The two greatest recessions in Australian history in the 1890’s and the 1930’s occurred after a major increase in household debt. Current Australian household debt is twice the level it was before the recession in the 1890’s and three times the level before the 1930’s. Debt is rising at a rate of $20 billion per month just for borrowing for houses. Unfortunately 90% of house finance is to purchase old houses not new dwellings. Ten years ago 50% of house borrowings were for new dwellings. There are many ways of “solving” the problem but if the government set a target of getting household borrowings back to be mainly for new houses then it would not only solve the housing affordability problem but it will start to reduce household debt and at the same time reduce our need for overseas borrowing.
The Federal Government is committed to building a new broadband network for Australia. As part of that process it will fund 50% of the rollout through the future fund. This money will be spent on what is called the “last mile” of connecting from the house to the exchange. One suggestion to reduce the cost to the government is to allow householders to finance the last mile. Whatever supplier puts in the appropriate infrastructure to give me have high speed broadband doesn’t have to own it. I already own the wiring in my own house. Why shouldn’t I own the rest of the wiring to the exchange?
Peter Martin (CT Nov 27th) suggests that the new government will have to somehow delay tax cuts or find some other way to reduce demand. Here is one suggestion. Give all the tax cuts but ensure that the tax cuts are spent on something that would be purchased anyway. For example give the tax cuts back to tax payers but as money in a special health care bank account owned by the tax payer. Money from these bank accounts can ONLY be spent on approved health care such as gap cover for the individual or their immediate family. If it is not spent then it remains in the bank account earning interest for spending in later years. A high percentage of people will not need it immediately and so spending will be delayed. It will reduce the need for the safety net provision on health costs and it will satisfy the promise to give tax cuts.