For anyone who doubts that the Liberal Party is no longer the party of free enterprise, the pile-on against a Young Liberal who made the mistake of offering a semi-helpful suggestion to the housing affordability crisis is proof.
Writing in the Fairfax papers, Harry Stutchbury (son of AFR editor, Michael), made a fairly obvious (and nowhere near far-enough-reaching) suggestion to address the housing affordability issues that bedevil anyone aged under 30. Stutchbury’s supposed radical idea was to include the value of a primary residence in the asset test for the age pension. It’s hard to argue the merits of a policy that exempts a multimillion-dollar asset from a pension asset test, but it’s merely one of the many means that the major parties have used to execute the greatest intergenerational theft in Australia’s history.
As Stutchbury suggested, retirees who have significant equity in their homes could very easily take a reverse mortgage (or heaven forbid, move to a cheaper residence). Surprisingly, this suggestion didn’t go down to well at Liberal HQ. Quick as a flash, Stuchbury was derided as being a “private school boy” (itself a strange insult, especially given the Liberal PM is as private school as one gets and, anyway, the school one attended should hardly preclude submitting a policy fix) by David Elliott, a New South Wales MP.
Elliott’s NSW ally, the right-wing Alex Hawke, added further criticism, claiming Stutchbury had been “intellectually lazy and inaccurately posited that older people exercising their absolute right to stay in their own home as long as they want are somehow hurting young people from getting ahead”. Elliott and Hawke neatly summarise the complete hopelessness of the Liberal Party: factional hacks, long term holders of full-time jobs paid for by Australian taxpayers, personally criticising someone who made a fairly harmless suggestion to fix an obvious problem.
That Stutchbury would be lampooned for such an inoffensive suggestion is especially strange – the principal residence exemption doesn’t really contribute much to the affordability crisis. But to suggest that the Australian market isn’t seriously inequitable is beyond foolish. The fault for this isn’t purely due to incompetent governments (both Labor and Liberal — don’t forget, it was Kevin Rudd who famously supercharged the first home owner’s grant in 2008), the blame also belongs to the banks.
Governments distort housing by giving a captial gains tax (CGT) exemption on a principal residence (which acts as the greatest form of intergenerational theft); negative gearing coupled with the CGT discount (arguably the dumbest policy, but actually less damaging than CGT principal residence exemption); various first home owner’s grants (which simply line the pockets of sellers) and the asset test exemption.
Banks however have been the primary cause the massive housing bubble by lending far-too-much money at far-too-low interest rates (often to the wrong people), which has the fairly obvious effect of bidding up the housing price. This is clearly evidenced by the explosion in Australia’s mortgage debt-to-GDP ratio (one of the highest globally, ever) and our anaemic gross rental yields.
Why do banks do this? Because, in the short term, it gooses their profits, and bank CEOs are smart enough to know that when the house of cards eventually implodes, they will have made plenty of bonuses along the way (and will probably get a generous termination payment on the way out).
It’s likely that the Liberal Party as a collective won’t ever wise up to the problems caused by the housing bubble and, certainly, won’t take any drastic steps to fix it (like removing all the tax benefits to owning land and imposing a significant property tax). They’re simply too wedded to their elderly base (even though that base is both dying, and wouldn’t vote for anyone else in any event).
Rather, they will eventually be swept away by demographics, while anyone daring to make a helpful suggestion will be mocked, criticised and excommunicated.
*Adam Schwab is a company director and the author of Pigs at the Trough: Lessons from Australia’s Decade of Corporate Greed, published by John Wiley & Sons in 2010
CORRECTION: An earlier version of this piece said David Elliott has “never had a full-time job that wasn’t fully paid for by the Australian taxpayers”. This is not true. David Elliott has eight years private sector experience, including at the Civil Contractors Federation and the Australian Hotels Association.