Finally, Kevin Rudd has indicated that the First Home Buyers grant is coming to an end,

"It's had a real effect, we're still measuring its full effect, but I think it's very important that as a community we understand that deadlines are imposed for a particular purpose," he said.

"It's had strong useful results so far, but I've got to say, that all good things must come to an end." -- Source

The property industry is already complaining, with Stockland's managing director Matthew Quinn coming out and saying "...we think that the market, the first homebuyer market, does have another six months to go before all of that underlying demand is soaked up and it will result in a rush of buyers towards the end of June" [ibid].

I'm not sure exactly what he means by "underlying demand" but I can only assume he means that an artificial lowering of the price (through low interest rates, first home buyers grants) will increase demand. Well obviously; the lower the price of any product, ceteris paribus, the greater the quantities that buyers will be willing to purchase. Add to that the constant trickery that interest groups have using on home buyers, such as: "you've just been wasting money on rent for the last 5 years, wouldn't it be nice to own your own place instead"; "it's just another, safer, form of investment!; and "interest rates are so low, plus this homebuyers grant will only be around for a while, if we keep enjoying life and decide to buy in five years, who knows how high they're going to be!" and you get more people buying homes -- younger and younger -- at the top of the credit bubble.

The government has misled, even if only indirectly, millions of people into levels of debt that they can't possibly service and even if they can, a lifetime of debt repayments. A house is not an investment. It's a consumer good that you have to upkeep. It's also a liability that you have to deal with if you lose your job. Fair enough, there may be non-economic reasons for home ownership, but if you're doing it because "house prices always go up", then it's time to consider renting instead. The government never offers you money to do intelligent things with it. As Ronald Reagan once said, the nine words you should be most afraid of in this world are "I'm from the government and I'm here to help".

Good riddance to the first home buyers grant; it was nothing more than a subsidy to the housing industry (and those related to it, building etc) at the expense of the taxpayer. It never helped the economy, it merely diverted resources from more productive means. In fact, as I mentioned earlier, I would go the other way and say it has (together with artificially low rates set by the RBA) probably resulted in many, many young Australians having a debt burden that's going to weigh them down for years to come, destroying families and lives in its wake.

What's that, the first home buyers grant doesn't do anything except subsidise the real estate/construction industries? I never would have guessed...

The Reserve Bank's deputy governor says the boosted first home owner grant may have pushed up house prices at the lower end of the market.

The Federal Government has in some cases tripled the value of the grant, in a bid to stimulate the housing market.

But the RBA's Ric Battellino has warned it could lose its incentive value.

"The benefits of that policy can get eroded very quickly by being capitalised into house prices," he said.

"From all accounts the bottom end of the housing market has picked up a lot in recent times, and it doesn't take long for the average house price to rise by $20,000 and leave the home buyers no better off than they were before."-- Source

The government never cared about homebuyers. If they did, they would have allowed the housing industry to suffer the necessary downturn making houses more affordable for low income families. That aside, since when was it a 'right' to own a house? In most cases renting is a far more economical, flexible way to go. The incentives behind home ownership are usually non-financial and instead psychological in nature (if we want to get more cynical -- the government loves it because it makes it that much harder for people to leave).

The first homebuyers grant was(is) nothing more than another prop-up for the real estate and construction unions along with various other interest groups. Good riddance.

I stumbled upon two pieces of news today, appearing at first unrelated but after connecting the dots the real culprit became glaringly obvious. The first article was published on Business Spectator, entitled Low pay, high stakes.

"For the past three hearings, the commission has operated in an economy where aggregate demand was rising, and its economic modelling rightly suggested that increasing the minimum wage would have virtually no impact on employment...

...Not surprisingly, Harper is telling the key bodies that make submissions to the commission - unions, employer bodies, and governments - to recalibrate their economic models to factor in falling aggregate demand."

Ah economic modelling, my old friend. Any economist worth his salt (not many these days) knows that economic modelling is about as capable at guiding decisions as is a blind man is at guiding a car down a street. Luckily we have the brilliant Professor Harper at the helm (that is, of course, until the new Minimum Wages Panel arrives -- ugh!), making sure the models that failed to predict the current situation are sufficiently up to date so that they may fail again in the future. What fantastic use of our tax dollars!

The inaccuracies of economic modelling alone should tell us that their figures on the minimum wage are off the 'mark' -- but the bigger problem is that the Fair Pay Commission's 'mark' is about, oh, $14.31 too high! That's right, there shouldn't be a minimum wage. I don't want to get into the fine details about this right now, so i'll just borrow a few words from Mises himself:

"The market wage rate tends toward a height at which all those eager to earn wages get jobs and all those eager to employ workers can hire as many as they want. It tends toward the establishment of what is nowadays called full employment. Where there is neither government nor union interference with the labor market, there is only voluntary or catallactic unemployment. But as soon as external pressure and compulsion, be it on the part of the government or on the part of the unions, tries to fix wage rates at a higher point, institutional unemployment emerges. While there prevails on the unhampered labor market a tendency for catallactic unemployment to disappear, institutional unemployment cannot disappear as long as the government or the unions are successful in the enforcement of their fiat. If the minimum wage rate refers only to a part of the various occupations while other sectors of the labor market are left free, those losing their jobs on its account enter the free branches of business and increase the supply of labor in them. When unionism was restricted to skilled labor mainly, the wage rise achieved by the unions did not lead to institutional unemployment. It merely lowered the height of wage rates in those branches in which there were no efficient unions or no unions at all. The corollary of the rise in wages for organized workers was a drop in wages for unorganized workers. But with the spread of government interference with wages and with government support of unionism, conditions have changed. Institutional unemployment has become a chronic or permanent mass phenomenon." -- Ludwig von Mises, Human Action

Now for the good part! In an article later in the day, Kevin Rudd announced that the government was going to fund apprenticeships around the country, costing taxpayers about $1 or $2 billion (what's the difference, right?!).

Thousands of school and university leavers will also be offered special assistance to find work under plans for a national "jobs compact".

Companies seeking a slice of lucrative infrastructure contracts may be forced to take on young workers, as the Rudd Government pushes for an apprentice-led recovery.

So companies no longer want to employ young workers. In other words, as employers will only pay the value of an additional hours work, the (government induced) credit crisis has resulted in many workers with low productivity (usually those with low education, job experience, and maturity) to be laid off by their employers. So rather than scrapping minimum wage laws and allowing people to work for what they're worth (shocking, I know!), the Rudd Government plans to 'redistribute' income from the rest of the nation and hand it to the people that their own policies put out of work! Our leaders truly are incompetent, both liberal and labour. To quote Donald Horne from 45 years ago (sadly nothing has changed),

"Australia is a lucky country run mainly by second-rate people who share its luck. It lives on the other people's ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise" -- Donald Horne, The Lucky Country

Maybe one day we'll stop riding on other people's backs, living off of nature's gifts (resources) and get our act together. We can dream...