From the Sydney Morning Herald:
The number of home loans plummeted by 7.9 per cent in January, the biggest fall since June 2000, after the phasing out of last year’s first-home buyers’ grant boost and interest rate rises sapped demand.
January’s result follows a revised 5.1 per cent drop in December, the Australian Bureau of Statistics reported, citing seasonally adjusted figures. Economists had been predicting a 2 per cent increase in January.
As usual, over the “long run” we again see that the predictions of mainstream economic “experts” are wrong.
This result underlines what contrarian economists such as Professor Steve Keen have been warning for several years. That the government and Reserve Bank of Australia have, together, fuelled a massive bubble in property prices. Rudd Labor’s doubling of the First Home Owners Boost, and the RBA’s slashing of interest rates in late 2008, have encouraged tens of thousands of borrowers to take on ever greater levels of debt. In the process, these buyers armed with cash handouts from the government and tempted by record-low interest rates, have bidded up the already record-high prices of Australian real estate.
Now that the FHOB has been withdrawn by a debt-laden government, and interest rates are beginning to rise, immediately we see a dramatic fall in demand for the loans that support Australia’s unprecedented housing bubble.
Barnaby Is Right 
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