Aussie News and Views

Geoff Forster

• • The International Union for Land Value Taxation is launching a campaign to modify the UN Declaration of Human Rights. Article 3 at present reads: Everyone has the right to life, liberty and the security of person. The proposed amended version is: Everyone has the right to life, liberty and security of person, the enjoyment of which is contingent on the right of access to land . The right to land may be exercised indirectly, by sharing equally in the benefits that accrue to the community when use rights are assigned to others.

Article 17 is at present: (2) No one shall be arbitrarily deprived of his property. The proposed amended version is: No one shall be arbitrarily deprived of his property, including through taxation.

Article 29(1) is at present: Everyone has duties to the community in which alone the free and full development of his personality is possible. The proposed amendment is: Everyone has duties to the community in which alone the free and full development of his personality is possible. The life of the community is reliant on the performance of those duties, principal among which is the payment to the community of the value of the benefits received from it.

• • Philosopher Peter Singer has recently (“The Age”, 3/4/08) advocated equal entitlement to the use of the earth’s atmosphere; this includes compensation to those whose habitat has been damaged as a result of greenhouse gas emissions. Meanwhile, blindness to the widespread inequality of access to the earth’s surface remains prevalent.
  • In December we saw the strange picture of a representative of ACCESS Economics claiming that the promised tax cuts by Labor when in Opposition (slightly less than those of the Coalition Government) could lead to inflation, by giving rise to more spending.

Taxes on wages of course actually lower real wages. What the ACCESS gurus neglect, of course, are land prices, which are increasing much faster than wages. The injection of more purchasing power into the economy, without any increase in the production of goods and services, constitutes the major cause of inflation, but is widely ignored or neglected. As usual, wage earners are blamed. One mustn’t upset the “property” investment lobby of those holding sites whose value is dramatically enhanced by community activity!

• • An “AGE” report late in December stated that the annual “property” rise for Melbourne up to November was 18%. This median figure varied widely; some inner suburbs showed a considerably higher figure, while outer suburbs in some cases were virtually static. As usual of course, what was neglected was the fact that the predominant factor in this figure would be land prices. The same issue of “The Age” contained an article describing the availability of $5 million waterfront townhouses on the Yarra’s edge – the north- facing Dockland estate. A classic illustration of the significance of location – a picturesque site close to numerous community facilities – again highlighting the need for community collection of site rents.
  • From January 1 this year the Victorian charter of Human Rights and Responsibilities came into operation. It is claimed to add legal rights to the defence of existing human rights. Those who provide government services must do so in a way that protects rights. This is of course a move in the right direction, but will remain incomplete until and unless there are equal rights of access to the natural resources which are essential for our basic existence.
  • A leaflet of the Public Transport Users’ Association advocates sensible ideas for extensions of Melbourne’s public transport system, but with injection of more Federal funds. However, this is unlikely until it is recognized that the very activity of extending the system generates increased land values, which become the logical source for the funding. The leaflet also contains some disturbing examples of perversities in the tax system.

Under Australia’s fringe benefits tax laws, the federal government gives over $1 billion in tax concessions each year to company cars. The further a company car is driven each year, the larger the size of the tax concession.

Rather than walking, cycling or using public transport, employees are frequently encouraged to undertake additional driving in order to reduce the amount of the fringe benefit tax payable. This contributes to extra congestion, pollution, fuel use and vehicle wear. It is even known for Commonwealth public servants to be encouraged to take long trips in their government car to reduce the amount of tax the federal government has to pay itself!

• Early in February it was announced that the Victorian government was increasing land tax in some cases. Welcome as this is, however, it would have been better to have levied the land tax without gradations, and accompanied by reductions in such imposts as stamp duties and payroll tax. At the same time, the official interest rate was raised, leading more mortgage stress for more people. As usual, silence on the role of rising land prices.
• During February it was widely perceived that new Treasurer Wayne Swan was floundering in answering questions. We can have no sympathy for him. A few years ago leading Georgist Maurie Fabrikant forwarded him an open letter explaining the plight of our economy. Either Swan didn’t read it, or couldn’t comprehend it, or apprehensive of offending vested interests, ignored it. Thus Swan continues to flounder, and our economy for which he is responsible, continues to stagnate. As usual, there was no attempt to debate Maurie’s excellent statement.
• A further sign of our ailing economy was “The Age” report of 22 February that families were skipping meals in order to pay rents, as well as denying their children schools excursions. Urban Research Institute researcher Terry Burke criticized negative gearing, the first home owners’ grant and rent assistance as measures that add to demand for housing without boosting supply. A separate study forecasts that over the next 40 years the number of households will increase by 50% but the number of renters will almost double. Amid all such disturbing material, of course land prices are not mentioned.
• A real estate newsletter (summer edition) comment on the change of government at the Federal level, stated that the Rudd government would “retain negative gearing for property investors” and leave the first home owners’ grant unchanged. In general, of course, the new government is tinkering at the edges rather than tackle core issues. In a very good outline of the sub-prime mortgage price, however, failure to mention high land prices was again evident.
• Another report (“The Age”, February 18) stated that real estate investors borrowed 30% more funds last year to snap up what they saw as bargains, and thereby pushed aside first home buyers as prices soared. This applied not only in Melbourne, but also in Adelaide and Brisbane, and to a lesser extent in Sydney . Investor borrowing increased 29.4% in 2007 in Victoria, nationally it was 18%; “house prices” in Melbourne increased 18%, nationally 12%.
• A later survey reported that average pay is insufficient to buy a home, revealing a hopeless outlook for typical earners. In December 2001, a person with a $300,000 25-year home loan was repaying $1902 a month on a standard variable rate of 6.05%. By February 2008, after the standard variable rate had risen to 9%, the monthly repayment had grown to $2517.
• In general mortgage stress was increasing, while matters were getting tougher for renters. At the same time a local newspaper reported a “house prices surge” in the Melbourne eastern suburbs municipality of Boroondara. The universal failure to distinguish the role of land prices seems constant, and hence the failure to attain a real remedy for this major social problem persists.
• Bendigo council has decided to exempt first home buyers from municipal rates. The intention is no doubt commendable, but it would be far better all round for the council to adopt site value rating.