Labor’s $10 billion social housing fund: the frill necked lizard of Australian public expenditure

Following my cri de coeur about the limited scope for progressive analysis now that Labor has adopted almost the whole of the LNP economic program, I got a number of useful suggestions, one of which was a detailed analysis of Labor’s most prominent spending initiative, the $10 billion social housing fund. This idea raises a lot of issues, so I’m going to tackle it a bit at a time

First up, is $10 billion a lot, or a little? There was a time when programs like this were typically described in terms of the annual expenditure they entailed. If that were still the case, the program would be a really big deal. With cheap publicly-owned land and scale economies, $10 billion a year would probably enough for 40 000 homes at $250k apiece. Compared to around 200 000 a year being built privately, that would make a big difference.

But it’s been a long time since the conventions of annual budgeting were observed. The standard procedure now is to quote spending over 4 years (the arbitrarily chosen period of forward estimates in the budget) and the LNP government has occasionally extended this to 10 years, which is absurd given the rate at which things change..

Even $10 billion over four years would still be a big deal however, enough to reinstate social housing as a major part of public policy.

Sadly, the crucial word here is “fund”. Labor isn’t planning to spend $10 billion. The idea is to borrow $10 billion, invest it in high-yielding assets and use the profit (the difference between the market rate of return and the government bond rate) to finance social housing. I’ll have lots more to say about this, but for the moment what matters is the amount that can be raised in this way.

The standard estimate of the “equity premium” is around 4 percentage points, meaning that the government could borrow at 2 per cent and plan to earn a 6 per cent return on average. That yields net earnings of $400 million a year, enough, on the calculations above, to pay for 1600 homes. That would be nice for the people who got off the waiting list, but not really a big deal.

Back in the day, the frill-necked lizard, which can make itself look a lot bigger than it really is, was briefly a popular meme, particularly in Japanese anime circles. Labor’s $10 billion fund is the frill-necked lizard of public expenditure policy.

5 thoughts on “Labor’s $10 billion social housing fund: the frill necked lizard of Australian public expenditure

  1. Frill necked capital. So apt JQ. Did you know this when choosing the title?

    “How the ‘Capital’ lizard got its frill

    “So the two sisters went to have a look around. They searched and they searched, but they couldn’t find any baaydjin grass. They came back and called up to their brother, ‘No baaydjin grass around here!’

    “Frill Lizard said, ‘Never mind. One of you take off that little skirt you’re wearing and throw that up. I’ll dip that in the honey.’ So one of the blackbird sisters untied the little yirrbi she had around her waist, and she threw it high up to her brother in the tree.

    “Well, his sister’s skirt got stuck in the Frill Lizard’s throat. And from that time on, when Frill Lizard gets excited he grows a lump on his throat. Well, that lump is his sister’s yirrbi, which he wasn’t even supposed to touch, and which he sucked honey from.”

    Labor is now planning to use return on capital, ala Perrottet and rapacious investment funds to fix the housing crisis, further supporting trickle up inequity, and entrenching the gap. Sad.

    And the lump in the throat of capital is what was to share, but this policy will cause the money lump in the throat of the greedy capitalism’s frill necked supporters to expand.

    And it will effect women more than men due to entrenched patriarchy. 

    I cannot understand Labor’s capitulation to capital.

    Acknowledgement to whoever identifies with frill necked lizard as totem.

  2. Labor are “do-nothing” neoliberals just like the LNP. Australia can hope for nothing from these parties. We have no good future while neoliberal capitalism remains in control of this country.

  3. I didn’t get around to posting my suggestion to your crisis of blogular purpose which was to suggest you could have a crack at some Greens policies. In some ways, providing the same analysis of our policies (I’m a member of the Greens) as the major parties receive could help legitimise us in the eyes of those who think seriously about politics but don’t take the Greens seriously.

    I must admit I have a bit of an ulterior motive in that I don’t particularly like the Greens housing policy initiative that’s just been announced and so I’m curious to know your thoughts. The policy is here:

    My concern with it is that there’s a lot of fiddly nonsense in there which reinforces the idea that public and social housing is somehow different to home ownership. I’d like to see them just emphasise that a private market in which housing is an investment asset and renters are second-class citizens can never be fair. We need comfortable public housing with a right to remain, whereas we are offering public housing, something which looks like public housing but is called universal-access rentals and a cashback scheme for people who have a $30,000 deposit. It’s that last scheme (here: which I’m particularly riled up about. I don’t understand how we have ended up with yet another variation on a first-home buyers grant scheme which still somehow manages to exclude those without access to a deposit.

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