There is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than the creation of a new system. For the initiator has the enmity of all who would profit by the preservation of the old institutions and merely lukewarm defenders in those who would gain by the new ones. The hesitation of the latter arises in part from the fear of their adversaries who have the laws on their side, and in part from the general scepticism of mankind, which does not really believe in an innovation until experience proves its value. So it happens that whenever his enemies have occasion to attack the innovator they do so with the passion of partisans while the others defend him sluggishly, so that the innovator and his party are alike vulnerable. Niccolo Machiavelli, The Prince, 1513

This has been quite an engaging discussion, but I think I am going to wrap it up from my side, and you are quite welcome to the last word. I thought your last post, besides a touch of Latin, had a touch of ad hominem about it which is really not necessary.

So where did we get to? On point 1 the cost of finance, I think we can agree to disagree, I understand where you are coming from and you have the CBA HIA affordability surveys methodology on your side while I have Demographias methodology on mine.

On point 2 I have no data as mentioned and will have to take your word for it on what you have seen for the product while it is very new and niche, noting that this could change as more people take up this type of mortgage and that early adopters may not be an accurate guide to the mature products spread of customers.

On point 3 we have some agreement on the inflationary risks to house prices should shared equity be widely adopted. I did anticipate your criticism by comparison to standard mortgages in my first post with Nicholas further up this page, the more of the same line of reasoning, my objection to this could be developed more, but there is a sketch of it there.

On point 4 I was responding to your post comments ex your op-ed which were not at all clear. My objection was that you appeared to be overstating the ability to strip out risk inherent in the index itself and hence the link to the Case-Shiller Index chart. As you were not intending this claim we have no disagreement on this point. Please be assured I have a fair understanding of risk and volatility.

On point 5 I stand by my objection to arguments from eminence.

You are quite right of course that 0.2x +0.4(x x) = 0.2x + 0.2(x x) being the equivalence that the Yale Professors are using is correct. I think that querying this equivalence without bothering to do the maths is not fatal to any of my arguments, it was really more of an aside. In a similar way that arguments from actually Googling Alan Greenspan is an idiot really dont carry much weight. I merely note again that a lot of top experts have been wrong over the last 10 years particularly in housing and particularly in the US. Their ideas should not escape critical appraisal and discussion.

Your final comments on compelling debt reduction and planned economies really are an attack on our old friend mister straw man, they are certainly not things I stand for. Over to you

Thanks for your response. Your comments, do, however, appear to contain multiple flaws. In particular, you are absolutely incorrect in relation to your misrepresentation of the Yale professors analysis and your statements regarding house price risk (see points 4 and 5 below). But let me first deal with a few other issues upfront.

1. The cost of finance

My initial question, Do falling interest rates reduce the cost of housing, was not meant to be reinterpreted as: Does a once-off fall in interest rates reduce the cost of housing over the term of a 25 year loan given volatility in interest rates, wages, and inflation, and whether one chooses to take out a fixed or variable rate loan, or a combination of both.

My question was pretty straightforward: does a reduction in your monthly interest repayments reduce your cost of housing, ceteris paribus? And I think we know the answer to that question.

For all current shared equity users (including the now over a thousand Australian families that have them today), and indeed those in the years to come, these unique zero-interest state-dependent (as opposed to time-dependent) equity finance contracts deliver a profound reduction in their upfront and ongoing cost of housing. And I would venture that this represents a very worthwhile innovation indeed.

But rather than listening to me, why dont you review the feedback from the shared equity users themselves here.

(As an important aside, you may make the fundamental mistake of trying to impute an implicit interest rate to a shared equity loan using certain deterministic assumptions about future house price growth when in actual fact the individual home owner is faced with enormous uncertainty as to how the value of their property will change over time prior to entering into one of these instruments (ie, prices may rise, fall or stay the same with a very low degree of certainty). I address this matter in more detail in the end note [1] below.)

2. Users of the product

I can tell you that based on the data over the last 1.5 years a very significant proportion of shared equity users employ the product not to buy a home but rather to reduce their interest-bearing debt and substantially increase their cash-flow for other portfolio diversification and/or consumption purposes (noting that the credit risk of these borrowers is extremely low based on the observed default data attributable to the portfolio since the product was launched in March 2007). This is the precisely the application for which shared equity is now being advocated in the US.

3. Impact on house prices

As I have already stated in my post above, in the near-to-medium term shared equity will likely have no impact on prices while delivering considerable benefits to users. If because hundreds of thousands of Australian households have decided that they wish to use a combination of both traditional interest-bearing debt finance (ie, mortgages) and equity finance as opposed to drawing exclusively on the former, and there is a pricing impactassuming that housing supply remains inelasticthen over the long-run you could be right that the pure affordability gains atrophy. However, the life-cycle portfolio diversification benefits would still hold and therefore support economic gains from trade (refer to my report to the Prime Minister for the partial equilibrium modeling of these gains from trade). Of course, if housing supply eventually responds to the increase in demand, then the affordability benefits could also accrue in equilibrium.

As I commented in my 2003 report to the Prime Minister, a key motivation behind establishing this important new market is to enhance consumer choice and expand the average Australians universe of available opportunities. Households are not obliged to enter into these relationships–equity finance is, therefore, nothing more than a free option exercisable at the home owners discretion. It is surely an arduous task to argue against what would be a significant increase in the supply, flexibility and continuity of housing finance, a reduction in the occupiers [time-dependent] cost of capital, and improved affordability and home ownership opportunities. By way of illustration, the same criticisms could be levied against the introduction of mortgage financeAccording to this most perverse line of reasoning, we should abolish all forms of housing finance simply because they have the potential to exert upward pressure on prices! Or, to take a more extreme example, the polemicists would have vehemently criticized the introduction of mortgage contracts in the mid nineteenth century!

4. House price volatility

I never said that you would diversify away all risk by investing in a portfolio of shared equity interests: I said investors would diversify the idiosyncratic risk attributable to the individual owner-occupied home (leaving them with the systematic market risk), which in my op-ed today I noted was–based on our empirical estimates of individual house price volatility using the population of all purchases and sales executed in the Australian housing market over the last circa 15 years–around 6 times higher than the index volatility.
The individual home owners volatility is in fact time-varyingit reduces asymptotically as a function of how long they hold the home; but it always remains multiples the index volatility, which the individual home owner can never obtain.

Of course, by investing in a portfolio comprised of thousands of shared equity loans spread across the country you can get this index-level volatility, which is in fact incredibly low (particularly once you strip out the phantom volatility attributable to median house price indices that are afflicted by compositional biases). This was my point in both my post and my op-ed, which I thought I had clearly made. I trust you now understand it.

5. Yale professors

You make a snide comment about the accuracy of the Yale professors characterization of the Rismark EFM product. You are wrong and they are right. Run the numbers: take a $100 home, compound it by x% per annum. Assume that you lend 20% for 40% of the future appreciation (plus repayment of the 20% principal).

Alternatively, use the Yale example where you lend 20% in exchange for 20% of the future sale prices and 20% of the future appreciation. Mathematically, the two results are identical. Ironically, they used this description because they thought that it would be easier for people to understand.

You should not be so dismissive of Ian Ayers and Barry Nalebuff, or the other academics I referred to. Ed Glaeser at Harvard is widely regarded as the top housing economist in the world.

In relation to your final point: you argue that you would like to deny households the opportunity to draw on external equity finance and compel them to reduce their traditional debt finance. That is finebut you need to find a centrally planned economy; there are still a few that exist in the world and if you surmount the necessary political hurdles you will no doubt have an opportunity to implement your vision.

Kind regards,
Chris

Endnote [1]

The shared equity cost of capital cannot be conceived as a charge in the nature of interest. The essential, defining characteristic of “interest” is that it is a “time-dependent” cost of capital; that is, the variable or fixed cost on the loan accrues for as long as the borrower holds the finance (ie, over months, years etc).

Under a shared equity loan, no interest rate is charged and there are no repayments required whatsoever until the borrower elects to discharge the loan. Most importantly though, the cost of the shared equity loan has nothing to do with “time” or, more specifically, the time over which the finance is held. That is to say, the borrower can have a shared equity loan for 3 years, 13 years or 25 years, and the total cost of the shared equity loan may be zero, positive or negative, depending exclusively on the performance of the underlying collateral asset (namely, the borrower’s residential property). The shared equity loan cost, in the technical lexicon, is therefore “state-dependent”; ie, tied to the state of the underlying property and it is categorically not time-dependent, as is the case with conventional “interest”.

Another key differentiating attribute of the shared equity loan cost is the fact that it may be positive, negative, or absent altogether. There is no precedent for any traditional interpretation of “interest” as involving a negative cost.

That is, a “negative interest rate”. Yet under a shared equity loan, if the value of the property falls, that is precisely what can occur: ie, the amount that the borrower repays to the lender is less than the sum that the lender originally advanced to them, to say nothing of the fact that the borrower has also not paid any periodic interest repayments during the term of the loan. Put differently, there is, in such situations, a value transfer from the lender to the borrower, not the other way around.

In addition, there are many normal contingencies under a shared equity loan whereby the total direct cost of the product will be equal to zero: that is, the shared equity loan will have been a costless form of finance (ignoring altogether for the moment that the borrower may have saved up to 30% or more off their traditional mortgage repayments; ie, the loan that is used in conjunction with a shared equity loan). All that needs to happen for a shared equity loan cost to be equal to zero is that the property’s value remains the same.

Thanks for your response, good to get all these arguments out there and discussed. You gotta love the blog

In response to your first point “Do falling interest rates reduce the cost of housing?” The answer for most borrowers in Australia is going to be “mostly no”. The standard 25 year mortgage is long enough to cover a number of business and interest rate cycles and on a variable mortgage the point of entry makes little difference over the full course of the loan.

Further, the correlation between interest rates and inflation means that even if your entire mortgage was executed during a period of low interest rates because of the likelihood of low inflation during this time and the associated wages control you are in effect no better off as your wages will be relatively similar at the end of mortgage period. This contrasts with the wages growth typically experienced during a period of high inflation and high interest rates. The difference between these two scenarios is only going to be whether the mortgage principal payments are loaded to the front or rear of the mortgage.

Lower interest rates at a time of historically high house prices relative to income as we have at the moment are actually a fairly bad outcome as they encourage people to pay up with the benefit of cheap money for something that further into the interest rate cycle they may not be able to afford. This would then set the scene for wages pressure down the track.

Some people are of course going to lock in good interest rates on fixed terms and effectively trade the cycle, but also many others are going to lock then in at the top of the cycle fearing further rises, so net-net this effect is likely not significant.

Your second point about allowing people to invest less of their wealth goes to whether people acting as individuals are going to keep some of their deposit money as cash for other investments or whether they will use whatever deposit they have plus whatever shared equity they can get their hands on to buy the biggest house they can. You would have early adopter data on this division, I will have to rely on my experience of human nature to suspect that people would be doing more of the latter, less of the former, with the effect of very little capital actually being freed up.

I am not sure you have countered my point about the inflationary impact of shared equity mortgages. I made the point that they still push up house prices for everyone proportional to the extent they do get adopted. If you are right and shared equity remains a niche product then my argument would agree with you that the effect on prices would be negligible. I think it is very worthwhile to still consider the effects that widespread popularity would have on the economy despite the fact that it is not a reality at the moment. I don’t think you have not countered my argument in this what-if scenario, demand-pull inflation is, after all, a fairly widely accepted principle.

I am not sure I understand how diversified away mortgage risk is when entire countries are having significant house price declines (http://en.wikipedia.org/wiki/File:Case-shiller-index-values.jpg). As you are dealing with institutional investors that assertion is probably okay to make, but if you ever do deal with retail investors you might want to be careful about making that claim.

I did follow the links you provided and will only note that Yale Professors appear to misquote what Rismark actually offers (20% down returns 20% of final sale price plus 20% of appreciation vs 20% down returns 20% of original price plus 40% of appreciation). The argument from eminence in general has hit a bad patch in the last couple of years (Google Alan Greenspan is an idiot if you dont believe me).

Also, I note you have not addressed my argument about the rough equivalence (and I do understand the differences) of a shared equity mortgage to a 40 year or more standard mortgage. That is the crunch point for the Rismark mortgage isnt it, 25 years down the track where you get the phone call Sell up and trade down very significantly or refinance now to the tune of a significant percentage of the current value of your home.

In response to your argument in the op-ed that the solution to credit crisis is to keep the debt the same and add equity into the mix, I would argue that that solution cannot compete with the alternative solution of less debt, lower house prices and more prudent lending. (Lower house prices here includes a whole bunch of tax and government changes to improve affordability- too much to cover here see On Line Opinion). Adding more money to an overinflated (relative to rents and incomes) and undersupplied market is not net going to help very much.
To which I could add that financial wizardry got us into this mess and I am not sure it is going to get us out of it.

With all due respect, the arguments you make that shared equity does not lower the cost of housing are pretty flimsy. Do falling interest rates reduce the cost of housing? Shared equity has exactly the same impact.

As I noted in my op-ed in the Australian newspaper today (see below), perhaps one of the most importance causes of the global financial crisis has been the extreme reliance of households on debt precisely because they cannot draw on outside equity.

