In the wake of Reserve Bank of New Zealand (RBNZ) Deputy Governor, Grant Spencer’s, excellent speech earlier this month calling for government assistance to rein-in the housing market, debate over housing policy has hit fever pitch in New Zealand.
For weeks, we have witnessed strong debate from all and sundry – the government, the opposition parties, the RBNZ, the property industry, the banks, and the overall commentariat – about the risks building in New Zealand’s housing system and the policies required to mitigate these risks and to provide Kiwis with more affordable housing.
A perfect example of this robust discussion was evident over the weekend in New Zealand’s leading financial news site, Interest.co.nz, which headlined with three articles discussing the housing dilemma.
New Zealand economist, Gareth Morgan, penned a piece arguing that New Zealand’s housing market problems are decades in the making and caused primarily by policies that have artificially juiced demand, namely: 1) too lower risk-weightings applied to mortgage lending; and 2) generous tax concessions applied to housing.
Contributing editor, Bernard Hickey, penned a piece analysing Auckland’s new “Unitary Plan” planning blueprint, which is the centre-piece for the National Government’s supply-led strategy for dealing with Auckland’s housing crisis.
Whereas, managing editor Gareth Vaughan, published a detailed analysis of the RBNZ’s latest macro-prudential curbs drawing on issues raised by ANZ CEO David Hisco.
On a daily basis, these types of articles are appearing across the New Zealand media. And while you may or may not agree with the assortment of arguments presented, at least the issue of housing is being rigorously debated across all levels of New Zealand, which is the first step in the reform process.
Now contrast this robust debate with Australia.
Our two biggest cities – Sydney and Melbourne – are experiencing a housing bubble equally as big as Auckland’s, with valuations at all-time highs against virtually all measures (e.g. incomes, rents and GDP).
The latest Household, Income and Labour Dynamics in Australia (HILDA) survey has just been released, which revealed a rapidly growing wealth divide between young and old, crashing home ownership rates, increased property investment by older Australians, and a blow-out in the cost of entry level homes.
Yet, despite these dire circumstances, you would be hard pressed to find much discussion on housing policy at all – from within the mainstream media, from our politicians, or from the RBA/APRA.
Heck, while the newly elected Turnbull Government introduced the biggest ministry since the Fraser Government – with 23 Cabinet positions and another seven outer ministries – it amazingly did not include a minister for housing.
Labor’s shadow ministry is marginally better, pushing housing to the outer-ministry under senator Doug Cameron. They also continue to push for much-needed reforms to negative gearing and the capital gains tax discount.
Still, the number one social, economic and inter-generational challenge in this country has barely anyone looking after it.
The RBA/APRA are just as derelict. For years they have buried their collective heads in the sand on housing, refusing to acknowledge that problems even exist and only implementing piss weak macro-prudential curbs long after the horse had already bolted. They rarely speak-up on housing-related issues and never explain to the public what reforms are needed to restore balance to the housing market and broader economy.
Then there is Australia’s mainstream media, which prefers to cheer-on rising house prices then confront the widespread damage and distortions caused by Australia’s busted housing market.
The end result is that Australia’s policy makers have been given a free pass to continue blowing the bubble via ineffective supply-side policies, distortionary tax policies, weak controls on money laundering, as well as sustained high immigration, much of it from questionable sources.
In short, while New Zealand is confronting the housing elephant head-on, Australia continues to ignore it.
