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Jun 13, 2006

Negative gearing and NSW Labor woes

The virtues of negative gearing a rental property as an investment for the future must be a highlight of dinner table talk in Perth at the moment. Australian Bureau of Statistics

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The virtues of negative gearing a
rental property as an investment for the future must be a highlight of dinner
table talk in Perth at the moment.
Australian Bureau of Statistics figures out today show a continuing rapid growth
in commercial lending to individuals for property purchases.

In Brisbane presumably
the discussions are not quite as animated as out west. Lending in
Queensland has
continued at the same level for some months. But in Sydney there must be people
who cannot afford the dinner parties. In NSW commercial lending to individuals
for property is on the slide.

These ABS figures on Commercial
Financial Commitments for Purchase of Dwellings for rent/resale (by Individuals)
are just another example of the “two Australias” that are
now very apparent. The growth gap between WA and Queensland shows up in
housing price changes, employment figures and the national
accounts.

For politicians state and federal,
this phenomenon presents some peculiar challenges.

For Morris Iemma and his Government
they create a climate where people are becoming grumpy because NSW is not
sharing in the continuing growth that federal politicians keep talking about.
Many people are seeing their wealth decline because of the fall in property
prices and will be looking for the opportunity to punish a
politician.

Prime Minister John Howard and his
Treasurer Peter Costello know that their time in the rack of NSW public opinion
will come if the same conditions persist after the state election. And for them
there is always the fear that continuing boom times in the West and in
Queensland will result
in further interest rates rises which will again hurt the people of
Sydney and its
surrounds.

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