This is an institutional dysfunction: households have never been able to draw on external equity–why would you possibly argue in favour of denying them this opportunity? It makes absolutely no economic sense for households to invest 60-70 per cent of all their wealth in the world in this one highly illiquid and very risky asset–and then gear it up to 95 per cent.

(Note that the investors in a pool of 25 year shared equity interests diversify away this risk.) In short, the historical absence of housing equity finance is just another case of a missing market that innovation has remedied.

You make the point that shared equity is a demand-side measure and therefore inflationary. This is, however, a straw-man argument. Even if there was more than $1 billion per annum committed each year to fund shared equity products (which is not likely to occur for years), this would equate to roughly 10,000 new shared equity loans being offered to households every year. In Australia, there are over 1 million home loans originated each year. So even if, in an optimistic scenario, $1 billion per annum was invested into shared equity, this would represent only 1 per cent of the entire home loan market. If shared equity only accounts for 1 per cent of the housing finance market, it is not going to have any material impact on property prices. Yet for the 10,000 new home owners each year, shared equity provides them with very tangible benefits.

As I noted in my op-ed, eminent economists around the world have started to realize that home owners should be able to use a safer mix of both debt and equity to fund their home purchases. Shared equity loans would enable households to achieve this. They effectively allow households to share the risks and returns of home ownership with third-party investors rather than assuming 100 per cent of those risks themselves.

Refer to the following recent links (there are others):

1) Professor Edward Glaeser at Harvard

2) Professor Luigi Zingales of the University of Chicago

3) Professors Ian Ayers and Barry Nalebuff at Yale

And here is my Australian op-ed:

Overlooked solution to credit crunch

Christopher Joye | December 15, 2008

Article from: The Australian

THE most fundamental lesson of the global credit crisis has been that the financial system had too much leverage, particularly the household sector, which in many advanced economies had assumed unsustainably high levels of mortgage debt. But surprisingly, that there has been little comment about the most salient solution: equity.

For hundreds of years listed companies have been able to seamlessly issue both debt and equity to finance their spending. Yet apart from recent innovations pioneered here in Australia, households have never been able to source both external debt and equity finance when buying their homes. This extreme reliance on debt has propagated huge problems, particularly in the US and Britain where the conjunction of flawed institutional frameworks and poor lending standards exacerbated the debt binge.

According to Fujitsu Consulting, the average home owner’s mortgage debt represents 57 per cent of the value of their property. The typical first time buyer’s mortgage accounts for over 70 per cent. Some gear up to an incredible 95 per cent or more. In today’s fickle markets, companies with that much leverage would be crucified. Yet this debt is secured against what is, in fact, a very risky asset. Our empirical research indicates that an individual home with all of its economic idiosyncrasies is about six times riskier than a diversified national property index. Indeed, the risk of an individual property is more akin to that of shares. The experience of the past 12 months has reinforced the fact that single family homes can suffer serious price falls even though most have avoided this fate.

Make no mistake: residential property is very safe if you get access to a diversified portfolio. An Australian house price index proxies for more than $3.3 trillion worth of assets but the index’s incredibly low volatility is a mirage for the individual home owner who assumes a far higher probability of loss (and has about 60 per cent of their wealth invested in this asset).
In 2003 I was the principal author of a report commissioned by the Prime Minister’s Home Ownership Task Force that presented a solution to the high levels of household debt that triggered the global credit crisis: the development of private markets in equity finance. Under our proposal, households would get access to zero-interest rate, shared equity home loans in exchange for trading away a small portion of the risks and returns of home ownership to outside investors. By doing so, they could cut their monthly mortgage interest repayments by 30 per cent or more while reducing their vulnerability to adverse economic shocks (think 2008-09). Importantly, they also retain complete control of their homes; they choose when to sell, what renovations to make, and at what point in the contract’s maximum 25-year term they wish to repay it.

Investors, such as super funds, get extremely low-cost, highly enhanced and very long-dated exposures to what has during the past three decades (including the recent calamity) been the largest and best performing of all investment classes: residential real estate. Historically, investors have only been able to access highly concentrated, risky development-style holdings comprising small parcels of properties that incur heinous transaction costs of about 12.5 per cent. By investing in a portfolio of thousands of shared equity interests, super funds could avoid all of these costs and secure the low risk diversification that they have never had before. Independent actuarial analysis suggests that about 15 to 30 per cent of all super fund capital should, in theory, be allocated to housing, in part because its returns are so unrelated to the performance of other investments. Compare the 50 per cent plus losses in shares and listed property trusts in the past year with the fact that the RP Data-Rismark Australian House Price Index has tapered by only -0.8 per cent.

