The great Australian dream used to be to own your own home. Now it is more like to own somebody else's home, or more. And last week's productivity roundtable doesn't look like doing much about it.
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There are two reasons. The first was the sort of people in the room. And the second was what they did not discuss.
Most of the people invited were either from the tail-end of the Baby Boomer generation or came from the very professions and interest groups that caused the problems they were supposed to be addressing in the first place. Or both.
They all agreed that the Australian tax and welfare system was causing inter-generational unfairness. Wow.
They agreed that housing was the most significant element of inter-generational unfairness. Then they completely ignored the biggest contributor to the fact that young Australians are finding it near-impossible to buy a dwelling without parents and/or grandparents chipping in - high immigration.
Since the end of the pandemic, Australia has brought in a net number of more than 1.5 million people. In 2022-23, it was a record 536,000.
Whatever the planning rules, building regulations, red tape or green tape, or tax system, the task of housing all those people was always going to be impossible.
And it will continue to be impossible if we continue the madness of bringing so many people into the country - stressing not only housing, but infrastructure generally and the environment generally.
It is elementary economics that if you increase demand, you create scarcity, and you drive up prices. The roundtablers would have learnt that in Economics 101, yet they studiously ignored it.
Worse, they did not make the obvious connection between high immigration and low productivity.
Australia's productivity slump has almost exactly coincided with the ramping up of immigration since the mid-to-late 1990s.
Businesses are simply not going to invest in innovation and technology while it is easier to import more cheap labour.
Again, Economics 101 tells us that if business faces labour scarcity, the price of labour (wages) goes up. And when wages go up businesses have to invest in capital that makes that labour more productive.
For too long, policy in Australia has been more directed at making labour cheap and compliant rather than productive and rewarding.
And the universities and education system in general are guilty of selling out to a system that brings people here, not for an education, but for a ticket to permanent residency.
The underemployed were not represented at the productivity roundtable, but the 1.5 million of them could boost productivity.
People who want more work but cannot get it because of childcare or age discrimination are not represented in the official unemployment figures, so they are ignored, to our cost.
The productivity roundtable should have made more of the link between tax, productivity and efficiency.
The Commonwealth has got to cajole the states to get rid of two insidious taxes - stamp duty and payroll tax.
Stamp duty is out of control. Research published this week by the property data company Cotality shows the way stamp duty is a huge disincentive for people to move into more suitably sized dwellings.
Three-quarters of dwellings in Australia have three or more bedrooms, and only a quarter have one or two bedrooms. Yet more than 60 per cent of households have only one or two people in them.
A lot of people are rattling around in half-empty dwellings. Sure, people should not be forced to downsize, but conversely, the tax system should not make it harder for them to do so, preventing the freeing up of dwellings for growing families.
Rather there should be some disincentive to staying in large expensive dwellings in the form of a land tax. It is very efficient and impossible to avoid.
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The Commonwealth used to have a land tax until it was foolishly abolished in 1953. Similarly, death duties are efficient and impossible to avoid, but were foolishly abolished in 1979.
As for payroll tax, taxing employment is economic madness.
There was some talk about negative gearing and capital gains tax. Like most concessions, they were easily created, but are much harder to take away.
Again, it is obvious that negative gearing and low capital-gains taxes make a juicy cocktail enabling people to move money from higher-taxed income to lower-taxed capital.
It has meant a rush of money to real estate and a rapid decline in home ownership, among those aged 25 to 34, from 61 per cent in 1981 to just 43 per cent in 2021. And the trend will continue if the tax system is not changed.
However, the smart productivity-improving move would not be to abolish negative gearing entirely.
Broadly, there are two sorts of negative gearing. One is buying real estate with borrowed money. The other is buying shares with borrowed money.
In both cases, the borrowing costs can be deducted against income earned from labour.
The trick would be to reduce gearing on real estate (to, say, one investment property), but not to reduce gearing on shares.
If that happened, the coterie of financial-advising tax minimisers would move money away from real estate and into the share market and other financial markets.
That would give a big boost to capital, which would be available for investment and innovation. It would relieve pressure on real estate so more people could buy dwellings to live in, not for other people to live in.
In all, the roundtable did not tell us very much new. Most people know what needs to be done.
The question to be answered is how to garner the political will to do it.
A government with this huge majority and friendly crossbench in the Senate should be able to take the risk to unlock the economic fruit of a more efficient tax and housing system for the benefit of the whole nation.
If not, our productivity and our living standards will continue to stagnate.
- Crispin Hull is a former editor of The Canberra Times and regular columnist: www.crispinhull.com.au
Crispin Hull
regular columnist.
