Economy

Apr 4, 2017

Turnbull will get mugged by housing like he was mugged by energy

As with energy, housing affordability has gone from a political issue to a major policy challenge, and it's not clear the government can handle either of them.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

Just as energy morphed from a political issue into a genuine policy crisis for the government, housing prices are now emerging as another challenge that not merely threaten to deal the Turnbull government a political mugging but risk the real economy.

The paths of both issues are eerily the same. The government has engaged in self-delusion on energy for years, unwilling to see that its climate denialism was creating an investment environment so uncertain to investors that they abandoned not merely investment in coal-fired power but also in renewables. As the consequences began to make themselves felt, the government's first instinct was to use it as the basis of a scare campaign against Labor, until the spreading impact of gas exports began threatening manufacturing jobs up and down the east coast. Cue summits and policy on the fly as the government moved heaven and earth to create the impression it was Doing Something -- culminating in Malcolm Turnbull's silly, poll-motivated Snowy Hydro 2 media release. 

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25 comments

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25 thoughts on “Turnbull will get mugged by housing like he was mugged by energy

  1. Jack Robertson

    Yet another cracker in your ongoing series on this, BK, keep at them/it.

  2. The Cleaning Lady

    It was Senator Scott Ludlam who initiated the negative gearing / housing affordability public discussion in June 2015. Glad to see Labor was listening. Have we finally reached the point where the Coalition will act – for the good of the nation? Or will their donors win?

  3. Roger Clifton

    “investors … abandoned not merely investment in coal-fired power but also in renewables”

    Ah, so you would blame the repeated shortages in SA to a lack of wind turbines? Or coal? Nope. The shortage was of gas, gas-fired electricity.

    Wind meanz gas. Any time we have an unreliable generator on the grid, it must be matched by an equal capacity of gas turbines, idling when the wind blows and surging up to full power when it doesn’t. Even when the wind blows, a similar amount of synchrous generation somewhere on the grid must be grunting to keep the wind generation in step.

    As injecting wind into the grid is a intervention by the State, so its gas backup must be State-provided. We must thank the SA Premier for that, not the investment market.

    1. Fred Bloggs

      The gas generation capacity is already there. The gas isn’t. Why? Because they built three LNG plants on one island in Queensland. Now they pipe all the formally cheap gas there, and ship it to Japan where they buy it cheaper than we do in Australia.

      It was a spectacular misallocation of capital that we are all paying the price for.

      As a result we need to ban third party gas exports and institute domestic reservations.

      1. mike westerman

        Oh dear FB, it sounds like you are advocating a government governing in the national interest which surely would damage the narrow interests of the big end of town – can’t do that! In the same way as we can’t act in the national interest to house Australians as that would damage the interests of the banks.

    2. Mike Smith

      An intervention by the State? Tell me, who owns power stations/windmill farms/solar these days? Private companies, *not* the state. So why do you assert that the gas stations need to be State provided?

      1. mike westerman

        Mike you should have asked Roger when he will start reading some engineering texts post 1903 (year Elling built the first gas engine producing a net output) and realise that spinning reserve is not the only means of providing for reliability in networks.

    3. AR

      Come on Dodger, stop poncing about gaz when we all know that you’re really all hot’n’sweaty for nukes

  4. Marian Smedley

    Would be nice if – just once – you acknowledged the Greens for their policy leadershop on both energy policy -and specifically on negative gearing and capital gains tax reform. Pleased to see ALP picking up these policies – despite initially rejecting changes to negative gearing.

  5. Lesley Graham

    Thank you BK, this is an area that needs constant pressure exerted on it. I have been having this conversation with people for years. Because the reality is the amount of greedy investors at the trough, exists because the rest of the country who aren’t as wealthy are the ones whose taxes are paying for their continued, decisions & choices that they are making to take advantage of this lucrative tax break This is where it has to stop, as anyway you look it, things aren’t going to end well.

  6. klewso

    When it’s all unravelled, you’ll find a silkworm is just a worm – in silk.

  7. mary wood

    Housing is a necessity, and should therefore not be treated as a casino, in which there are a few lucky winners and many, many losers. Abolishing negative gearing, with perhaps the exception being of people who own one negatively-geared property only. Abolish capital gains tax write-offs and put your fingers over your ears to drown out the screams. Of course house prices will fall, that is the idea isn’t it. But if you are selling your residence at a reduced price then you will be also buying at a reduced price. Put a punitive tax on owners of investment properties who leave them empty. And while we are about, let’s abolish negative gearing on commercial properties, so that the small businesses the government loves to talk about are not being screwed by landlords who make just as much money whether their properties are let or not. I believe this would make commercial rents more realistic and do more to encourage genuine entrepreneurial skills than tax cuts, and at a gain to the federal budget rather than a loss.

    1. Marjorie Carless

      I absolutely agree with you Mary and it has to happen soon before the whole housing becomes a disaster for everyone.

      1. bref

        Agree with all here. Sorry to say, it’s already a disaster for all the young borrowers. They’re the ones with a lifetime of dept or bankruptcy in their future when the bubble bursts, or even if all of a sudden there’s a rise in supply and prices drop. Their million dollar loans won’t drop…

        1. Mike Smith

          At some point, they’ll realise this about those loans:
          http://www.lifehack.org/articles/communication/how-the-sunk-cost-fallacy-makes-you-act-stupid.html
          And walk away. And prices will drop more, and banks will be left holding worthless paper. GFC, redux.

    2. Jack Robertson

      Great suggestion re: commercial property.

    3. Richard

      Negative gearing does not make as much money for an owner if a property is empty as if it is rented. Nobody loses real money to save tax, unless there is some real scam going on.
      Anybody buying at today’s prices will not show the returns that some here imagine and it is only if a property has been held a while that money is made (as rents have gone up) or when sold..
      I doubt the ‘bubble’ will deflate wildly, either. Only those almost underwater will sell if forced and that will result in a gentle pleasing plateau, not a valley of crushed corpses.

      1. Mike Smith

        You can get to own more property by not negatively gearing. Positive cashflow trumps making a loss.

    4. Richard

      No sympathy for Turdball re energy.
      He turned his back on the wonderful plans that is BZE’s and walked away into the arms of the filthy fossil fuel purveyors. Why? is a real mystery. For somebody who ‘could not be bought’ there is clearly some ego problem that needs validation in some way from such doubtful sources, that he would risk the horrid odour that now permeates his very soul.

      1. Richard

        “..that are… “No EDIT button. ??

        1. Mike Smith

          Also, no like or vote up or down buttons…

  8. AR

    No matter what, if any, semblance of decency & reality breach the boneheaded boors in government on this issue,the sad truth is that, as with so many other issues – drug war anyone? – there are too many people with too much skin inolved in the curent abuses to quietly accept changes.

  9. Mike M

    Sadly, this government has fallen into the trap of playing politics instead of implementing good policy.

    1. Mike Smith

      Can you remember the last government that didn’t fall into that trap?

  10. Suiga

    Bernard you don’t mention the Greens policy on negative gearing and CGT. The Greens announced its policy before Labor and Labor followed with a less ambitious plan that grandfathers tax breaks for investors. If the Greens had not taken the lead Labor would have been far more timid.

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