Michael Pascoe: Housing and AUKUS in the frame, but going nowhere much

Debate about the AUKUS deal is unlikely to go too deep, Michael Pascoe writes.

Debate about the AUKUS deal is unlikely to go too deep, Michael Pascoe writes. Photo: TND

Two major meetings this week with absolutely crucial policy issues in the crosshairs – and the likelihood that neither will add up to anything much.

The first is national cabinet on Wednesday with the preliminary palaver about governments wanting to be seen to be doing something about our housing crisis.

Unfortunately, all the leaks and previews add up to doing nothing more than fluffing around the edges – agreeing on some minor improvements in renters’ rights that already exist in most states; a little publicity about what states might do with the Commonwealth’s previously-announced $2 billion “social housing accelerator”; another opportunity to bag the Greens’ political game of blocking Labor’s Housing Australia Future Fund something-is-better-than-nothing gimmick, and much repetition of developers’ lobby talking points about zoning and planning changes alleged to magically increase ‘supply’.

Add all that together and you get nothing that will increase supply by enough to make a perceivable difference to the housing shortage causing rising rents and prices – but a bunch of politicians will be seen to be talking about it and get plenty of meaningless coverage.

Simple solution

Regular readers of this space know the only real difference our various governments can make is to commit to a quite massive direct investment in public and social housing to start making up for the lost decades of neglect.

Beginning to solve the problem means governments directly building housing on a not-for-profit basis, not the various half-arsed policies we’ve become used to that primarily benefit real estate vendors and landlords.

It requires politicians with the intelligence, the nerve and the ethical commitment required to call a halt to our unsustainable belief in shelter appreciating by as much as, or more than, the stockmarket.

In particular, they need to reduce demand in the unaffordable private rental market by taking low- to medium-income people out of that market.

Governments begrudgingly accept they have duty to house the impoverished (if they survive long enough on the waiting lists) but the problem now stretches to essential workers. When our nurses and aged-care workers are priced out of the market, the market is broken and needs large-scale direct government intervention.

But that won’t happen because the politicians smiling in the national cabinet photo op lack some or all of the three previously mentioned necessary qualities.

To a degree, the pollies only echo the broader standard housing chatter, including by people who should know better.

Dr Lowe has his say

Outgoing governor Philip Lowe and the rest of the RBA mandarins have often been guilty of that, but on Friday Dr Lowe appeared to perhaps, maybe, sort-of open the door just a fraction to better policy.

In his final appearance before the House of Representatives economics committee, the governor was asked a number of housing and rent-related questions and he also bought into housing through the prism of how to improve Australia’s low productivity growth.

Dr Lowe began with the standard line of the solution to rising prices and rents lying in increasing supply.

“There’s been strong demand for rental accommodation, and the rate of addition to the housing stock is low,” he said.

“This year the Australian population has increased by 2.5 per cent; the number of dwellings in the country has increased by 1.5 per cent. There’s a big gap there. When demand is strong and supply is weak, prices go up.”

Without needing to spell them out, he added an admonishment of the short-term “solutions” that pollies love to announce.

“There’s always a tendency – and this is a reflection over 20 years – to try to come up with a short-term solution. There aren’t short-term solutions here.

“The solution has to be putting in place a structure that makes the supply side of the housing market more flexible.

“That means zoning and planning deregulation, and it means state and local governments being part of the solution.”

Ray of hope

Did you see the ray of hope in that last sentence? Well, I’m hoping it was an indication of a light bulb moment at the RBA when he said state and local governments need to be part of the solution, because that could – and should – mean state and local governments directly increasing supply, not just giving developers what they want for maximising profit and land banking.

Alas, the economics committee members lacked the wit and/or desire to pursue that thought.

Normally I would dismiss my interpretation as being too optimistic, but Dr Lowe subsequently became interesting when asked about how we could improve productivity growth.

He cited three factors: Education, digital economy and (drum roll) the price of land. He’s still repeating developers’ talking points by thinking it’s about zoning, but he might be getting closer to the light:

“The third thing I would point to is competition policy and regulation, particularly around zoning. One of the biggest issues we face at the moment is the high cost of housing in the country. I think that is debilitating for many, from both an economic and a social and personal perspective.

“Housing is expensive not because of the cost of building a house or an apartment – it’s the land. The land embedded in each dwelling is very expensive in Australia, perhaps the most expensive in the world, yet we have a huge continent.

“Why is that? It’s because of the decisions we’ve made around urban design, housing, planning and zoning.

“This is not something within the gift of the federal government, but it is within the gift of governments broadly to make a difference there to the value of land embedded in each dwelling.

“I think if we could do that it would be to the benefit of the society as a whole, not to the benefit of some particular land owners at the moment.

“But, again, thinking longer term, doing something in that space I think would make a difference to the quality of life in Australia.”

Again, that line was not followed up by the humdrum committee. The developers’ interpretation would simply be that Dr Lowe meant allowing greater density, allowing more units to be built on each square metre of land.

Of course, in the real world, what that does is increase the value of the land, not lower the eventual price of the dwelling – check the windfall profits every time there’s a rezoning.

Instead, I’ll give Dr Lowe the benefit of the doubt in that he might have meant governments could act to reduce or cap the price escalation of land by developing it themselves on a non-profit basis.

An economist of Dr Lowe’s experience should be able to recognise when a market is failing society. And when a market fails, it’s the government’s duty to intervene.

Awkward AUKUS debate

The second major meeting this week? The ALP’s national conference starting in Brisbane on Thursday.

The little that’s left of the left has managed to get a weak implied criticism of the Albanese government’s defence/foreign policy onto the agenda, a mild watering down of the policy of “all the way with the USA” via AUKUS and all who submerge in her.

It will be important as it will be the first and only political debate on the bipartisan swallowing of the AUKUS surprise Scott Morrison sprang on Australia.

With mainstream media performing as an almost unanimous cheer squad for nuclear-powered submarines and Sinophobia, the outlook for the motion is bleak.

As James Robertson has reported, Prime Minister Anthony Albanese and Foreign Minister Penny Wong control enough of the nominally left votes to ensure the motion is defeated, never mind the votes of the right controlled by the Defence Minister and Deputy Prime Minister Richard Marles – alias “Dutton with hair”.

So two important meetings with two very big policy issues with multi-generational implications for Australia – and neither will go anywhere.

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