Australian Land Speculation: 1830-2013
Econintersect: Paul D. Eagan and Philip Soos have written a book analyzing the current state of the Australian real estate market with comparisons to previous bubbles going back to 1830. They find that the current cycle has produced "the largest land market bubble on record".
From the executive summary:
Australia's housing market bears significant risk of a large correction. Economic depressions in the 1840s, 1890s and 1930s and recessions in the mid-1970s and early 1990s were caused by bursting land market bubbles, though mainstream economic commentary and analysis does not acknowledge this. The common refrain is Australia has unique characteristics distinguishing it from those nations suffering recent economic downturns induced by real estate collapses. A groundswell of irrational exuberance and frenzied speculation has blinded most Australians to the threat posed by the largest land market bubble on record.
The delusional 'This Time is Different' syndrome has afflicted both the public and elites, instilling fervent belief that 'prices have reached what looks like a permanently high plateau'.
The study finds a systematic pattern of Ponzi finance, abetted by "trillions of dollars' worth of obscure and unregulated derivatives, with off-balance sheet business almost fifteen times the size of the economy". The authors allege "the political parties and rentier class have an unspoken accord to preserve privilege for the rich and to further redistribute wealth and income upwards in a 'flood up' effect". The inevitable end to the commodity mining boom for Australia is seen as the triggering event that will bring the entire bubble to a sudden deflation.
The authors cite what they feel is a contradiction in the thinking and posturing of the plutocracy:
On the matter of 'rentier economics', while the economics profession points out there is no such thing as a free lunch, it is patently obvious the rich are everywhere feasting on a free banquet of economic rents and unjustified privilege. Despite perplexed economists and policymakers blaming recent economic woes on government debt, regulations and social welfare, it is precisely the colossal corporate welfare state for bankers, landowners, big business, billionaires, multi-millionaires, insurers, executives, managers and real estate firms that has spiralled out of control, amplifying financial instability and threatening the entire economy. Over recent decades, the Australian economy has been regressively transformed by neoliberal interests into a haven for usurers, robber barons, free riders and price-gouging monopolists.
The book offers a total of 67 reform recommendations:
- Taxation, Property and Mining Sector Recommendations (23) - page 686
- FIRE Sector Recommendations(22) - page 691
- Government Policy, Political and Institutional Recommendations (10) - page 697
- Theoretical and Economic Modelling Reforms (12) - page 701
Click on the cover page below to access the complete book, available through Creative Commons: