Well for the government to get involved in the first place, it's almost a given that the risk is, a significant portion of voters may well default. Why bother getting involved otherwise?
I wouldn't have a clue how many might default, but I know the governments budget is dwarved in comparison to the size of the market, a market which could easily shift 10-20% (that's 400-800 billion). Defaults will depend on what else is happening at the time, is employment rising (which it could well start if the AUD keeps pushing north).
Most importantly, would the government want to commit to such a policy, or guarantee, if there was a risk it would send them bankrupt. If they start with such a policy, and prices continue falling, they will have really put themselves in a bad position.
Is there a precedent for this, where a government has backed mortgages against default? Just not sure how it would work.
