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Got Interest Rate thread

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The world greatest treasurer is speaking pearls of wisdom again!

So, to take his point.... the higher the property prices the better for the economy? Wayne would be ecstatic then if average house prices would exceed $1m.

Our housing capital stock is already 3 times the sum total of the market capitalisation of all companies listed on the ASX (i.e. the productive capital of the country). Does Wayne think that housing being 10 times productive capital would be better?

It sounds like it is everyone's patriotic duty to increase our debt level with bank borrowings from overseas to keep house prices rising.

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The world greatest treasurer is speaking pearls of wisdom again!

So, to take his point.... the higher the property prices the better for the economy? Wayne would be ecstatic then if average house prices would exceed $1m.

Our housing capital stock is already 3 times the sum total of the market capitalisation of all companies listed on the ASX (i.e. the productive capital of the country). Does Wayne think that housing being 10 times productive capital would be better?

It sounds like it is everyone's patriotic duty to increase our debt level with bank borrowings from overseas to keep house prices rising.

Does house price inflation and household debt improve the Federal Government's bottom line? I can only think that Wayne Swan is talking out of his own defecit and sees some kind of benefit to *his* bottom line if Australian households take a sledgehammer to *their* bottom line.

Maybe he is trying to talk up debt to generate jobs in the debt industry.

I can't seriously see how a responsible treasurer could be spruiking household debt unless there's some type of benefit for him or his governments bottomline.

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well assets are a cut off for pensions on the gov system so more valuble houses means less expense on paying oldies, pensioners in general.

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well assets are a cut off for pensions on the gov system so more valuble houses means less expense on paying oldies, pensioners in general.

I think that houses are either not counted for pension tests or only counted if they are REALLY expensive. So nanna can stay I her $1m inner city bungalow and collect the pension. I don't know whether that is right or wrong, per se, but it is one of the consequences of having house prices out of line with incomes....

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I think that houses are either not counted for pension tests or only counted if they are REALLY expensive.

PPOR is not counted. Goose may have been referring to IPs?

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oh ok i looked assets not counted, but if they own a PPOR instead of renting their assets test value losses about 150k of cap. ie its counted in a sneaky way.

i cant explain look it up here

http://www.humanserv...blers/assets#a5

but you are right, house value is not prt of the income/assets test as such. just part of setting the level

Edited by savagegoose

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Is that regardless of value?

Yes.

If grans house is worth $50m, as long as it is her PPOR and she has no other assets or income then she will be entitled to the full pension. Although I doubt any pensioner with a $50m house would have not other assets or income.

I guess the moral discussion here is about gran with, say a, $2m house and no other assets receiving the full pension. Should she be forced to sell the house? Perhaps downgrade to something less than the 5bed home? Should she be forced into a 500k unit and be made to live off the other $1.5m?

I say NO.

Edited by zaph

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Yes.

If grans house is worth $50m, as long as it is her PPOR and she has no other assets or income then she will be entitled to the full pension. Although I doubt any pensioner with a $50m house would have not other assets or income.

I guess the moral discussion here is about gran with, say a, $2m house and no other assets receiving the full pension. Should she be forced to sell the house? Perhaps downgrade to something less than the 5bed home? Should she be forced into a 500k unit and be made to live off the other $1.5m?

I say NO.

I agree she shouldn't be forced to move, but the pension should be a HECS style debt which is paid off by the house when she dies.

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how about a gran with 500k of assets one of which is a 250k house. and a gran with 500k of assets , but renting. hubby has passed away. renter pays 90 a week to state housing

https://plus.google.com/u/0/photos/107159417816940137073/albums/5819013684314602145/5819013687292441970

finally fortnightly income is at bottom, of course renter pays 180 a fortnight for rent, so is $20 a week worse off, and doesn't have own home,. to live in. and the deemed income is less than high interest rates, but most oldies wont be messing around on the net looking for higher income froom savings ea month

Edited by savagegoose

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I guess the moral discussion here is about gran with, say a, $2m house and no other assets receiving the full pension. Should she be forced to sell the house? Perhaps downgrade to something less than the 5bed home? Should she be forced into a 500k unit and be made to live off the other $1.5m?

I say NO.

I agree with you zaph, but.......

You are correct, when you state that we shouldn't legislate for a person to be forced out of their own home in a free society.

It would be difficult to ascertain the criteria for such legislation, in any case.

In legislation you have to determine the criteria for the cut-off point. So what would it be in this case.

ie; As soon as you turn 75. If your home is valued at over $1.5m. The home has more than 2 bedrooms. etc, etc.

So then, if we/society cannot dictate the nature of where a person lives, pursuant to the value of that property.

Then the moral choice comes back to entitlement to the pension.

Governments have to determine who is entitled to taxpayers money.

