Transcript: Housing, transport and family hardships

Audio transcript (edited)

AIFS Seminar: Housing, transport and family hardships

Professor Julian Disney

Thank you for the opportunity to be here and especially for it to be during anti‑poverty week and I want to say a bit about that in a moment.  But perhaps to emphasise that I don't really approach this topic mainly as an academic in the area because I'm not, I've been mainly for the last 15 or 20 years only part-time as a professor, but more an advocate or a co‑ordinator of cross‑sexual groups in the community pushing for reform and housing change.  So I'm drawing a fair bit on the sort of, practical experience either when I was the head of a welfare rights centre right at the coalface or working closely with those people. 

But it is anti‑poverty week so I hope you'll excuse me if I just say a little bit about that because we established that 15 odd years ago at the University of New South Wales at the social justice project that I'm the head of.  And it really arose from my experience - I'd just finished then as the head of the international council on social welfare and was aware of some of the activities developing around the international anti‑poverty day, which is October 17 - and although I'm not over the moon about days and things of that kind, they can be more tokenistic than anything else, it seemed to me that there was value in developing and particularly, to try and get beyond the charmed circle of the usual suspects of people who speak about poverty issues. 

My own view, and I think the experience of anti‑poverty week confirms this, is that there are more people than the media and the many in politics believe in Australia who is deeply concerned about poverty, especially from their own personal experience of people around them.  Not necessarily themselves being in poverty, but people who move in those communities where people are severely disadvantaged or at least to some extent, are still visible. 

But it's important not to preach to them, not to tell them what they should think about poverty too much and certainly not what should be done about it, and to encourage them to feel part of a broader movement to try and reduce poverty without having to sign up to any particular ideological framework.  And also not to exaggerate to them the nature of the hardship that we have.  And so anti‑poverty week itself has remained fiercely, rather like just hiring a hall and saying anyone can come and turn up their stall.  

And one of my roles is the National Chair, which I've been from the beginning, is actually the stop it, as it were, being taken over by any particular policy or approach.  It's got to be a broad church.  That's sometimes misunderstood by some, but of course while participating in anti‑poverty week one can say whatever one likes.  One can push as much of a policy line as one wants, but it's important that the week itself, as a process, as a week, is available to everyone. 

And we've grown from the first year when we had five activities all run by people whose arms had been severely burnt by me.  The last four years we've had more than 450 around Australia and I think we'll have the same number this year.  And just to give you an indication of the breadth of it, read from the national media alert we put out at the end of last week about the types of activities; launches, forums, workshops, awards, exhibitions, walks, fundraisers, publications, presentation, addresses, festivals; huge festival in Forrest Place in Perth this year as it was last year.  And the venues include; shopping centres, parks, cathedrals, community centres, libraries, hotels, health centres, welfare agencies, business offices, town halls, parliaments, universities, schools, car parks, squares and markets; and we've had some even more out there alternative venues in previous years. 

You may have seen there have been some reports or strategies already released and one of them was particularly relevant here is Anglicare State of the Family report, which they release each year during anti‑poverty week.  This year we've also got Salvation Army report and a report on poverty and disadvantage from the Curtin Economic Centre in Western Australia and many others.  So I hope if you haven't already been involved with anti‑poverty week that you might take the opportunity in the future.  I should say it's spread now to Scotland first, about two or three years ago, and it's now spread to the United States.  Anyway, that's a digression, but I hope a legitimate one to try to emphasise the importance of anti‑poverty since we're meeting during that week.  

Now I want to turn now to the main theme, which is housing, transport and family problems whether poverty or hardship or of other kinds and in doing that, I want to look at aspects of the impact of the family home; so that's cost and adequacy and security; and of the family location, the choice they may have about location, problems relating to family relationships and health and some broader public impacts.  And then I'll look at some options for action.  

Deliberately, some of them not in the mainstream of what many people who are working specifically on family issues focus on.  I firmly believe that those of us who are concerned about social justice, many of us anyway, not everyone, but many of us need to address ourselves to the deeper underlying causes very often, particularly in relation to economic issues, not to regard economic issues as either beyond us or beneath us because very often otherwise, frankly, we're just sort of trying to swim upstream trying to reduce some of the damage of the deeper underlying environments and economic settings and public policy settings that are causing the problems. 

