The extraordinary rise in house prices has become a national disaster, yet governments still don't seem to grasp the basics: Economics 101 teaches that supply and demand regulate the market. Right now, supply is woefully short while demand remains insatiable. So how do governments respond? By offering ever more assistance to first home buyers - measures that only push demand higher. From 1 October, the rules for the First Home Buyer (FHB) Guarantee will be loosened, adding more fuel to the fire.

The FHB Guarantee lets eligible buyers avoid lenders' mortgage insurance (LMI) while purchasing with just a 5 per cent deposit. Strict income caps have always applied - $125,000 for singles and $200,000 for couples - so many higher earners were excluded from a program designed to ease the savings

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