This is the issue of making choices, and in many cases trying to compare apples with oranges.

Is the person in the $2m mansion entitled to a full pension, when in the house next door; valued at $500k, lives a person who has made the choice to put their money into self funded retirement investments, and because they have $1.5m in term deposit, are ineligible to receive even a part pension?

Such people are required to spend down their $1.5m before becoming eligible to a full pension.

Who made the decision that the value of a PPOR cannot be included in the means/asset test, yet cash investments are?

I'm agreeing with you, on the basis, that I too don't want to have to see people in their twilight years, go through the trauma of leaving their beloved family home, simply to ensure they have sufficient cash to live on.

(Such process being forced upon them that is, because, we/society make it a requirement to procuring a pension allowance.)

But you have to admit, that those who didn't plough all their money into expensive real estate, have a genuine complaint, and at the end of their life, have much less to show for their labours, and to pass on to their heirs, then the person who still retains their $2m building.

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OFF TOPIC:

This discussion has got me thinking.

It has highlighted for me, the power of broad discussion of government policy.

So often, policy is determined by the few, with very little input by the general public.

With the availability of facebook, perhaps governments should be placing their "green" papers on those sites, and inviting public comment before legislating.

I have found many of your comments extremely insightful and have learned a great deal from the diversity of people who post on this forum, by allowing me to see issues from perspectives that my particular place in the social fabric, insulates me from.

So often new legislation is only developed by public servants from a particular sector, and the resultant legislation is then only circulated in the particular sphere of those people who are affected by it. The only time the rest of society hears about it, is if it makes it into the media, or the actual material is being considered by the parliament.

What I'm thinking is that others, devoid of emotional and vested interest may actually provide a more invaluable insight into the nature of the effects of such regulations, upon other areas of society. Maybe even having comment from other parts of the world, may be helpful in avoiding mistakes already identified by other governments.

What I'm thinking then, is that maybe there is a place for social network discussion of public policy.

Does such a place already exist on the net?

I'm unaware of a government site, that allows public comment on legislation, or government policy, with a view to influencing government decisions. (Too idealistic, I know)

And don't worry, I'm well aware of the crack-pot element that would attempt to derail such a site.

But perhaps my esteemed friends on here can enlighten me.

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A pensioner living in their 2 million inner city home may have an emotional attachment to it Sol. Their partner might have died there or some such and they have vowed to live out the rest of their days there and go in the same place as their loved one.

The problem isn't where people want to live, IMO, it is the concept that a pile of bricks on a patch of dirt can be worth more, or offer more oppurtunity, because of its location. We need to decentralise. The same ease of life and oppurtunity should be available to a citizen living 50ks from the city as to one living on top of it.

Re interest rates, I have been thinking, seeing as the banks are allowing mortgages to be locked at less than 6% PA for 5 years, the banks must be fairly confident IRs are not going to raise in the next 5 years.

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I'm agreeing with you, on the basis, that I too don't want to have to see people in their twilight years, go through the trauma of leaving their beloved family home, simply to ensure they have sufficient cash to live on.

(Such process being forced upon them that is, because, we/society make it a requirement to procuring a pension allowance.)

But you have to admit, that those who didn't plough all their money into expensive real estate, have a genuine complaint, and at the end of their life, have much less to show for their labours, and to pass on to their heirs, then the person who still retains their $2m building.

Ok, i may sound like the harsh one here but i don't see a huge difference between the person living in the $2 million house being asked to draw on their equity to pay for their retirement (even if that means moving) and the person living in the $500,000 house with $1.5 million in the bank being asked to draw on their bank account to pay for their retirement.

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If, as many of us like to think, a house is _not_ a purely financial instrument for getting rich but instead should be considered as simply something most people need to have a reasonable lifestyle then we have to say that a house has intangible values.

As opposed to, say, money / stocks / gold which are all pretty much interchangeable.

If we are willing to say that houses should not be subject to the same kinds of speculation as those assets which are essentially arbitrary representations of wealth then we have to stand by that on both sides of the argument.

If I bought my girlfriend a pretty trinket and she valued it for the sentimental value but then everyone else decided that the only way to get rich was to own that type of trinket and society _depended_ on her surrendering her trinket (keeping in mind it had bugger all value before everyone else in society went mental and decided the opposite of what we think) then I say screw them.

Either a house has non tangible value or not. If you have the personal belief that houses are worth something outside of the fanatical get rich quick peoples opinions and believe that families deserve housing which is not bubbled out of reach then you have to let the granny stay in her home.

Anything else seems a selfish grasp at personal riches concealed within the fake pleas of fairness to me.

If granny has to sell then she gets paid her intangibles would be the only sensible solution and, as a non breeder, I am not sure I could fairly value the child's first steps in the hallway, smile of the departed partner over the carrots he just grew or any of that romantic crap. I'm just too damn capitalist to know how to value that stuff.