So I'm going to look at tax reform in relation to the principal residences.  I deliberately don't call it the family home because increasingly things that are called the family home are really tax shelters and it's being a little too kind to them to call them family homes.  So it's principal residences; secondly, rental properties; and thirdly, some issues to do with transport.  And then public planning and investment; regional cities, housing and transport.  

Some underlying concerns before doing that, just very briefly.  Firstly, to an extent that I think a few people in Australia realise or are willing to admit, we're a highly vulnerable economy.  When it happens people are going to say no one believed it was going to happen.  I don't really understand why.  We've been saved for a decade or so by China, but the underlying problems with our economy will come out eventually.  One can't say exactly when, but I'm sure they will.  We're a very small economy, we're very remote, both in distance and in some ways, in culture from the countries that are near as and we're very heavily dependent on commodities.  And increasingly, the extent to which we are able to make a living in the work, as it were, through services we will be subject to much more competition from Asia.  

We have very low levels of public investment even though we're a country, which is one of the fastest growing in population in the developed world.  We're still a relatively new country in terms of so-called western development and we have big distances.  You'd expect us to have an above average level of public infrastructure investment amongst developed countries; in fact, it's very low.  We have weakening work opportunities hidden to some extent the fact, the extent to which it's underemployment rather than total unemployment.  But the total supply just in terms of supply let alone quality, which I'll come to in a moment of employment, is weakening.  

We have, as I think, both ACOSS and Anglicare have shown this week, increasing financial inequality, but I want to emphasise many of the studies tend to focus on income inequality and that's significant, but asset inequality is far worse.  It's a factor of five to ten times worse, the inequality in relation to assets and getting worse with every passing month.  And I think asset inequality is hugely overlooked both within the social justice sector, if I can put it that way, and also more broadly. 

We have heightened social tensions, I believe, partly religiously related, partly to do with this growing inequality and divide that I'll say a bit more about later and I'm afraid I think also we will have heightened race base social tensions in the future.  I think we have to be brutally realistic about that.  We have accelerating climate change in a country that's particularly vulnerable to it because of our underlying climate anyway, but secondly, amongst many factors, dependency on coal.  

We have a highly concentrated population and I'll come back to that later, and I think we suffer form particularly poorly informed public discussion by comparison with many other developed countries.  Partly because of the tendency for the media to become increasingly sensationalist, increasingly pushing material out in haste without having thought about it or checked it sufficiently; and also a growing tendency towards polarisation especially in the mainstream media as they seek to find fellow travelling markets in order to try and remain commercially viable.  

So those are some of the underlying concerns, but I want to move on now to problems relating to the family home.  I'm not going to dwell on some of them because I think they're very well known, but prices and rent are much higher relative to incomes than in the past and extraordinarily high even by international standards and that's comparing it to household income.  And when you bear in mind that household income for the relatively middle to higher is two-earner income where a few decades ago it was only one-earner income, it shows you that this has gone up by far more than just real terms because household disposable income has gone up a lot ahead of inflation over that longer period as women, in particular, has come into the paid workforce.  

And that means of course that sole parents and other single-income families are particularly falling behind.  These prices and rents may plateau and I'm afraid the media will then believe the problem has gone.  They may even fall slightly and again the problem, the media would be, and others, would be very ill-advised I think, to think that the problem has gone, but I'm afraid that's the way things often operate.  We are already and have been for a long time at deeply damaging levels of house prices and rents.  Damaging not only for the people who have to pay them, but also for the broader economic development of the country, which I'll come to later.  And of course, it's aggravated by the fact that public housing is not keeping pace with increases in the size of the population let alone increases in the populations that formerly would've been able to get into it and needed it.  

We've got increasing dependents on parental support in order to get into the housing market.  Now that made, to some extent funnily enough, overcome some of the massive problems of intergenerational inequity that are arising from the sort of, baby booming generation in a sense.  At least some of their ill-gotten gains are being passed on to help their children this way.  But that's fine for those who've got parents who got lucky or wise, but in many cases it's really luck, and have that gain to pass on.  So it's actually aggravating very severely inherited inequity, which is one of the worst forms of inequity and I think it's a huge social problem.  Some of us have been pointing that out vainly for 20 years because none of this is really new, it's just become even more acute.  But it's been a major problem and clearly can't have come worse from 20 years ago.  

