Ruminations and recipes from a small kitchen in a big city.


It's OK to gamble: chief croupier.

Federal treasurer Joe Hockey, in a casino-logic moment, says that if you think house prices are unaffordable, just get a better job. See? Simple. Croupier logic. Rake in more money and everything's great.

(Incidentally, 'Joe Hockey' could not be a better name for a hustler at a shady casino in a James Hadley Chase novel. But I happily admit that's just gratuitously nasty.)

As truisms go, Hockey's assertion is practically an axiom, or even a platitude. I don't know, I'm just throwing words around meaninglessly, as you do in a casino while you're waiting for the spinning to stop. Plenty of spinning goes on in Canberra. It's a money pit. Want a million dollar house? Get a better job.

Truism. Of course anyone can buy a house. All you need is a deposit and enough income to service the payments. Guess what? The commentators agreed with Uncle Joe.

But they're asking the wrong question, or shooting the wrong fish, or looking into the wrong barrel. Or something. I don't know.

Peter van Onselen in today's Australian (subscription required) crunched some figures. By averaging the salaries (circa $65,000) of three classes of public servants, van Onselen arrived at the conclusion that a pair of these earners could borrow in excess of $800,000. Case proven.

None of this figuring takes account of risk. Risk is everything. But wait, we're in a casino. Risk is an exciting part of the game; not a threat to your financial security. That last sentence is savage irony because even though it looks right, the truth is completely and utterly the reverse. Risk has to be minimised or at least covered first. Financial crashes have always started with the fatal flaw that you buy at the highest price you can afford. But prudence demands that you ask yourself if you could afford the loan if you no longer had the house. That is: if the bubble bursts; and you have to sell a million dollar house for $500,000; and you still have an $800,000 loan. There is no jingle mail in Australia. You have to pay off the loan even if you lose the house.

Van Onselen concludes:
"Hockey's comments were fair, reasonable and factually accurate."
'Fair' is in the eye of the beholder, we've already dealt with 'factually accurate'; and that leaves 'reasonable'.

Was it 'reasonable' for a federal treasurer to reprimand the electorate for worrying about astronomical house prices? Hockey's comments might have read like a statement, but to the electorate it came across as a cantankerous rebuke.

So no: it was not reasonable. It is not reasonable for a federal treasurer - or a croupier - to cantankerously rebuke his customers. A prudent treasurer would at least be more guarded in discussing any potential bubble which might affect millions of constituents.

Meanwhile, The Australian's Stefanie Balogh reported in a break-out story alongside van Onselen's column the comments of a losing bidder, who fell short of the $2.33 million sale price at a weekend Balaclava auction:
"Mr White said: 'I did hear (Tony Abbott's) comment earlier in the week that he owns a house and he's happy prices are going up ... and I thought it showed a complete disregard for people entering the market.' "
More gratuitous nastiness: if Joe Hockey is a good name for a crooked croupier, Tony Abbott is a great name for the fictional casino boss you find in the secret back office behind the red velvet curtains. If you can get past the bodyguard. Aah, Tony, there's a guy here wants to see you. Everybody wantsta see Tony ...

These people have the political nous of a housefly. Or a Clifton brick. One of the two. And the alternative is an ex-unionist being investigated by a corruption inquiry. Since when did politicians come from that background?



Sometimes you just need a little perspective: at the Balaclava auction mentioned above, the gap between the reserve and the selling price was double the amount I paid for a Melbourne house in 2005. It went for two houses more (at 2005 values) than the buyer expected.

If that's not starting to look like a bubble, I'm James Bond. Or Phillip Marlowe. Or both.

1 comment:

Melbourne Girl said...

So true KH...I despair with some of the rubbish coming out of Canberra at the moment.