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If, as many of us like to think, a house is _not_ a purely financial instrument for getting rich but instead should be considered as simply something most people need to have a reasonable lifestyle then we have to say that a house has intangible values.

As opposed to, say, money / stocks / gold which are all pretty much interchangeable.

If we are willing to say that houses should not be subject to the same kinds of speculation as those assets which are essentially arbitrary representations of wealth then we have to stand by that on both sides of the argument.

If I bought my girlfriend a pretty trinket and she valued it for the sentimental value but then everyone else decided that the only way to get rich was to own that type of trinket and society _depended_ on her surrendering her trinket (keeping in mind it had bugger all value before everyone else in society went mental and decided the opposite of what we think) then I say screw them.

Either a house has non tangible value or not. If you have the personal belief that houses are worth something outside of the fanatical get rich quick peoples opinions and believe that families deserve housing which is not bubbled out of reach then you have to let the granny stay in her home.

Anything else seems a selfish grasp at personal riches concealed within the fake pleas of fairness to me.

If granny has to sell then she gets paid her intangibles would be the only sensible solution and, as a non breeder, I am not sure I could fairly value the child's first steps in the hallway, smile of the departed partner over the carrots he just grew or any of that romantic crap. I'm just too damn capitalist to know how to value that stuff.

Maybe it's because I have moved around a lot and maybe because I have never owned a house but I just can't see a house as having much value beyond the utilitarian value of a place to store my stuff and hang my hat. I have lost two houses and all my stuff through natural disaster and it doesn't really matter. It's the people that matter in a home as opposed to a house. Most people move on average every 7-10 years anyway. If the physical house was that important would they do this?

The truth is for most people they choose a house that suits their needs at that time. Upsize to accommodate a family and downsize when the place gets too much to handle with age. If people want to stay in their houses then I'm happy to let them. I like the idea of the HECS scheme wim mentioned if the house is the only asset they possess. There is no reason I can see why one asset class should be treated differently from another in terms of receiving a pension. It's still taxpayer dollars being spent. There is no entitlement to a pension based upon all those years paying tax, especially given the increased life spans we see now.

The subsidies that exist for health benefits, rates, transport are already quite generous.

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I personally don't have a problem with people trading houses if that's what they wish to do. I do have a problem with their trading being subsidised by the federal government to the tune of billions. Or the market being distorted by the gov in other ways for the benefit of select wealthy demographic groups. I also believe that reasonably affordable housing should be available to all so as long as the market is able to provide that I don't have an ideological problem with people making a dollar out of real estate.

As for gran... if she is worth $2 mill in housing assetts and can't fund her retirement then she needs to liquidate her assetts, down size and use the money to live on. I understand there may be an intangible connection to the $2 mill property that may exist. But that doesn't (in my mind) make someone immediately eligible to be subsidised by the taxpayer - in the same way my intangible emotional connection to high performance sports cars doesn't (unfortunately) entitle me to get subsidised if I happen to own one.

Edited by Crest

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in the same way my intangible emotional connection to high performance sports cars doesn't (unfortunately) entitle me to get subsidised if I happen to own one.

So if you happen to get your hands on a car which is worth bugger all and then a bunch of crazy people decide that the only way to get rich is to own that car and bid it up to ridiculous levels you'll be happy having it effectively forced to be sold because it is "worth" too much.

I mean, personally, a car? pfft like I would care. How many memories am I being forced to give up? A couple. Not much of an issue.

That personal aspect aside you should therefore be happy that houses cost so much because that is what everyone thinks they should cost. Why one earth would your personal thoughts (as a non house owner) carry any validity in the world of capitalism? Houses aren't treated that much different to any other investment (if it isn't your PPOR).

Or do you think that PPOR is an investment and should be treated as such?

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So if you happen to get your hands on a car which is worth bugger all and then a bunch of crazy people decide that the only way to get rich is to own that car and bid it up to ridiculous levels you'll be happy having it effectively forced to be sold because it is "worth" too much.

I mean, personally, a car? pfft like I would care. How many memories am I being forced to give up? A couple. Not much of an issue.

That personal aspect aside you should therefore be happy that houses cost so much because that is what everyone thinks they should cost. Why one earth would your personal thoughts (as a non house owner) carry any validity in the world of capitalism? Houses aren't treated that much different to any other investment (if it isn't your PPOR).

Or do you think that PPOR is an investment and should be treated as such?

A lot of mixing colours going on there tor. There are separate issues to be considered:

- should people be forced to liquidate assets before being eligible for government subsidy, or should we subsidize 'asset rich/income poor' people?

- if asset rich people are to be subsidised, should different asset classes be treated differently for gov. subsidy purposes?