There's greater difficulty in meeting other basic costs of course.  Housing is the largest expenditure for most families and it's the first in a sense.  It's the one that they really have to pay and they'll go without almost everything else including food, in order to keep the home over their heads.  And therefore, it has flow-on impacts to food, to clothing, to school trips, to health costs.  I saw Andrew Leigh, the MP who wrote a really wonderful speech for Anglicare Australia national conference recently, who says - and I'm sure he's right because he says so meticulous - that lower income people have seven less teeth than higher income people, just because of the disparities and the ability to have dental care. 

So these are sort of deeply, deeply brutal every day life problems that are caused by the high housing costs, but also I think for the first time really at least in my experience, it's now reasonable to say that much of the cause of homelessness is housing costs.  I don't think that was the case ten or 20 years ago.  There were usually other factors that were far more prominent than the actually cost of housing.  But I think now it's fair to say that unaffordability of housing is a really, quite substantial and growing factor in the problems of homelessness.  

We have very high household debt in Australia - I'll come back to that again later - and we're diverting national resources into just bidding up house prices against each other.  National resources, which could've gone into job producing enterprises or into enterprises which would reduce our trade deficit, but all they do is pay more and more money for, by and large, a product that is much better than when the price was very much lower.  

I'll move on then to problems of adequacy.  We have larger houses for many families and of course, that's one of the things that's commented upon by people who say, well house prices are going up, that's because housing is so large and we are over providing housing; people have excessive housing expectations.  

I think to the extent that my view is relevant, that is true that quite a lot of housing that's been provided for people now is pretty much over the top.  I've been looking at some recently where there is sort of as many as three or four sort of entertainment theatres or multimedia places, that sort of thing, in a fairly standard house.  They are getting very big for middle income, but the biggest problem in house prices is not the construction of a house by a long shot, it's the land.  So those who worry about the cost of building, okay, it may be that you know, some of the houses are a little over the top, but that's not really a significant impact in the broad scheme of things in house prices, it's the land.  

And one problem that flows from that of course is that's why you'll tend to have huge McMansions on tiny blocks and when you look inside those McMansions quite often, there'll be hardly any furniture.  Furniture isn't a tax break, the house is.  I was telling that story, from my experience, about furniture to someone the other day who works at the frontline and she said that their workers often notice when they go to some of those McMansions that when they turn up, there sort of might be one light on in the house, even though there are lots of people in it.  They're having to save on energy costs and that sort of thing.  So huge amount of money gone into the house, it's a tax break; furniture and use of energy is not.  

There are more families whose only option is an apartment.  I think this is a huge problem.  Of course apartments are very desirable or at least neutral for many people, but for many others I think exactly the opposite, and the data and research tends to suggest particularly high-rise apartments have major problems especially for people with youngish children.  They can be bad for the family relationships through being on top of each other too much without sufficient space and privacy and access to outside; adverse impacts on health because of the reduced exercise; and adverse impacts on the ability, for example, to study and further one's education. 

Now of course that's not always the case.  Some apartments can be better than some detached or semi‑detached houses, but we need to be very careful, I think, of believing that apartments are the answer and especially you find, as I've seen over the years repeatedly happens in the housing industry, where they say, this is what people want.  They only want it because it's all they can afford in many cases.  Some do want it.  I've lived in apartments during my time and they've been what I've wanted to live in at the time.  But you know, I had the money to be in a reasonable apartment, but it's quite misleading to say that just because people are buying apartments that's what they want and that's a sufficient response to their concerns.  And Melbourne, apart from anything else, is as good a place as any to learn the problems of high‑rise apartments for low‑income people.  I thought that lesson had been learnt, but I'm not too sure it has been in the longer term, at least by people in treasury. 

