David Collyer and Catherine Cashmore for Prosper Australia
Introductory Remarks to the House of Representatives economics committee inquiry into Home Ownership Friday 14 August 2015
Thank you for allowing us the time to speak today.
Some background to our current crisis.
I call it a crisis because the cost of continuing exceeds the cost of change.
I won’t drag you back to the Magna Carta, but to a founding philosophy of : the Settler Compact.
In a new country of unlimited land, conservatives, liberals and socialists agreed that all who lived prudent careful lives could reasonably aspire to own land and build a home.
Privacy, security and independence were available to everyone.
That is no longer true and your inquiry is proof of this sad reality.
Today, property is cheaper on than in Alice Springs. Much cheaper.
To meet the market, first home buyers need a large deposit and must sign away a large share of their life-time earnings – not for construction, but to gain title to the raw land and the right to build a dwelling.
God help them if interest rates rise any time over the next twenty-five years.
Property price inflation has fallen entirely to land. Construction cost in real terms haven’t budged in twenty years. We have world-beating land prices in the least densely populated country on earth.
Many fear a crash will end this land boom. I believe the damage such an event would cause is now less than the cost of continuing.
A land bust would bankrupt many; propping up this fragile state of affairs will bankrupt us all.
I see four causes for this misery.
* Restrictive planning that directs buyers to a handful of locations – all owned by developers determined to extract every cent from the sale.
* A massive infrastructure deficit that makes land most unattractive, boosting the price of all well-located sites.
* A staggering appetite for debt – both in willingly assuming the burden and by banks in extending it so freely.
* Very bad tax laws that extend every privilege to existing owners while weighing heavily on the landless.
Reserve Bank Deputy Governor Philip Lowe laid out the dilemma we face in his speech on Wednesday. He outlined the serious damage high land prices are causing. Quite right.
We can fix the planning rules. We can build more infrastructure. We can regulate the banks to better judgement.
Our descendants will curse our lack of foresight.
Prosper Australia’s submission urges the Abbott government to impose a one per cent federal land tax – fully rebatable against state land tax paid – to oblige the states and territories to migrate their revenue bases away from taxes we know cause genuine economic injury.
The Commonwealth would be entitled to argue this intervention is for sound economic reasons and thereby dissipate the political fallout.
We am now ready for your questions.