it is a sensible idea , soJust heard an interesting discussion on the radio. An English woman immigrated to Australia about 30 years ago, she retired a few years ago and recently looked at taking on a boarder to utilise her large home and get some extra spending money. Apparently, this is common in the UK and does not affect their pension.
Not possible in Australia. If she takes on a boarder, rents out a room, she will either lose part or all of her pension, and be inundated with taxation paperwork.
The discussion was about how many empty rooms are available to rent during the current rental crisis but are not on the market because of our complex and outdated taxation rules.
I can see nothing wrong with someone that has worked all their life and is now receiving a pension, being able to top up their income by renting a room or two. Alleviates multiple problems; increased income, improves the rental situation, improves social interaction and loneliness, helps maintain property through increase income for repairs, and so on.
Disappointing zero-sum economic thinking represents unlearning of hard-learnt lessons of the past
At the joint press conference announcing the government’s recent aged care reforms, Jim Chalmers said something very revealing about how the Albanese government sees economic policy.
“Aged care spending will continue to grow, but at an average of 5.2 per cent, not 5.7 per cent, over the next decade,” the federal Treasurer said. “And that means, as a share of GDP, over the next decade it will moderate from 1.5 per cent of the economy to 1.4 per cent, even with more people in the system and a higher standard of care at the same time.”
Seems like magic, right? The kind of positive-sum economic reform we became accustomed to in decades past. Sadly not. This statement reflects “thinking like an accountant” rather than “thinking like an economist”. Because Chalmers was referring to the fiscal cost of aged care and not its economic cost.
Because that was the focus of the reforms negotiated with the opposition and announced by the government. To increase the amount users pay for aged care so as to relieve the government of some of the burden.
Now, don’t get me wrong – making the budget more sustainable is an important task and the government deserves credit for chipping away at it. We have a big structural deficit to close and this reform will help. But we should not kid ourselves that it is economic reform.
Economic reform generates a growth dividend that enables our economy to afford better aged care. Indeed, better aged care would be just one of countless manifestations of the higher living standards afforded to us by a growing economy. But that is not what this government is delivering.
No, those better aged care services will come at a cost to those who will pay for them.
Yes, we can have them, but we’ll have to give up something to get them. Economic growth, on the other hand, lets us have more of everything.
Sadly, this zero-sum economic thinking pervades this government’s policy agenda.
Take the way it is approaching childcare, with a focus entirely on who pays and not at all on what it costs. The problem with childcare is not that the government doesn’t provide big enough subsidies. It’s that the services cost too damned much. And that problem will never be solved with subsidies which, if anything, make that fundamental problem worse.
Do we expect that regulating 15 per cent higher wages for childcare workers will lower the economic cost of childcare?
Do we expect that raising workers’ income tax burdens via bracket creep (the government’s only major projected source of new revenue) to fund higher childcare subsidies will improve their workforce participation – the thing the subsidies are intended to achieve in the first place?
The problem with childcare is that it is a wildly overregulated industry characterised by weak competition that offers minimal choice and flexibility to parents. The current childcare system generates no incentive to improve quality, to offer services that better suit parents and their children, or even – god forbid – to generate some genuine innovation to raise productivity in the sector.
Our obsession with heavily subsidising private childcare providers – turbocharged by the Morrison government, it should be noted – has served nobody except perhaps the providers themselves, and undoubtedly has shrunk the pie.
The government thinks our only way out of this hole is to keep digging deeper.
What about housing, by far our country’s greatest economic emergency? I don’t know a single credible economist who believes that anything other than a dramatic expansion of supply will solve this problem. It is as close to a silver bullet as we have in economic policy.
Yet the government’s housing policies will make such a small difference to housing supply it’s hard to understand what all the fuss is about. They are an order of magnitude (or two) short of the challenge.
Meanwhile, the government’s flagship housing policy, in which the government would co-invest in 40,000 homes, would have exactly zero impact on supply. A few lucky people who win the lottery will get a house that someone else would otherwise have had.
The government’s mooted curbs to negative gearing, far from boosting supply, will act only to make investing in new housing supply even less attractive.
It’s zero-sum economic thinking at every turn. What’s most disappointing is that it represents an unlearning of the hard-learnt lessons of the past.
Progressive governments focusing entirely on how to cut up the pie without any regard for growing it led us to ruin. But their progressive descendants learnt the lesson that before cutting up the pie, you have to have a pie in the first place.
The Hawke, Clinton and Blair governments really got that. But this isn’t just nostalgia. Today’s more enlightened progressive thinkers get it, too.
Here in the US, progressive writers such as Matt Yglesias, Ezra Klein, Derek Thompson and Jerusalem Demsas have all, in one way or another, advocated an “abundance agenda” that rejects the kind of zero-sum economic thinking that the Albanese government has come to epitomise.
Australia’s living standards have improved very little in the past decade and have actually gone backwards in the past couple of years. Our economy is not on a path that will generate the growth dividend to pay for the things progressives want. This way lies ruin. Perhaps some future Labor government will learn that lesson.
Steven Hamilton is assistant professor of economics at George Washington University in Washington DC and visiting fellow at the Tax and Transfer Policy Institute at the Australian National University.