More adult children, as you know, now are staying at home.  Now they're not staying out of love, by and large, they're staying because of their wallet.  This, I think, is aggravating problems of friction and lack of privacy in many cases and also, it may be what some people commented on as a sort of prolonged adolescence or a slowness in becoming independent.  I don't just mean in relation to housing, but in other ways.  Again, you could regard this as the baby boomers getting back what they deserve from having children around longer than they want, but that's really not helping either side of the equation. 

And it's also leading, in many cases, to parents staying in a larger house even after the children have left.  Larger houses than they need and that they want in many cases, because they can't be sure whether the children will in fact, in the current housing market, want or need to come back.  And as you may know since I'm in that sort of generation where my children are about that age, it's a very common occurrence that they were to come back into their parents' house even if they've left it at the age of 30 or even older because of the current housing environment.  

And also high, particularly cooling costs for many lower‑income people through very poor housing design.  It astounds me how we've allowed such climatically - I always have problems with climatic and climactic, but here I mean climatic - for our climate to be building houses without eaves and in other ways, so much dependent upon air‑conditioning is really crazy and has been a major factor in the over investment in generating plants and therefore the increase in electricity prices. 

Well I'll move on to the last of the areas to do with problems with the family home and that's security.  Work incomes now are often less secure.  This again is a problem in the work environment, which I think is not sufficiently picked up by many economists and others who just tend to look at raw figures and at moments in time figures and don't realise that particularly for younger people now, so much work is so precarious.  Some younger people are at the stage where they relish that.  They see it as freedom and flexibility to be an entrepreneur et cetera, et cetera.  

I may be wrong, but I think quite a lot of them are going to find that life's very difficult later on when they want a greater degree of security for one reason or another.  But in any event, the 7‑Eleven experience is actually pretty widespread for many young people, as you probably know.  Highly exploitative employer behaviour, not only in relation to low wages, but also in relation to the risks of any downturn, even the fact that not many people turn up at the beginning of a four‑hour shift so that the person gets told to go home and not paid for the remaining three hours of the shift they come in for, that kind of behaviour is not that uncommon.  

As part of the general transfer that's occurred in the last 20 years of the risks of business downturn, even short business downturn, being transferred right at the front end to workers, rather than carried by the business itself for a reasonable period.  

Fewer homes fully or largely paid off.  As you know, it's still the case that very often data about housing talks about home ownership and homeowners when some of them are home purchasers, they may have only just started buying.  Now for a long while, perhaps it didn't matter in one sense, because they were all going to become full homeowners and nearly all of them pretty soon.  But now it's very important to distinguish, it's probably five or six years ago that the tipping point, in a sense, occurred when more than 50 per cent of people in buying their homes were still buying rather than fully owning.  Before that, it was a much higher proportion.  

So many are still paying off and of course, now we have interest‑only loans so many people haven't really even started paying off at all.  It's said that superannuation will be part of an answer to this in that instead of in the past, being fully paid off when you go into retirement, you won't be fully paid off, but you'll help super to help pay the mortgage.  And there's some truth in that, but superannuation is not entirely risk free.  Again, this is another example of the trend in the last 20 years to transfer risk from public or employer locuses to the worker or the consumer.  

And superannuation, we haven't fully realised yet, I think, we had a short period in the global financial crisis, that superannuation is not actually a golden egg and in any event, just paying out, seeing whether superannuation will last through your unknown lifespan is very different from having fully paid off your house.  

The increasing dependence of low‑income families on insecure private rental, I think that's pretty widely known so I won't dwell on it, but of course it's been exaggerated by the relative decline and the availability of public housing.  It's also a consequence to some extent of one of the many ways in which Australia is a real outlier, as it were, in the world in the housing area.  I don't know if any area of policy where we're actually so unusual by world standards as housing.  And one of the ways in which we're unusual is what, to people overseas is a quite freakish level of so-called mum and dad investment in property.  Of course it's no longer mum and dad. 

No other country is remotely near us in terms of the amount of the rental stock, which is owned by non‑institutions.  And although I'm not usually a huge fan of financial institutions, you know, being able to make lots of money out of doing not very much, we badly need, as a very high priority in the housing area, to get our major financial institutions, including superannuation funds, involved in large scale provision of housing, especially affordable housing.  And one of the things that that maybe ironically will do, in many cases, is actually provide greater security for tenants than if one's at the mercy of a particular individual investor who has their own changing family or other needs and greater economic vulnerability anyway, to address. 

