Land: A Key Natural Advantage

Uluru

Last night, the Reserve Bank of Australia Governor Glenn Stevens acknowledged Australia may have given away a key natural advantage: inexpensive land.  As far as I am aware, this is the first time the Governor has used this language.

Hectares of softwood and gazillions of bytes are consumed interpreting the words of government economic decision-makers.  Their public comments are deeply considered and new themes are rare. These remarks are a watershed.

He said:

“…I very much agree with your points about the supply side, I mean I think that’s a huge issue in housing and in a sense if we’re too rigid on the supply side then fundamentally housing prices have to be higher.  That’s not a bubble, that’s fundamental, that’s not good though.  Because really in a country this size and the land we have, I can’t see how we shouldn’t be able to have fairly inexpensive shelter really and I wonder whether we’ve unnecessarily given away a natural advantage we have. But anyhow, that’s really beyond my area of expertise.”

Well, he meanders a little around house prices, shelter (structures) and land, but we all know the price of land is what fluctuates.  Structure costs are overwhelmingly sunk labour and tied strictly to wages.

I have been talking for years about how important inexpensive land is to national prosperity. Low land prices would have a profound impact on every facet of economic activity, from decent housing for low income earners to profitable farming to industrial development and the delivery of services.

If the RBA and our economic mandarins observe a national strategic advantage they have an obligation to foster it and deploy it to the advantage of all.  One of ours is space.  We have chosen to welcome migration, dig up minerals, grow crops and animals – but also to strictly ration by price the access to land for young adults.  They are presented with two repugnant options: buy at current stratospheric prices  and become debt-slaves, or rent and enrich a rentier.

Glenn Stevens cannot acknowledge we are in a land bubble for fear of bursting it.  But it is one thing to deny a bubble and quite another to stand mute as strategic national assets are squandered.

What are you going to do about it, Governor Stevens?

 

 

 

 

 

 

5 Comments

  1. THEO04-07-2014

    The RBA has to be the biggest hypocritical institution in Australia. I cannot understand the purpose of its innuendos and so called ‘concerns’ when in fact it is a non-government institution. and has the power to defy, in the interest of what is best for Australia, any government decision that is detrimental to it. and worse, joins hand in hand with governments down the path of economic and social demise. for Australia. I have lost all respect for the RBA and what it has to say anymore as much so as I have no respect for the voter of the corrupt Labor/Liberal party. decades long governing monopoly.

  2. Andrew Atkins07-07-2014

    I’m sad. And tired.

    I’m 30, my wife’s 25. We don’t own. We can’t afford to. In 5 years we’ve saved 40k a long long way to go from the 120k we need for a crap 3×1 closer to the city. Our rent goes to someone who negatively gears the property and all their money goes to the bank. There’s no point in living in Australia.

    Were slaves.

    I’ve recently got a job offer in the US. Houston. We have almost 50% of a home deposit with out saving. Our wages drop 20% but at least the cost of living is halved and we have all the opportunity to grow.

    Sorry australia. We won’t be turned into slaves to keep you’re worthless property afloat.

  3. Andrew Atkins07-07-2014

    Sorry I forgot to add. That’s 120k would be 20% we still need to borrow another 480k and use over 60% of my pay to service it and live off a couple hundred a week. On top of all that our wages didn’t rise this year.

    The point of working is that you set up a system that gives back to you more than you put in. Why would I spend all day tossing water out of a sinking boat for 30 when I should be finding the leak, plugging it, then installing a solar power pump to drain it. 3 days work vs 30 years…. Are you, pardon my French’ fkn insane?!

    Bye bye Australia.

  4. PT15-07-2014

    The theory is that with a bit of hard work you can buy some real estate. THE REALITY IS THAT LAND HAS BEEN STOLEN FROM YOU. This is no exaggeration. It is just the simplified truth. The market doesn’t price the land so high. Banks create artificially high prices by lending to those who can not afford to repay, and by holding land off market to keep prices high. What happens to those loans that people cannot afford to repay? RMBS. Chances are that they’ll end up in your super fund.

    While we’re at it:
    http://www.youtube.com/watch?v=akVL7QY0S8A&feature=related

    Biggest predictor of bankruptcy: Double income and kids. Someone gets sick or someone loses a job and it all falls over because a single income doesn’t cut it any more.

  5. KristianM16-07-2014

    If their is an aspiring political party out there who is ready to exploit the absolute voter apathy in this country and stand up for the rights of future generations against Boomer self-interest they would have my vote. They would have a lot of votes.

    Why aren’t we protesting / rioting in the streets?

    I want a home for my family. My wife and I are professionals who make more than most but there is no way we could support our children AND pay of a $650,000 plus mortgage. Outrageous!

    My taxes subsidise Boomer healthcare, Boomer pensions, Boomer negative gearing. It’s time for change.

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