Australian Economist who lost bet will walk from Parliament to Mount Kosciousko

I think we also have to much demand for housing in Australia to have a really bursting of the bubble. IN recent year immigration has kept demand up. There is also the artificial raising of the value of new estates by only allowing small new allotments at a time to be sub divided to become new suburban areas.

Even though Australia has the windfall mining receipts, it still runs a current account deficit and has basically forever. And although the mining take is large, it's dwarfed by the larger economy. I don't think it is that which is inflating house prices, with the possible exception of some mining towns, where increased wages chase finite supply. But that's not the case on the east coast, for example.

Absolutely. Every time I see the senior economist from the Westpac bank being interviewed on the television I think :

1 - Why do they keep interviewing him about the future but never talk about how accurate he was in the past.

2 - He is deliberately couching everything he says in 'weasel words' so as to never risk being wrong.

But he wears a suit, has a position of authority and looks like he should know what he is talking about, that seems to be all they want.

Much of the world is a confidence trick.

One thing we could do would be to create prediction markets, which are just a more systematic way of allowing people to make bets on policy outcomes.

This way, if an economist doesn't (literally) put his money where his mouth is, you know not to trust him.

Of course, in the US, this would require legalizing gambling. Unfortunately, our backwards approach to securities markets even discourage speculation except as a way to provide liquidity for hedging.

[disclaimer: I'm currently working at a prediction market startup.]

He _is_ taking 8 days to do it, so he's only got to walk ~30km (just under 20 miles) a day.

And although it's up Australia's highest mountain, we don't have "mountains" as most people understand them, Mt Kosciousko is just a medium sized hill piled on top of a medium sized plain. There's barely 1600m (~5000' or ~1 mile) of vertical distance - Canberra's at 606m, Mt Kosciousko is only 2228m tall.

Iain

This is Peter Schiff's prediction.

The financial crisis becomes a currency crisis when the politicians keep trying to pump up a false boom by printing money until the rest of the world wakes up to the loss of value in the US dollar leading to massive inflation.

In the UK's last recession in the early nineties house prices crashed two years after the stock markets crashed. When the stock market crashed the government used low interest rate to boost the economy. This had the effect of keeping mortgages avoidable. However when the economy recovered interest rates had to be put up because of inflation. The resultant increase in the cost of mortgage repayments along with high unemployment, a lagging indicator, resulted in high repossession rates and the property crash.

As a general rule, buying something because prices just go up and up and up is a good way to get thoroughly shafted.

At the very least consider the following:

a) What is your rent currently compared to your mortgage repayments? If you're going to be paying more, just rent and invest the difference in something else.

b) Do you have ambitions of quitting your job and starting a company? If so, having a large mortgage is only going to hinder that goal (it's far easier to make the plunge when you don't have to worry about servicing a large debt, and it's much less painful to downsize between apartments when you're leasing.)

c) Consider whether you're going to want to do the place up, which can be a huge black hole as far as money is concerned.

d) Finally, if you're living with a partner, consider whether you're willing to have the added financial entanglements that owning a house together will entail.

(I personally rule house ownership out for reasons a), b) and d))

Sailormoon,

I can't answer your question but interesting things I have learned reading around this subject :

- Since WWII in most of the west house prices have risen in real terms (meaning as a percentage of average wages, compared the food bills etc, so not just inflation.

So many people think that's the way it works, but data on the price of housing going back to the 1600s says this isn't the normal state of things, house prices stay constant in real terms.

- Check whether you are relying on the 'bigger fool' principle. If you could rent a nicer place for less (don't forget maintenance and taxes) but are only buying because you think someone else will be willing to pay even more, even though they could rent somewhere nicer. Question whether that's sustainable.

As someone who, like you, is trying to figure out the right thing to do in Melbourne, it's hard to say isn't it. On the one hand things seem so ridiculous in terms of debt. On the other hand we have strong population growth and demand here it seems. Although, I have no idea what our growing population is doing for jobs.

Because, things are very centralized here, the options for buying are getting further and further out and the public transport systems doesn't look like it's going to be upgraded to match any time soon.

Inner city apartments are currently pretty small and expensive too, which hopefully changes with some more supply.

Wish I had a crystal ball on this one. All that said, Melbourne still rocks :)