New "Teal" politician and economic growthist, Allegra Spender, promotes immigration rates of 220,000 p.a. over the next 2 years, (ABC RN 9 June 22) in the context of also promoting reduction in carbon emissions, rising energy prices, and economic growth. Don Owers recently wrote to her.
Can I suggest that it is our obsession with economic growth that has created not only the greenhouse gases that threaten the planet but almost all the problems we currently face including biological extinctions, soil depletion, food insecurity, the housing crises and associated household debt and developer related corruption. You would have noticed a minor media outburst when it was announced that the value of Australian residential real estate had surpassed $9 trillion. It’s a figure made even more extraordinary because it had jumped $1 trillion in just 5 months and is now more than the combined value of our superannuation, the ASX and commercial real estate. It achieved this dizzy figure because the average house value jumped to a record $835,700, up from $689,400 a year ago. It was enough to make economists salivate with excitement because due to the magic of economics - or creative accounting - this will increase GDP but not the consumer price index (CPI) where house prices are ignored.
What wasn’t mentioned was that Australian owner-occupiers debt also rose to over $1.2 trillion. This left Australia with the dubious distinction of having the world’s highest household debt and according to the RBA 70% of households in suburban electorates are in mortgage financial stress. There are 2.6 million families, about 32% (up from 18% in 1984) of the population, who are currently renting their homes and are desperate to become home owners. This desire is fuelled by financial stress from the high cost of renting and uncertainty of tenure but more importantly it is almost impossible to retire if you do not own your own home. This urgency for home ownership has left them vulnerable with lenders pushing them into “factually inaccurate” mortgages and there are now $500bn worth of these mortgages sitting on the books of Australia’s banks with the level of factually inaccurate mortgage applications rising significantly since 2015, from 27% to 33%.
Potential home buyers face a considerable risk because house values are only a function of what people will pay and history is full of housing bubbles that imploded, including the one in the US where the GFC caused a price drop of one third from which some regions have not recovered with home owners “underwater” meaning they still owe more than the value of their house.
In Australia the housing market has been described as extraordinarily resilient defying many predictions that the pandemic would cause a price collapse but the opposite has occurred which raises the questions of how and why this happened. In short, the answer was through the direct involvement of the federal government who in co-operation with the Australian Prudential Regulation Authority (APRA) , the banks allowed more than 493,000 mortgages to be deferred, with over 118,000 mortgages still deferred according to the latest data. Without this action most would have defaulted on payments triggering repossession by the banks and a housing price collapse. The Morrison government also committed to $507 billion in stimulus policies, encompassing the JobKeeper program and JobSeeker supplement, among others, something that went entirely against their own conservative ideas but was essential in order to keep home buyers viable.
At the same time the Reserve Bank (RBA) committed to up to $200 billion in near free (0.10 per cent interest) funding for the banks at a time when bank funding costs were spiking due to rising risks in financial markets. To put these measures into perspective the entire Rudd-Gillard Global Financial Crisis era stimulus package was only $51 billion and spread over four years yet it caused great alarm and derision from the then opposition. To be fair many of the Morrison governments actions could be put down to the need for extreme actions in extremely difficult times and there have been criticisms that the spending did not go far enough or long enough. This is borne out by a survey from the small business Australia group who found that 415,000 small businesses were on the brink of collapse, including some house construction firms driven into bankruptcy by the rise in timber prices.
Even well before the pandemic the housing industry received support that, like negative gearing, CGT, first home buyer grants and high immigration was designed to keep prices increasing. This has been a considerable advantage to the wealthiest 60% of home owners especially the 18% who are landlords, and has been the main driver of wealth inequality with the top 20% some 90 times wealthier than the lowest 20%. Almost half of our politicians are landlords, their full property ownership is impossible to determine because many properties can be concealed through trusts, companies or self-managed super funds or even owned by their spouse. Such a situation is alarming since these are the people making decisions on policies that will influence house prices. As an example, Tim Wilson MP owns 5 investment properties and holds the position of chair of the house economic committee where he argued that first home buyers should be allowed to dip into their super to pay for house deposits.
While we could dismiss these actions as self-interest it does not explain the failure of successive governments to rein in the rate of corruption that runs rampant through all levels of government and industry following a housing boom. The Pandora papers have revealed that Australia has huge gaps in its financial integrity which has allowed it to become the go-to destination for dirty money which ends up in real estate. The current anti-money laundering and counterterrorism financing laws do not require real estate agents, accounts or lawyers to report suspicious transactions even though this has long been pushed by a G7 task force on financial action. It is so blatant that Australia has been listed by the US State Department as a “primary jurisdiction of concern” when it comes to money laundering while the UN office on Drugs and Crime warned that Australia is part of organized crime networks involved in among other things wildlife and forestry crime estimated to be worth US$ 19.5 billion annually. Illegal timber harvesting threatens many of our near neighbours and Government figures put our illegal timber imports at about 10% of our total sawn timber but it is almost impossible to trace the source of wooden products like furniture.
Organizations that most benefited from the housing boom have been involved in corruption for as long as the boom and this includes our big banks and financial institutions like AMP along with developers and the real estate industry. However, it is the housing market that provides the save haven for dirty money which comes from a variety of sources including casino's, gambling superannuation providers and even football clubs. In Australia some $65-$75billion goes through pokies each year and according to Andrew Wilkie Mp up to 95% of registered clubs do not adhere to AML/counter terrorism laws. Even when criminal acts have been exposed the penalties are hardly likely to discourage future transgressions, the CBA was fined $700m and Westpac $1.3b all of which essentially came from shareholders dividends while the CEO of Westpac was given a $2.7 million redundancy.
Dear DonThank you for your email. Allegra is keen to encourage more effective public engageme
nt on all issues of concern to Wentworth voters to ensure that you are heard and we thank you for taking the time to write to her.The issues you have raised relate to a number of policy areas.Integrity measuresTrust in government is an essential part of a healthy democracy and Allegra is committed to delivering honesty, transparency and accountability in federal politics.
The Commonwealth is the only jurisdiction without an independent, anti-corruption agency. Allegra supports the Integrity Commission model put forward by the Member for Indi, Helen Haines, which has the power to hold public hearings, hear referrals from the public, examine past cases of alleged corrupt conduct and establish a code of conduct for parliamentarians.
Allegra also supports further measures, including:
- tighter controls on political donations and lobbying
- greater transparency around tax-payer funded programs
- more independence for the public service and holding ministerial advisers to account
- preserving the ABC and championing independent, unbiased reporting
- prohibiting misleading or deceptive political advertising.
#000000">This is not an issue that can be quickly solved by renters just choosing to buy a house. It’s also not an issue that can be solved by loading more and more debt onto people when interest rates are about to rise.
#000000">Whilst many decisions regarding housing policy are State issues, Allegra believes the Federal government has a leadership role to play. In the short term, we need to look at new solutions like shared equity arrangements, which can make it easier for people to buy their first home and would be budget positive in the medium-term. We also need to consider the appropriateness of the current level of Commonwealth Rental Assistance. In the long term, we need to look at housing supply, including how the Federal government could support the construction of more social housing and more affordable housing in the private sector.
Inequality gap and taxation
policiesWith regards to tax policies, Allegra supports a full review of our taxation system
IMore details of Allegra's policies can be found here: Policies - Allegra SpenderIf you would like any further information at this stage, please let us know.Kind regards,Kath, Policy Advisor