The former secretary of the Treasury and now head of super fund adviser Mercer, Tony Cole, has commented: “We find the case for institutional investment in [shared equity] compelling. Historically, residential real estate displayed a negative correlation with commercial property markets and a low correlation with the share market, providing diversification benefits in a multi-asset class portfolio.” Actual returns to Australian-shared equity portfolios during the past one-to-two years have validated this investment case.

While some commentators have made hyperbolic predictions of precipitous house price falls they have been proven relentlessly wrong. The tremendous improvements in affordability delivered by the Reserve Bank’s reversal of its monetary policy settings, combined with the shortage of homes in this country, will likely ensure that this continues to be the case.

Following the 2003 task force’s recommendations, Bendigo & Adelaide Bank in conjunction with Rismark International launched the world’s first private-sector, mass-market shared equity finance program in which the lender participates in both the capital gains and wears the losses associated with home ownership without charging any interest. Hundreds of Australian families have bought their first home or cut their monthly mortgage costs by 30 per cent or more as a consequence. Since then the initiative has won industry awards and public praise. Kevin Rudd even canvassed it as one solution in the housing strategy paper that he launched before last year’s election.

The task force recommendations and the Australian experience have been explicitly used as a guide for billions of dollars of government investment in shared equity initiatives in Britain and New Zealand. More recently, I have been invited by the Rockefeller and MacArthur foundations to show the new Obama administration how they could apply the Australian model to ease their housing woes.

Leading academics including Edward Glaeser at Harvard, Barry Nalebuff at Yale, Luigi Zingales at the University of Chicago and Joshua Gans at Melbourne University are calling on governments to help borrowers swap a portion of their mortgage debt for shared equity-style instruments along the lines of the Australian model.

While the Rudd Government has guaranteed trillions of dollars of bank debt and injected $8 billion into the securitisation market, it should turn its mind to addressing the more fundamental problem of the mix of debt and equity on household balance sheets. They face few political risks since the Opposition has declared their support for the solution. The South Australian, West Australian and Tasmanian governments have committed more than $500 million to underwriting public shared equity initiatives. But there remains a critical role for the commonwealth to play in fostering the mass market. Asymmetrical policy that only benefits the banks and conventional mortgage providers does not achieve this aim.

Excluded middle? Maybe. I would see gains proportional to costs with a bias against lower socio-economic groups. Time will tell…

I think I see an excluded middle Damian. Shared equity loans are NOT an alternative to lowering the cost of housing, they’re a sensible part of the financing mix.

As for the terrible situation the people in the home for twenty five years got themselves into, they’ve turned up without a deposit and not paid interest on 20% of the value of their house for 25 years. Doesn’t seem like such a bad deal to me! And they did it all by choice. If they want some more equity, they can save for it.

I don’t see much capital being freed up if shared equity becomes widespread. This would be because the extra money sourced from shared equity (needed to keep up with the other shared equity bidders competing with them) would be in addition to the maximum that they could have borrowed before. That is, the amount borrowed ex the shared equity amount does not change, just the price of the houses, which appreciate to absorb it.

On the other hand if shared mortgages don’t become widespread they will still push up house prices for everyone proportional to the extent they do get adopted. Higher house prices have negative consequences for the poorer in the community in particular. This may not be countered by the existence of shared mortgages as they may not be high on the priority list of the shared equity lenders to counteract this disadvantage.

So either way bad for affordability, plus widely adopted = no capital free up.

Assuming that at the end of your 25 year shared equity loan you do not want to downsize, and need to refinance to pay off the shared equity component, then depending on the change in property value over that time you may have to refinance a fairly hefty chunk of the final property value (20% of the original price plus 40% of the gain). To me this seems like it could leave the product similar to a 40 year or more mortgage.

Seems a bit over the top just to buy a house?? I think it would be better to focus on improving affordability and avoiding things that decrease affordability as a preferable way to free up capital.

It’s true that equity mortgages don’t lower the cost of housing and if anything increase them – by lowering the cost to some buyers of buying them. If most people end up with shared equity mortgages – which I doubt – I’m struggling to see what’s wrong with that. They’ll still be majority owners, but they can use their capital for other things – like buying an education and so on. So long as they’re in the house with equity in it, all the social benefits of home ownership are achieved – they’ve got incentives to pay off their mortgage, they mow their lawn and have a ‘stake’ in the neighbourhood etc.

