ABC Lateline does housing affordability

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By Leith van Onselen

ABC Lateline last night aired a segment on housing affordability, which involved a panel discussion involving:
  • Former federal leader of the Liberal Party John Hewson;
  • Director of research at Essential Media Rebecca Huntley;
  • Managing Director of Market Economics Stephen Koukoulas; and
  • Victorian CEO of the Urban Development Institute of Australia Danni Addison.

The segment discussed a variety of policy options on the table including:

  • Unwinding negative gearing and the capital gains tax discount;
  • Bond aggregator model for social housing;
  • Abolishing stamp duties for a broad-based land tax; and
  • Shared equity schemes.

The discussion is decent and balanced, with John Hewson stealing the headline for stating the housing market:

…”is a crisis, it is a bubble. I know people are hesitant in saying it, but it is a bubble. House prices have gone up 250% since the mid-90s in real terms. Household debt is more than 200% of disposable income. 120% of GDP. And it stands as a monument to neglect and drift by both levels of government”.

Boom!

While the discussion is decent, it failed to adequately touch on the role of mass immigration, which is the key driver behind the 80,000 to 100,000 people flooding into Sydney and Melbourne each year, and is a key ingredient driving-up property demand and prices in our big cities. I cut a monologue on this exact issue for this Lateline special, but the ABC refused to use it, instead using some useless statements from me about shared equity schemes.

In fact, the only one to address the immigration issue at all was Stephen Koukoulas (aka “the Kouk”), and only in passing. But he played it off as mostly a supply-side problem, not a demand problem:

“I think the issue is that we have a shortage of housing relative to our unrelenting growth in population, so we need to address the supply-side if we are to be serious about addressing affordability. We need to simply build more dwellings, and that’s going to require effort from both commonwealth, state and local government sectors. So, it’s really a supply-side question…

We just haven’t built enough places. Every three years, Australia’s population increases by more than a million people. Now, a lot of those people live in the big cities, so we’ve gotta be building a large number of places year in, year out to just house them – to keep supply constant…

There’s no doubt that it [immigration] is a fundamental driver. We’re talking about, again supply and demand… If we’ve got this unrelenting demand coming through high immigration levels, well that’s an important underpinning of demand and price levels…”

If mass immigration is a key driver of housing demand and unaffordability in our big cities (which are the magnets for migrants), then where is the logic in maintaining an immigration intake that is so far above historical norms and one of the biggest in the advanced world?

Australia's immigration

Surely a key solution to housing affordability is to reduce immigration back to sensible and sustainable levels? It’s hardly rocket science, and yet the Lateline panel barely discussed the issue at all and certainly did not argue for an immigration cut.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.