Political economists sometimes talk about the “two speed economy”, the “plight of the working poor” and the paradox of “poverty in the presence of plenty”.
There is plenty of evidence that these are issues of relevance to Australia, and no-where is this so obvious as in the market for housing. Think indigenous Australians for the most obvious group at the lower end of the totem pole for housing, but also think first home buyers and those young Australians forced to rent.
Nassim Khadem writes from Canberra for The Age:
The number of Australians under financial stress from housing costs has soared to a historic high, with more than a million households now spending at least 30 per cent of their income on loan repayments or rent.
Adding fuel to a potentially explosive election issue, census figures show that the number of households officially declared under “mortgage stress” has almost doubled in five years – to 547,054.
At the same time, the number of households above the “rental stress” threshold – spending more than 30 per cent of their income in rent – has climbed to 520,598. This makes a combined total of 1.068 million households under financial stress from their loan and rental payments.
Yesterday, David Uren reported in The Oz:
Home owners are shedding their fears about rate rises and trading up to bigger and better properties, pushing prices up in the process.
New home loans in April were 11 per cent higher than a year ago and the average loan of $234,300 is 6.4 per cent higher.
However, first home buyers are being pushed to the back of the queue, with their share of the market falling.
What can be done about gross inequalities of income and wealth is unclear. With respect to housing, a partial solution is to release more government land on the fringes of our major cities, the IPA solution.
Others lobby for cuts in land tax, the reduction or abolition of land tax or (gasp!) the elimination of negative gearing or the taxation of capital gains on a family’s principal place of residence.
Henry bravely points out that the easy money globally in the early years of this century fuelled a massive asset boom that raised the prices of assets, including houses, while the emerging workers of the BRICs kept wage and goods and services inflation low.
Clearly, however, a massive dose of asset deflation is not the solution to the housing problems of Australia’s poorer residents.
John Howard has been known to point out that no-one complains to him when the price of their house goes up. This is the essence of the debate on poverty of housing or any other indicator of wealth or income.
The winners from economic growth attribute this to their own intelligence and good decisions, while the losers (many fewer in number) can suit themselves.
Henry’s thoughts on the general issue of poverty are contained here.
If gentle readers see this matter differently, contact Henry here.
Can the Coalition win the Federal election? Pollster Gary Morgan, a contributor to Henry Thornton, this week wrote an article that addresses this question: “The answer is ‘yes’, but over the next few months much can happen and we know ‘over 20%’ of electors make up their minds as they vote!” Read the full article here.
Vale Robert Younger
Henry was saddened by the passing of Robert Younger in late June. Younger was born in Kew and educated at Trinity Grammar. He was the author of more than a dozen books, including the acclaimed 2003 biography Keith Murdoch, Founder of a Media Empire.
Read more at Henry Thornton.