I think that behind your objection is the idea that they’re somehow missing out on some equity in their home. That’s up to them – I’d prefer to trust their judgement than mine. In any event, I suspect that home equity will be a less good investment in the next generation than it was in this one, because (if prices don’t come back a long way – which I don’t think they will) the rise in prices that we’ve seen will have been a one off adjustment to the fall in nominal interest rates and an asset price adjustment to the increased ease of financing a house. So houses won’t rise as strongly in the next generation. Best for households to diversify from home equity into other forms of equity. They’re being forced to do that with 9% of their wages and we should let them do it with more. Of course some will use it to just spend more, but I’d rather see them in houses sooner, than later – when some would miss out altogether.

The main concern is that although Rismark has arisen as a result of historical extremes of unaffordability rather than address that problem (and there are many, many ways this can be done) the Rismark shared equity model perpetuates the lack of affordability and in doing so may arrays the interests of institutional investors against improving housing affordability.

An objection to this line of argument may be that the invention of the modern mortgage itself is one of the primary drivers for increasing prices over the last century and Rismark is simply more of the same. My response to this would be that the original mortgage model is the minimum required to make housing accessible to many. It has proved its worth in allowing most people to eventually own their own home. The Rismark model does not even set out to allow people to own their home in the traditional sense and is definitely more than the minimum required to make home ownership widespread and this excess has costs to the community.

If the shared equity mortgage catches on, and I really hope it does not, the next time a first home owner goes to an auction to attempt to buy a home, they will find themselves competing with people prepared to sacrifice ever owning the home in exchange for being able to pay 25% more than they can afford. This could end up spreading to where to compete most people end up with a shared equity mortgage. The spread will likely occur in rising markets.

If it does become widespread to the point where most people never fully own their home then that will be a significant step backwards for society. Not quite back to England before the War where most people rented off Landlords, never dreaming to own, but to some sort of half-way house where big business part owns (25% to say 50% of) everyone’s home and that will be the most people will be able to hope for.

This would not be a concern if it was for yacht ownership, but I think it is best for the fabric of society if we keep ownership of shelter in the hands of the people.

Happy for people to tell me where I am wrong.

Oh dear! Finger down throat sickening acolyte stuff possums!!

Whats for tea in Adelaide tonight?

Chamomile?

What you are saying is, of course, music to my ears as I’ve been saying pretty much that for a good while. It was proposed in Lateral Economics Beyond Taylorism: Regulating for Innovation (pdf) paper.

This can result in peculiarly arcane rules. One that I noted especially was that to minimise risk of forgery, our bank cheques were required to have the amount typewritten in words and numerals. Hand writing was not permitted. However to minimise risk of forgery, foreign currency bank drafts were required to have the amount hand written in words and numerals. Typewriting was not permitted. The peculiarity of this did not seem to dawn on others.

No institution has a complementary department whose job it is to simplify procedures that have become unnecessarily complicated or remove those that are simply obsolete. It’s all very well having initiatives like Ken Henry’s tax review, but simplifying and eliminating needs to become a routine institutional function with line accountability.

It’s not clear that the Advocate for Government Innovation will fulfill such a role, although presumably he will help to navigate through the bureaucratic jungle.

But could some brief for interaction between the Advocate and the Government Auditor’s Office provide scope for felling the odd tree, rather than navigating round it?

I’m surprised how rarely what you’ve just done is done. In my observation (partly of my own behaviour) people ‘keep their powder dry’ so to speak in these kinds of circumstances, because it’s quite unpleasant (it is for me anyway) getting tangled up in a fight with someone. So they let people fight their own battles. But there is a very high value in the defence of the communal space that defends basic standards of civility.

So thanks again.

Are you really arguing that because Nicholas spends a bit of his time in the same $250bn per annum mortgage industry as the articles subject that he should be disqualified from commenting on policy as it relates to that industry?

Is it not exactly this experience and expertise that places him in an excellent position to contribute to our understanding of the issues?

Your comments capture the Neanderthal attitude that defines the problems innovative policymakers confront when trying to improve our nations welfare and the worst of our bureaucracy.

Nicholas, as a member of the Review of the National Innovation System, has selflessly made an important contribution to improving the nations approach to productivity policy.

What have you done, Thersites?

He highlights an excellent case-study that is hard to find fault with and you give us perhaps the most asinine post of the year.

Grow up.