of a sudden so very concerned about housing affordability.

c) Both sides of politics are terrified of the bubble popping on their watch. They're acutely aware that voters confuse correlation and causation when it comes to economic policy (see: Howard & Costello's budget surpluses) and don't want to be forever branded as 'those guys that ruined the Australian economy'. So they'll do anything to kick the can down the road.

So (a) + (b) means they want to be seen to be doing something to improve housing affordability. However, this presents a problem: something becomes more affordable when that something becomes cheaper (i.e. prices go down). Unfortunately, doing anything that lowers house prices pisses off the second largest voting demographic in the country: the baby-boomers (53-71).

Combine (c) with the above and the solution becomes obvious: a policy that makes Gen Y feel as though they're in a better position to buy a house, that also pushes prices up (due to increased demand in a market with fixed short-run supply). This has the nice bonus effect of kicking the can just that little bit further down the road. And really, who cares about the distant future?

Although, I'd bet they aren't factoring in how ratings agencies might perceive such a policy. Australia is already on 'credit watch'. This kind of policy could very well be the final straw, resulting in a credit rating downgrade for the Commonwealth. And because the Commonwealth underwrites almost all retail bank deposits (explicitly), a Commonwealth downgrade is almost equivalent to the banks being downgraded.

Were this to happen, overseas lenders would increase their rates on wholesale funding that they lend to our banks (roughly 50% of the banks' cash). In turn, our banks will be forced to raise variable rates on retail housing loans, ironically triggering the bubble pop that the government was trying to avoid in the first place.

In short, it's just awful policy whichever way you look at it. However, I wouldn't want to bet against it happening anyway; this government seems to have an awfully large supply of stupid.

A recession will also throw a very large number of people out of work, and that is going to impact the less well off.

Convince me it will? The less well off are just above the welfare line as it is. They can work 20 less hours a week and not see a big drop in income.

It's the boomers a recession will hurt. People on minimum wage actually do shit for a living.