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Sunday, 25 September 2011

AUSTRALIAN BANKS RELY ON GOVERNMENT WELFARE

We get so many gloom and doom experts making so many predictions that the Australian property market will experience a massive collapse very soon similar to the USA market did..
My view is that the Australian property market is different than in USA because the USA is not so generous towards its own poor.
From a simplistic point of view there are possibly two main reasons why the property market could decline, the first being if the RBA decides to increase interest rates or keep them too high for too long or if any new incoming coalition of politicians decide to cut welfare and rent assistance for Centrelink clients. The USA does not appear to support its lower income or no income citizens in any way near as our generous politicians support of our people. Property prices are to some extent underpinned by several million government welfare recipients using their Centrelink benefits in true Keynesian style by renting housing and buying food and utilities.
Can you imagine the effects on the banks asset backing if we where to get a crazy government which would suddenly cut the rent assistance benefit in Australia. I dont believe those people including many of our politicians who own units and houses fully understand what would happen to the value of their assets if this were to occur.... each time they complain they are supporting the poor through their taxes..Their own wealth is underpinned by government welfare and they just dont get it.
The reality is the everybody rich and poor relies on government welfare to be maintained and not be fiddled with.

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