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.
The attack was a factional assault and he had defected from their faction, I think. Also the Liberal right are extremely vicious to anyone outside their sphere of influence. They are a bunch of social Darwinists who actually believe their own propaganda. Everyone should actually meet some Young Liberals to see what kind of horrors are in store for all of us in the future. Most of them seem to be in the Liberal right.
Wow! Baby boomers are the worst generation of people to espouse the doctrine of divine right since the English reformation. Not sure who their god is though, Supreme Being Chevron, His Holiness Halliburton, Coke the Creator or Nike the All Knowing.
Wow, nothing like a bit of stereotyping, hey?
I’m calling bullshit on this one.
Stereotyping has it’s place to rail against the corrupt and powerful (also if it’s close to the mark), it’s when it’s used to oppress minorities that it’s a problem. Jog on mate.
In the early 80s when I married, my wife and I lived in Neutral Bay, Sydney. We had a car each, walked down the road for the ferry to work and up the road to the Oaks pub. We had a very comfortable life. It still took us only 3 years of saving to buy a fixer upper in Manly. Thats affordable housing!
Until we reach that point again we need to go back to what happened after the depression and after WW2. My grandfather, a low income carpenter for the council, lived in a ‘council house’. He, and many thousands across the country, was able to put a roof over his family’s head and raise his children with dignity.
Like most countries in the world we need to go back to the concept of social housing, so the current low income generation can also live with dignity. Every town in the country should have a program of social housing. We also need to bring in European style rental regulations.
The American style ‘dog eat dog’ system we have hasn’t worked and will not work into the future, especially as more and more people will fall out of work in the robotic future we’re inevitably facing.
We’d need to drastically cut not only our population growth rate but also our actual population to go back to those days.
Instead our young can look forward to long lives of debt servitude in an ever degrading environment caused by over population.
Thank you so much for this voice of reason. Public housing was the same in the UK as it was here and now it, too, has almost evapourated. The American system leaves almost everybody except the very rich behind.
One correction for the above. It took us 3 years to save for a deposit on the house in Manly.
You’re right, the big dogs have eaten way to much and what’s left of the pack is looking pretty fat and weak, ripe for a correction.
I’d like to see what your actual argument is regarding your claim that the CGT exemption is more damaging than the negative gearing legislation. You also seem to ignore the fact many people in the boomer generation will eventually be handing down their properties to their kids, and I find it curious that someone who claims to be against this supposed generational theft, has no problem with the class theft that would occur if middle class boomers were forced to downgrade or sell off their primary residence entirely just to survive. In fact wouldn’t such a change cause even more generational theft via loss of inheritance?!
‘Selling their residence to survive’? ease up mate no one will be on the street and starving. So people with a million+ dollar house are allowed to get a pension off everyuone to make sure they have money left over for their kids. Sounds like the actions of degenerate mooching off the State to me.
No matter the rightness or wrongness here, as our society gets more unjust and unequal, these type of arguments are going to grow and become more forceful as a generation of have-nots become angrier. Its time for some real action instead of tinkering around the edges leading to 1 or 2 percent drops in house prices.
People may not “be on the street and starving”. I don’t think the commenter suggested that but remember that these are the homes that the elderly might have known for most of their adult lives. In the communities they have raised families and been involved with for that period as well. As a person who has a lot to do with the elderly; I don’t get the idea from many of them that they relish the idea of looking for a new place to live and just “drop in” to new community connections. For what? I think it’s pretty myopic and callous to want to do that with the distant promise of a break in the housing market for the young.
Nobody is forced to sell their home, they simply don’t qualify to receive funds that have been compulsory acquired from other people. They pension is the dole for old people, it should only go to those who simply don’t have the means to support themselves. It’s fundamentally unfair to have a pseudo – means tested benefit except excluding am asset only if you live in it. As young Mr Sutchbury pointed out, if you invest in shares rather then a house turn the full amount is included in your means test, but have the same wealth in your own home then hey pesto. It’s absurd. If they want a pension, why not make it like HECS so that you get the pension to acknowledge you asset- rich, cash -poor status, which then gets recouped from the proceeds of the sale of your house after you die.
Don’t even go there Cantbeeffed! You really need to look into the history of pension in Australia. We pay our entire working lives for our pensions through our taxes. It used to be a separate payment from our wages (way back) until the govt of the day in their wisdom rolled it into our income tax. My pension is mine and fully payed for…
That’s not the case, there’s no special provision for a portion of your taxes to be put away to pay for future pensions. The taxes you pay cover the costs for that year. There’s no such thing as ‘your’ pension, it’s a welfare payment. That is why people like me, who literally pay millions in tax over their lifetime are not entitled to a cent of the pension. I work to pay for others. There are plenty of people who’ll receive far more in pension than they ever paid in taxes. Most people who receive the pension never pay their way because they’re low income earners or unemployed who never paid much tax in the first place. Without tax paid by those working right now, there is no money in the system to pay pensions. As the population ages and the proportion of the budget apportioned to aged welfare and support increases, they more burden is placed on younger tax payers and the more that needs to be taken from those things that help the young like education. I know what was started when income taxes were first introduced, but the system as it has been working for more than 50 years takes from the young to pay for the old. Superannuation was meant to fix this, but they screwed the system by allowing for double – dipping.
As wages keep stuttering and company tax receipts shrink with tax cuts, these inherent tensions will really hurt.