And we also lack long‑term residential leases.  I shared this, I think it may have been mentioned, a ministerial taskforce on affordable housing 20 years ago for the New South Wales government and we pointed out then that we really needed to move, as an option, to longer term leases; five years, ten year leases as is common in Europe in particular.  There'd have to be some adjustment in landlord‑tenant responsibilities, but it's an example of how in many ways we need to provide a richer spectrum, rather than two ends of the housing options.  

Rather than the security for life as it were, of either being in public housing or having paid off your home and home ownership, or totally at the mercy of the private rental market with maybe two weeks or four weeks' security.  We need to fill in more of the middle points there and one of the ways is to have longer-term residential leases.  

Now I'll move on to problems with the family location.  A key thing here, I think, is the greater needs and options for job mobility.  That, together with the entry of women into the paid workforce has had very profound impacts on the way in which our urban development occurs and on the needs of families and I think it's still not fully realised how much of an impact.  In a sense, it's both economic regulation and gendered deregulation.  They have worked together to have a huge impact on those patterns.  And one of the consequences is that it's made a flexible location; a location from which one will be able to get to any one of a number of possible work opportunities that one may want or need in future years, has become increasingly important.  


Instead of staying in the same job for 40 years and getting the gold watch, most people in the future, you know, will go through many jobs in that time.  When you more or less double that because you now have in many cases, two people in that situation in the family, and of course if there are children living at home, adult children living at home, more than that, then you can see why living near - either living near the jobs or living near a very effective transport hub, which will enable you to get in different directions, become very important.  And that's a key factor, the key factor in my view, in the gentrification of the inner‑city suburbs and increasingly around maybe transport hubs.  

So location has become hugely more important in the last 30 years because of those two factors.  Greater voluntary or involuntary job mobility and at least two people now in many households needing to have that mobility, rather than you know, just having the one job for one person, the only work travel need will be to go to the same place for 40 years, which was the norm until moderately recently.  

So more families living further from work options and particularly the lower‑income families because of the reasons I've mentioned.  The people who've got the money move closer to where the jobs or the transport hubs; drive up the house prices, other people have to move out.  Now that's been around for a long time, but it's become more acute in the last ten or 20 years.  And amongst other things, that means of course if they can afford it, they need more than the one car.  

Again, I saw an extraordinary study, I hope it wasn't by the Institute of Family Studies, I don't think it was, which concluded that there wasn't a transport problem, a work travel problem for many people in outer suburbs because they tended to have more cars than people than inner city so they could cope with it.  Now that's really confusing cause and effect.  They have to have two cars in many cases to be able to get to a job, but even actually to get to almost anything else in many of those suburbs.  And that's why you do have a relatively high ownership. 

I know Joe Hockey thought that people, poor people didn't drive too much.  Well very poor don't, perhaps, but lower‑income people do, and in some ways they are lower income because in order to get a job they have to incur those sorts of expenses.  

Also more complex transport needs in relation to education in childcare and elder care.  This is a huge change.  Again, I'm again flowing from women's entry into the paid workforce.  The change from the male trip to the place they've worked for 40 years, with the women it was nearly always, but not always the women, being at home and doing the smaller trips to school et cetera and there being no need for childcare, has transformed of course.  

So that nowadays if you're anything like I was with the two location choices I've made in the last 20 years, hugely influenced by access to childcare and to schools and in one case, almost entirely due in those days to the fact that the local primary had an onsite after‑school care place.  That's really why we chose the suburb where we live.  So these are hugely significant to try to, as many of you will know everyday, these much more complex transport needs than in the past. 

And also of course, more need to, in many cases, travel to help look after parents who are living longer and often in frail conditions and my generation is starting to experience that very acutely.  For many women of roughly my generation of course, it's meant that they have moved directly into looking after women because it's they're parents because it's tended, unfortunately, to fall on them and hopefully men will move more into taking a fair share of that at the same time as doing it also and in relation to their children.  

