Burgess drops racism labels, attacks foreign property buying

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Recall the recent spray from Rob Burgess at LVO:

One of the issues certain to feature in the next federal election is Australia’s rampant population growth, more than half of which is due to immigration.

It’s a vexed debate because it is usually conducted just a hair’s breadth away from xenophobia or blatant racism – making it a well of support for politicians who wish to ‘dog whistle‘ on those issues…

Economist Leith van Onselen, for instance, has railed for years against the high levels of immigration that became the norm during the years of the Howard government.

In particular, he focuses on the way the flood of new Australians:

  • pushes up house prices by ensuring demand continues to outstrip supply;
  • puts strain on creaking infrastructure, particularly road and rail; and
  • inflates headline GDP numbers, while per capita GDP growth remains weak.

…the government has to take its share of the blame for creating an under-populated nation that ‘can’t afford’ to house new migrants, or provide them with services and jobs.

So in the short-term immigration levels will need to be cut. But in the longer-term we need to stop blaming willing, hard-working, would-be migrants for the policy failings of Canberra.

We are – or at least should be – much bigger than that.

Apparently we are not bigger than that. Nor should we be, from Rob Burgess today:

The new census data released on Tuesday should infuriate young Australians because it shows definitively how the housing market is being rigged against them.

It dispels for good the myth that a shortage of dwellings is what’s causing house prices to rocket beyond their reach.

The key myth-busting statistic is the average number of people per dwelling, which has not budged an inch in the five years since the last census. It’s staying at 2.6 which is where it was back in 2000 well before the house price boom began.

Breaking down that number, the census shows the number of occupied dwellings increased by 6.8 per cent over five years, which is less than population growth over the same period: 8.8 per cent.

However, the number of unoccupied dwellings grew at 11.3 per cent over five years. That equates to 105,000 more empty dwellings since 2011.

Those numbers explain the apparent paradox of ‘people per dwelling’ remaining static, while renters and home buyers experience a tightening market.

And it is getting tighter, as shown by the rental data. Median rents increased by 17.5 per cent over the period, outstripping average income growth of 13.7 per cent over the same period.

That pushed more people into ‘rental stress’, defined as requiring them to spend more than 30 per cent of their disposable income on rent. In 2011 the proportion was 10.4 per cent, but that has now risen to 11.5 per cent.

So the dwellings are there, but either not on the market or increasingly unaffordable if they are.

What’s maddening about those two problems is that they are caused by politicians, not ‘the market’ as the pollies always try to pretend.

There are two categories of market participants that have led to this situation.

One is overseas property investors, dominated by buyers from mainland China. They are permitted to buy only new dwellings – a rule that is supposed to stimulate housing supply and put downward pressure on prices.

In reality, there are two major exemptions. They can buy homes for their adult children to live in during periods of study in Australia, and, more recently, to house children as young as six who enrol in Australian primary schools.

But the investors who are leaving properties vacant aren’t interested in accessing education. They buy off-the-plan apartments as a store of wealth, much like giant gold bars.

If China suffers an economic or geopolitical collapse, which many commentators think likely, some of their fortune will be sitting in high-rise towers in Sydney, Melbourne or Brisbane.

The second class of market participants operating in a decidedly non-free-market way are local investors seeking to minimise tax through negative gearing and profit from the 50 per cent discount that applies to any capital gains they make.

Those investors are subsidised by other taxpayers to outbid would-be owner-occupiers.

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If the Australian government cannot put roofs over our children’s heads then it has no purpose at all.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.