Housing crisis or just bad policy?

Most of us breathed a collective sigh of relief when the Reserve Bank of Australia announced earlier this month that interest rates would remain on hold: most of us that is, with the exception of Tony Abbott and Joe Hockey. It is little wonder that there is so much focus on interest rates, with the RBA telling us that the size of household debt owed to banks in this country is $1.2 trillion. This issue of interest rates is a political double-edged sword: when they are low, the government talks of the fiscal responsibility that brought them down, while when they rise, the opposition sings the ââ"šÂ¬Ã…"mismanagementââ"šÂ¬Ã‚ tune. Both the electorate and media now seem to use interest rates as a kind of proxy to judge the economic management of the government of the day. In a globalised economy, the direction that interest rates take has as much to do with international factors as domestic management - and as a result, this proxy can be misdirected. A better way to judge economic credentials and leadership is by looking at the issue of housing: who can afford what; what are the inflationary implications; where is it located; and is it both economically and environmentally sustainable? These questions should not be limited to home ownership, but also need to be applied to the rental market.