Hockey sticks his neck out
I was at a Media Club lunch in Brisbane today where Joe Hockey was the speaker. Amid a bunch of fairly predictable talking points, he offered the view that, if we want to address problems of housing affordability, measures that increase demand, like the First Home Buyers Grant, are exactly the wrong way to go. He’s right of course, and just about every economist who has every looked at the issue has made the same point. Still, given the sacred-cow status of home ownership (both in itself and as a speculative investment) it’s the kind of statement that Sir Humphrey would call “courageous”.
Strikingly, not one of the assembled journalists took him up on it. Instead they bowled him up a series of questions on the kerfuffle du jour regarding the Christmas Island funerals all of which (to mix my cricketing metaphors) he padded away, let through to the keeper or dispatched to the boundary with ease. If I had been looking for a story instead of going through the motions, I would have asked something like “How much could the government save by abolishing FHBG, and where would the money be better spent”.
Given that Hockey has tackled one sacred cow, let me express the hope that some truly courageous politician will make the point that the biggest source of house price inflation is the set of subsidies to owner-occupied housing including exemption from land tax and capital gains tax and exclusion from most means tests. Michael Egan tried to tackle this in NSW, only for houses worth more than $1m IIRC, and got nowhere.