Govt encouraging Aussie sub-prime crisis

The federal government is encouraging an Australian version of the US sub-prime crisis with its economic stimulus payments and first home owner grants says a leading economist. The First Home Owner Grant has cost the Government about $200 million, but has inflated property prices by close to $3 billion.

Professor Steve Keen said “the additional $2.8 billion or so has come from increased mortgage debt taken on by those most vulnerable to a serious economic downturn at a time when we can see very clearly that the global recession is coming our way.” Keen says average home prices are nine time the average wage, compared with seven times in the UK and the US when their property markets crashed.

Gerard Minack, chief economist at Morgan Stanley, said property prices could fall by half in some coastal areas and by 20 per cent in the major cities.

Source: Sunday Telegraph