But the transport to look after older people who are often further away because of the problems of housing costs because it may be that the parents were able to get into a particular suburb when it was relatively modest in price, but children have no chance of getting there.  So there can be long distances, as you will know, between, I'll call them the grandparents, and the parents. 

Socioeconomic segregation and disadvantage is getting significantly worse.  We've always had it, of course, but by and large, very often it was just between neighbouring suburbs, so at least you actually saw how the other half lived.  Now for poorer people that could, you know, have engendered some annoyance et cetera, but at least it meant that wealthier people had a little bit better sense of the disadvantage and hardship that others were experiencing.  At least it was near them; next suburb, a suburb or two away.  

Now if you take particularly Sydney and Melbourne, there are very, very clear dividing lines with huge swathes on one side of the city being advantages and huge swathes on the other side being disadvantaged.  They're really, in many ways, different cities and I think that has a big impact on social views and values and maybe down the track on social cohesion. 

And the socioeconomic segregation and disadvantage can of course, as many studies including from here as shown, have very significantly adverse impacts on education, on safety, on behaviour.  Can even have problems on things like access to transport.  I recall there were two public housing estates in south‑west Sydney; one had a good shopping centre, a railway station, and a good school; another public housing estate a little bit further out, none of those; two shops.  The only other thing there was a corrective services facility, largely populated by people who lived in the area unfortunately, and so dangerous that neither buses nor taxis would go into it at any time of day. 

Now the area that was sold off by probably house authorities was the good area because it was more saleable, so we lost a relatively good area; we were left with a place that whoever put it there really should be taken out, severely dealt with.  Crazy location and very badly serviced.  And finally in relation to location, we have excessive pressures to live in major cities.  I'll come onto that a little bit more later, but it's important to emphasise where we live in Australia is not a neutral choice.  Sometimes as between metropolitan and elsewhere, sometimes when I'm talking about this people will say oh you're trying to tell people where to live.  We tell them where to live now.  We have huge distortions that I'll come to, which greatly influence that choice through distorting economic or social circumstances. 

It's important and certainly in that context to bear in mind that although regional housing is by and large cheaper than metro housing, incomes are lower.  So there's actually very little difference between the affordability relative to income as between city and the regions.  Now Internet of course can be a huge positive here and that's one of the reasons why the NBN was seen as so significant by Tony Windsor and other people, because the Internet and variations of that is so crucial.  

I recall once when I was up in Lismore in Northern New South Wales and I just looked at there amazingly impressive post office that had been built there more than a hundred‑odd years ago, telephone and post, and you'll see the same with train stations too, the huge amounts of investment that was put into an infrastructure for communications.  Now the modern version of that is IT and we're not spending anything like a commensurate amount on those forms of communications as we did 120 years ago when it was realised to be so crucial in regional areas.  

Okay, so sorry, also with family location, family relationships and health, adverse impacts of lengthy trips to and from work.  I think this is a major problem.  Not only the stress of the trip in many cases - for some of course, it's actually a peaceful time and if one's lucky getting on at the right place and getting off at the right place and with the right kinds of fellow passengers, it can be a very tranquil or useful experience.  For many other people it's not that at all - but of course, it's also the extent to which it leads to quite often three hours of total sedentary lifestyle in the train or bus.  

But then I think particularly importantly, the stress back at home.  The loss of time from family time caused by work travel which is now very often up to 60 or 90 minutes or even more, many people in Sydney, for example - and I think it's the same here at least, with say, coming from Ballarat - many people in Sydney even quite well-off people actually have had to live up on the Central Coast up towards Newcastle or south in Wollongong and have very long commutes each day.  

So stress back at home, not only in terms of its impact on parenting and what I'm afraid I regard as the meth of quality time, I think there's no substitute if one can have it for a degree of unstructured relaxed time, rather than an alleged three-quarters of an hour quality time, which suits the parent, but not the child.  So there's a big price that we pay in this lengthy travel, but also in the personal relationship if it's a couple as between them.  

The greater distance from the extended family members who need support, I've referred to that, but also who can provide support.  As you know, increasingly now and perhaps to an extent that's excessive grandparent - certainly many of them think it's excessive - grandparents are helping out with children in order to enable their own children to work.  But that's harder if they're living a long way away. 

