Wednesday, August 28, 2013

Where do the parties stand on housing: part 3 – Labor

Last week, after much squinting and reading between the lines, we convinced ourselves that we could see the outlines of the Liberal Party's housing policy (reforming negative gearing – it only makes sense).

Faced with a similar absence of an express housing policy from Labor, we now apply to them the same line of inquiry and deduction.


Upon returning to the Labor leadership, Kevin Rudd outlined a new narrative for the national economy, the Federal Government and the Australian public. Breaking from the previous leadership team's tendency to cozy buttering-up, Rudd presented a more challenging narrative: that the mining boom and associated windfall gains to the national income were passing, and that if we're to enjoy increased incomes in the future, we're going to have to earn them.

In other words, the Australian economy will have to become more competitive.

Rudd's 'new national competitiveness agenda' encompasses a wide range of issues, but we can reduce these to a couple of broad themes. First, there's the problem of those factors of production that are too costly, and that may cause Australia to 'price itself out of international business'. In particular, Rudd highlights the high cost of electricity, and the cost of government regulation. He also mentions, more obliquely, the high cost of the Australian dollar.

He might also have mentioned the high cost of land.

The second broad theme is the problem of those parts of the economy that promise great enhancements in productivity – but are starved of funds for investment. Rudd identifies the areas in need of investment as education, skills and training; infrastructure – roads, rail, ports, urban transport and the NBN; and small business, which might produce eggs in a diversity of baskets other than mining but which need greater access to capital.

He might have mentioned the flip-side of this problem: the huge over-allocation of capital in land, particularly housing, which is reflected not just in its high price but in the lack of access to capital and credit for really productive activities.

True, some of the investment in land and housing markets has actually produced wealth, in the form of new dwellings, and higher quality shelter – but not that much. Rather, most of the shedload of money that's been borrowed and sunk into these markets has done nothing more productive than shuffle the title certificates around, as speculators position themselves to capture wealth from others – whether that's the life-time of future earnings pledged by the individual mortgaged purchaser, or the gains in value created by the whole of the community through its investment in infrastructure or simply through its numerical growth and hence more intense demand for land.

In policy terms, what Rudd's competitiveness agenda is driving at is obvious, if unstated: Labor must mean to implement a reformed, broad-based land tax.

A reformed land tax would be a tax on the value of on all land, including owner-occupied housing, and not merely the narrow range of commercial and rental properties that our present land taxes apply to.

Land tax reform would capture for the benefit of the community those unearned gains currently captured by speculators – and thereby chase off speculative investment in land and housing, and reduce prices. It would also allow for the lessening of the tax burden on labour and enterprise, reducing costs and freeing up their productive energies, so that they might take on the markets of the world.

Yes, that must be what Labor has mind.

And between Labor's land tax reforms, and the Liberal's negative gearing reforms, the Australian public surely has an embarrassment of housing policy riches to choose from on election day.

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