I have been watching the Australian dwelling construction industry for more than half a century and I have never seen it in such a mess.
In a strange way the decision of the Prime Minister to buy a luxury dwelling on the north coast of NSW has suddenly focused the community on the crisis. But neither our state nor federal politicians have the powers or ability to separately repair the damage.
And so they talk mindlessly about targets to build dwellings — targets which can’t be achieved in most areas of Australia unless the basic problems are understood and hopefully addressed.
From time to time, simple solutions are paraded to the community like “skills training” and importing more skilled workers. These and other “remedies” are part of the solution but they won’t help unless the structural issues are addressed.
And so this week Industrial Relations Minister Murray Watt is calling a conference to address the CFMEU rackets. Those rackets boost apartment costs, so it is a good thing to do, but it does not address the complex underlining problems.
Another solution is to slash migration. That will alleviate the symptoms of the building crisis but, again, does not address the structural problems behind the crisis.
Today I will do my best to map out crisis contributors in addition to the above, but there will be many others.
I will start with the destructive force I have documented many times, which will have contributed to Anthony Albanese buying an existing dwelling — the “NSW disease” which is now spreading to Victoria and the rest of the country.
NSW has an army of bodies and planning operations which devote their life to substantially delaying most projects and substantially increasing their costs. Politicians are powerless.
As the “NSW disease” infects the nation already, existing cost increasing systems become worse. And in some areas Aboriginal communities are now increasing their ferocity in blocking projects.
It is as though the referendum defeat, the regular acknowledgment of some form of title and a different legal system in some welcome to country words appears to have made it much harder for non-Aboriginals to gain approval from Aboriginals to build on freehold land. And this force often links to an increasing range of environmental problems.
If politicians want to overcome the housing crisis they must tackle the “NSW disease” boosting the costs of dwellings in every state. But behind that disease is a deep community dislike of developments near their residence.
Reflecting this community dislike, most councils will not consider going through their developmental approval process unless all the various bodies have approved the project.
The delays and legal costs create monumental bills that must be recovered in the price of the land and buildings.
But that’s just the start. When builders walk into a bank and ask for working capital, unless they have lots of asset security, they are the laughed out the door.
Most banks are no longer interested in funding builders, even though builders are essential components in their mortgage lending supply chain. What makes lending to builders so risky is that bank lending departments demand fixed-price contracts when building costs are rising more than expected, which regularly send builders broke.
If a developer proposes an apartment development and gets through all the hoops outlined above, the banks usually want close to 100 per cent of the proposed apartments to be sold in advance “off the plan”.
In the old days it was 50 per cent. This is not an easy process.
As well, on top of the approval-driven cost increases, the states lob an array of taxes on property that sends costs skyrocketing.
In some states such as Victoria, the market price for apartments is simply too low to enable a builder to complete the project and break even.
So even if all the apartments were to be sold in advance at current market values the proceeds would not be sufficient for the builder to complete the development without being in the red after allowing for regular cost increases. The development cannot proceed.
And then we get to homebuyers. The current situation is banks, under current regulated lending rules and interest rates, simply can’t justify lending to most first-home buyers who do not have parent or grandparent support.
There are a multitude of government support schemes, but they are having limited impact because the problems start earlier in the supply chain.
The NSW Productivity Commission canvassed the idea of governments signing contracts to build the apartments at a price that gives the builder a profit. In theory, state governments can bulldoze their way through the approval process, not tax themselves.
Any state government that obeyed the current rules and paid the costs would have to cross their fingers and hope the apartments rose in value.
Alternatively, the state governments will simply rent the properties out and we will turn Australia into a rental community rather than a homeowning community.
This is not an easy problem to solve, but it has to start with state governments setting up fast decision-making approval bodies and appointing people who are trained to efficiently approve or reject proposals. Then we will need to look harder at building and construction methods to see if there is a possibility of substantially reducing construction costs.
Unless state and federal governments are prepared to tackle all the problems, including bank practices, isolated solutions won’t work.
Nothing to add to the above, and does not go into the neg gearing or CFMEU usual narrow minded views.Blind Freddy could see the current housing crisis coming -
When builders walk into a bank and ask for working capital, unless they have lots of asset security, they are the laughed out the door.Most banks are no longer interested in funding builders, even though builders are essential components in their mortgage lending supply chain. What makes lending to builders so risky is that bank lending departments demand fixed-price contracts when building costs are rising more than expected, which regularly send builders broke.
As well, on top of the approval-driven cost increases, the states lob an array of taxes on property that sends costs skyrocketing.
and THAT is a direct consequence of participation in the Vietnam war .. enjoyThe writing is on the wall here, imagine the next generation's retirement problems.
Horror retirement trend causing major stress for millions of Aussie workers: 'I will have to sell'
- A worrying number of older Aussie workers are facing a bleak reality as they edge closer to retirement. Research from Vanguard revealed around 30 per cent of people will still be paying off their mortgage when they leave work for good.
- The trend could force many to delay retirement to finish their home loan repayments, sell their home, dip into their super to be mortgage-free, or go onto welfare payments.
