Author: Quentin Grafton, Crawford School, ANU

Despite its importance, water rarely receives the attention it deserves, at least in rich countries, except when there is too much (floods) or too little (droughts) available. Indeed, many people do not even know how much they pay for water which, by weight, is by far the most important natural resource they consume. In high income countries, such as Australia, the average household consumption per capita is 285 L per day or 104 KL or Cu.M per year. Even on a global scale, water withdrawal by humans is substantial and represents about 30 per cent of total accessible runoff and is increasing as global water consumption rose over sixfold in the 20th century.

The lack of attention to water, at least in rich countries, is because many people pay very little for it — it accounts for less than 1 percent of household budgets in wealthy nations — and it is readily available 24 hours per day, 365 days a year. Read more…

Author: Quentin Grafton, Crawford School, ANU

Many of the new Aussie homebuyers who have taken advantage of the boosted First-home Buyers Grant since October 2008 appear to be blissfully unaware (or it wishful thinking?) of the global financial crisis. Thousands have rushed to buy over-priced houses, sign up to mortgages that they can barely afford and, seemingly, with little or no understanding there is a property price bubble.

In the days before the federal budget and the June 30 deadline for the end of the boosted First-Home Buyers Grant (raised in October last year to $21,000 for new homes and $14,000 for existing homes), it’s a good time to take a look at the price of our housing stock and the current recession and the Great Financial Crisis.

Robert Shiller in his book, The Subprime Solution, convincingly argues that speculative bubbles and busts in the US stock market (peaked in 2007), and in particular the US housing market (peaked in 2006), were important causes of the current crisis. Between 1997 and 2006 real house prices in the US rose 85 per cent. This housing boom encouraged lenders to make loans that couldn’t be afforded by some borrowers (the subprime and low doc loans). Lenders believed that house prices would not fall. They also took greater risks because their loans could be ‘securitised’ and the risk of default passed on to others. As interest rates started rise from record lows in 2002-2004, foreclosures increased and prices started to fall. The rest is history.  We are now in a worldwide recession as confidence in the banking sector has slumped and consumer confidence has fallen off a cliff. 

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Author: Quentin Grafton

The latest IMF report on the world economic outlook paints a very disturbing picture. World merchandise trade is down 45% (yes, that’s forty-five per cent!) on an annual basis in the last quarter. Nothing like this has happened since the Great Depression of the 1930s. Indeed, the winner of the Nobel Prize in Economics in 2008, Paul Krugman, noted that the current state of affairs looks like the beginnings of the second Great Depression.

Australia is lagging behind the recessions in all the world’s major advanced economies (US, Canada, UK, Germany, Japan, etc.) but it will likely arrive in 2009/10 as the value of our exports drop sharply, especially as the effects of a decline in global world trade get worse, as they surely will.

It is against this background that the Australian government has made clear its willingness to use spending and budget deficits to ‘prime’ the economy to preserve jobs and to lessen the impacts of the recession that will surely arrive in Australia in 2009. There was already a $10 billion plus stimulus package in December 2008. Following the successful passage of the latest fiscal stimulus package on 13 February 2009 there will shortly be another $12 billion or so in cash payments in the pockets of Australians very shortly. 

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