Philip Soos, a researcher at Deakin University’s School of International & Political Studies and author of the paper Bubbling Over : The End of Australia’s $2 Trillion Housing Party posses the question if economists are ignoring our property bubble?
In an article published today and titled Are economists ignoring Australia’s property bubble?, Soos writes :
This [.com bubble] was followed by an US$8 trillion housing bubble, which saw an 86% run-up in housing prices between 1996 and 2006, climaxing with a spectacular crash that nearly bought down the entire banking and financial system in the US.
Again, economists either missed or denied the existence of a housing bubble, though many fundamental indictors clearly pointed to this reality.
In Australia, our $2 trillion housing bubble has seen prices rise by 127% from 1996-2010, and every fundamental indicator is off the chart.
But while it seems logical to conclude that Australia’s property bubble will inevitably burst, very few observers seem willing to do so.
(Our readers don’t have trouble spotting the bubble)
He believes economists continually get it wrong due to “equilibrium economics” or neoclassical theories, widely practiced in government, industry and research institutes. Other leading economists are biased due to conflicts of interest which require them to promote economic fact such that houses double every 7 years and we have a shortage of houses.
Literally three months before the peak of the housing bubble in the US, the two leading economists in that country, Alan Greenspan and Ben Bernanke, testified before Congress that a bubble didn’t exist. If they couldn’t see it, what hope do Australia’s economists have?
» Are economists ignoring Australia’s property bubble? – The Conversation, 20th September 2011.