- The typical picture that has been painted for workers is that you buy a home, work hard, and when it comes time to retire, the property is paid off and you can enjoy your twilight years.“In actual fact, the research suggests that’s not going to be the case in many instances … it will be a real financial burden.
- Census data provided by the ABC showed that the number of Aussies aged 55 to 64 who owned their homes outright had halved over the last 20 years.
- The average retirement age for Aussie workers is now the highest it has been since the 1970s.
Recent KPMG analysis found the average age of retirement for men was now 66.2 years and for women, it was 64.8 years - the highest they’ve been since 1972 and 1972 respectively.
I've lost 3 lots of super, Divs. When I started to work it wasn't compulsory for the worker to nominate a chosen super account, the employer just paid into what suited them the best. I changed a few employers and couldn't amalgamate the super accounts due to having days off work to do the paperwork and super management fees swallowed up what money I had in the existing accounts.and THAT is a direct consequence of participation in the Vietnam war .. enjoy
i watched for decades the survivors of the conflict come back to disintegrating marriages , crippled and diseased bodies , and then slap-bang into a superannuation scheme that turned into a financial scam
and of course the cherry on top was to lengthen the duration of home mortgages in the name of 'affordability '
BTW i see the US is starting to offer 40 year mortgages , think about that for a college graduate couple
so a realistic scenario is now .. work until you can't , sell the house and go into a retirement villa/nursing home
It is now automated. You can amalgamate them with 5 minutes work. Just go to the Super you want, ask them to do it for you. They will find them all and move it.I've lost 3 lots of super, Divs. When I started to work it wasn't compulsory for the worker to nominate a chosen super account, the employer just paid into what suited them the best. I changed a few employers and couldn't amalgamate the super accounts due to having days off work to do the paperwork and super management fees swallowed up what money I had in the existing accounts.
I mainly have a small amount from what the mining jobs paid and that was 10 years of EBA contract work so they only paid for my work hours, not the full 10 years worth of super.
This all happened in the early 90s to late 00s, the super accounts were closed down because the money got eaten away by account fees, nothing was getting paid into them after I left the job and they didn't make much money, one was below the threshold and they paid it out, only about $100. I managed to keep one account I think it had about $5000 in it back then, that I amalgamated with the current one I have now.It is now automated. You can amalgamate them with 5 minutes work. Just go to the Super you want, ask them to do it for you. They will find them all and move it.
As every traveller knows, the worst area in term of seediness, petty crime and drug dealing in any major city is the train stationWill the Victorian plan of building high rise on train stations work?
Nope, says Alan Kohler.
Alan Kohler: Housing affordability is largely a matter of tax reform
The Victorian government’s blizzard of housing announcements this month is the first serious effort to deal with housing affordability.www.thenewdaily.com.au
While several cities such as Perth and Adelaide show strong returns, investors have kept away from the larger cities as a long-awaited drop in interest rates from the RBA has not come to pass and the majority of economists now predict a cut will not be on the cards until mid 2025.
Prices in metropolitan Melbourne are now going backwards, falling 2 per cent over the past year and there are early signs that Sydney prices are under pressure. According to CoreLogic prices in Sydney were flat with zero change over the past month and clearance rates in Sydney are shrinking steadily towards the 60 per cent mark.
Forecasts from the Bank Of Queensland are that Melbourne will end this year at minus 3 per cent and Sydney will see price growth at 6 per cent, which would be less than half the 13 per cent notched up in 2023.
The decision by the government to effectively freeze property taxes gives investors in the residential market a clear line of sight after weeks of uncertainty.
It has also been echoed by the refusal of regulators to budge on mortgage buffers. The ruling which demands that lenders add 3 per cent to the headline rate when assessing home loans is now unlikely to change after the “big four” banks publicly split on the issue.
(The buffer means a borrower applying for a 6 per cent home mortgage is assessed on their ability to service a 9 per cent mortgage).
Prudential regulator APRA seized the opportunity to flatten any speculation that the buffer rules would change when CEO John Londsale recently told a parliamentary committee “3 per cent is a prudent number”. In fact, the rebuttal was strongest yet from APRA because it insisted the policy was not exclusively linked to interest rate settings. The regulator says it is in place to buffer against any “economic shock”.
The argument against the buffer had largely been based on the notion that rates are about to drop, so there was a case to drop the buffer as well.
Negative gearing is whereby property investors can declare losses against tax. Capital gains tax discounts are whereby property sellers can get taxes halved if they hold the property for more than a year.
Politically, any move on property taxes is extremely difficult. The most recent example comes from New Zealand when the former Ardern government cut property tax incentives and the volume of investment funds entering that market had halved three years later.
New Zealand’s current government has since progressively reversed the changes.
I bought our ponderosa nearly three years ago convinced I had absolutely overpaid for it (reasons), and absolutely convinced I would take a bath on the value in the coming years.The RBA cant understand why house sales have gone up, despite interest rate rises.
Maybe it's because people belive they can't lose, no matter how much they pay.
RBA baffled by home loan growth despite rate hikes
Higher interest rates were meant to put the brakes on the housing market. The RBA is asking why the opposite happened.www.afr.com
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