Alan Moran (The Age, August 3, “Land-based wealth an illusion”) has it partially right. He correctly claims that inflationary pressures provide the impetus for interest rate pressures. He also correctly claims that there is a disparity between supposed wealth levels and savings levels, most of which is due to a monstrously artificially high price of land.
However he is incorrect to assume that this is entirely due to stringent zoning rules which reduce the supply of land. This does indeed play its part. But the other factor has been the ill-considered reductions in land tax by the State government and moves from rates derived from site rental to capital value by local governments.
Both of these actions punish people who are productive, constructive, improve their homes and provide employment. They encourage investment in land over labour and capital, with not one new job created or one new good or service from these so-called investments.
Who can seriously be surprised at the results?