- if so, why?

- is prevailing market value the best approach to wealth measurement?

- should housing be treated 'as any other investment', or is there a moral or economic reason why it should not be?

- if housing should be different, should it be tax preferred or tax disadvantaged?

- for all of the above - if the 'right' answer differs to the asset quo, what are the equity/moral implications of changing the rules for people who made decisions based in the status quo?

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So if you happen to get your hands on a car which is worth bugger all and then a bunch of crazy people decide that the only way to get rich is to own that car and bid it up to ridiculous levels you'll be happy having it effectively forced to be sold because it is "worth" too much.

I mean, personally, a car? pfft like I would care. How many memories am I being forced to give up? A couple. Not much of an issue.

Well if after driving around for 30 years in a $10,000 Hyundai Excel, I find that at the end of that time it has morphed itself into a $500,000 Rolls Royce (by whatever means) then I don't expect to be treated the same way by the Government as when I was driving my Excel.

Whether I like it or not, whether I was responsible for it or not, my financial circumstances and net worth have changed. And if were to pull up out the front of the Centrelink office in my glittering Rolls I think they should be within their rights to point to it and say, "Mate you don't belong here". They aren't forcing me to sell my car. I do as I please. But I shouldn't expect a handout from the Government when I am high net worth individual courtesy of the car I drive.

Just because I became wealthy through a vehicle (no pun) which I didn't initially purchase to make me wealthy that shouldn't make me exempt from being treated as wealthy by the Government.

Wealth isn't about what your motive was when you did what you did to become wealthy. Wealth is about your current position in terms of cash and assetts. And whether gran likes it or not her living in a $2 million house makes her a wealthy citizen by most standards - regardless of whether she intended it or not.

Or do you think that PPOR is an investment and should be treated as such?

I think PPOR is an assett. And if that assett is worth a significant amount then it is not unreasonable to expect some of its value to be used to fund a persons retirement.

Edited by Crest

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A lot of mixing colours going on there tor.

That should be mixing drinks, I don't even remember posting that :)/>

There are separate issues to be considered:

- should people be forced to liquidate assets before being eligible for government subsidy, or should we subsidize 'asset rich/income poor' people?

- if asset rich people are to be subsidised, should different asset classes be treated differently for gov. subsidy purposes?

- if so, why?

- is prevailing market value the best approach to wealth measurement?

- should housing be treated 'as any other investment', or is there a moral or economic reason why it should not be?

- if housing should be different, should it be tax preferred or tax disadvantaged?

- for all of the above - if the 'right' answer differs to the asset quo, what are the equity/moral implications of changing the rules for people who made decisions based in the status quo?

The thing is that, in many cases I think, during the current housing bubble a fair chunk of people, if PPOR was measured as a normal asset, have become exceedingly wealthy but the only asset they have is the PPOR; they have bugger all else.

Forcing the sale of these houses by saying "no pension for you" seems somewhat crazy during a bubble.

The only reason that would make sense to me would be a significant gain to society by forcing the sale. As I don't believe there is a housing shortage I see no significant benefit to society and so don't see the forced sale as anything other than government forcing a transfer of wealth between people arbitrarily.

In a theoretical way I would guess that forcing the sale during a bubble would actually be a negative for society. It would crystallise the bubbles transfer of wealth. The sale would take money from the younger generations and give it to the older people until they die:

old person, net assets = 1 house, young person net assets bugger all

Year 0: House worth $1

Year 1: Bubble, house worth $1 meeellion

Year 2: Crash, house worth $1

old person, net assets = 1 house, young person net assets 2 years saving

With no forced sale not much has really changed.

Alternately

old person, net assets = 1 house, young person net assets bugger all

Year 0: House worth $1

Year 1: Bubble, house worth $1 meeellion, forced sale of house through pension pressures

Year 2: Crash, house worth $1

old person, net assets = $1 meeelion, young person net assets -$1 meeellion

Seems a bad idea to me. Especially as bringing in the change could actually cause the crash which would cause the old people to get all the money (if there were actually that many of them, which I doubt)

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A LOT OF OLDIES WOULD RATHER DIE IN THEIR OWN HOUSE THAN A HOSPITAL. PROB NOT THE CASE IF IT WAS A UNIT IN SOME NURSING HOME.

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It's an interesting discussion, but a moot one. No govt is going to include PPOR in means testing grans pension.

It comes down to what people think is fair and just, and we will all have a different opinion on that. Some, like my parents, don't believe the pension should be means tested at all. Or if it is it should be far more generous than it is.

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so as an oldie, you could have $500k in super

retire, take lump sum

buy a house

go on aged pension.

or

take a payment plan,

get part pension.

pay rent.

just saying family home or not, id take the full pension.

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