And greater difficulty in accessing health and care services.  That's pretty obvious, but I'll just point out that greater reliance on market forces as, for example, you see in childcare, by which I mean the private sector, we seem to be having to learn again what's the relentless lesson of history, which is that those kinds of services will tend to proliferate more in the better income areas.  Because obviously, people will be able to pay more for their childcare, more chance of being able to make a buck out of the childcare.  

Okay, and finally on problems with family location, adverse environmental impacts.  I won't dwell on that, but it is interesting how some of the urban sprawl, and this applies in Sydney, is occurring in suburbs which were deliberately not developed for quite a long time because of environmental problems.  For example, the western suburbs in Sydney, many of them passed towards the Blue Mountains, are particularly subject to air pollution; heat haze related air pollution, that sort of thing.  

In some other parts, in Perth, for example, where there's such a shortage of water, a city really shouldn't be developing as large as Perth is.  And so there are environmental impacts of the urban sprawl that's developing and they're the familiar pollution impacts of car dependency and congestion.  

We have the adverse pressures on wages and productivity.  This is a very important one from the point of view of the future of Australia for the reasons I mentioned at the outset; we are really going to be facing difficulties in ten, 20, 30 years' time.  I can't be sure when, but I'm absolutely sure it will happen.  If you want a simple example, which you may laugh at, at first, but I hope you'll think about it some more, it's useful I think often to look at analogies with sport.  And 50 years ago we absolutely dominated the tennis world.  We don't now.  That's entirely predictable.  

As more parts of the world became able for socioeconomic reasons to engage in the sport, our basic position in terms of our size in the world and other things, and to some extent, our remoteness, tends to become more of the reality.  And the decline is not a passing thing or a surprising thing and you'll see it in other areas as well.  The same applies to our economy.  And that means that we need to avoid any unnecessary impact on our competitiveness and one of the ways we can do that is by avoiding excessive housing costs because excessive housing costs tend to flow into a higher, than would otherwise be the case, labour costs, which is a problem for competitiveness. 

I live near the big business development area near Macquarie University in Sydney and many of the people who work there now have insisted when they've negotiated wages or salary if they're in that position, on a premium for the transport problems of getting there and in particular, the cost of the tollways to get there.  So there's a direct add‑on into wages and salaries because of poor transport provision in that situation.  

 It's interesting that Tom Playford, the long‑term Premier of South Australia, when he was trying to work out how to make South Australia competitive - and it's a challenge of course, they've got again now - the main reason why, even now, but more so ten years ago, South Australia had far more public housing than anywhere else in Australia, is that Playford deliberately provided cheap public housing to attract the car industry and other employers to South Australia because they would therefore, be able to pay lower wages.  So their labour costs would be reduced because their workers' housing costs would be lower.  That's the sort of approach we need to take nationally rather than the reverse. 

 I want to move on now to what we do about it, having spent a lot of time on the problems.  So firstly, tax reform; the principal residences.  It's important, I think, when looking at tax at its impact on housing to think about three phases of the housing process; firstly, buying; secondly, owning; thirdly, selling.  Buying, by and large is stamp duties; owning, by and large is only council rates; and selling, if you live in the home is nothing because there's capital gains tax exemption and a land tax exemption.  Our housing system really is upside down and back to front.  It's particularly back to front because it hits you at the beginning when you're trying to get into the housing market and then it literally leaves you home‑free, not paying anything except rates after that, despite the great benefits that you get from that, which are significantly contributed to by the public in one way or another.  

We need to reduce the barriers to entry and to moving house for the reasons that I've mentioned.  Enabling moving house is very important and should no longer be seen as a sort of discretionary luxury as it was, perhaps legitimate to think of it 20, 30 years ago.  It's not the case now.  Because of the needs for job mobility, moving house and the complexity of, you know, households with more earners, it means we must facilitate moving house and we must also facilitate downsizing by older people. 

So that's why I think it's very important to reduce or remove stamp duty on all purchases - sorry, that should be up to about the mid‑price points.  Not, I think, at the higher end.  That's partly because there's a significant loss of revenue involved in this and one has to be realistic about how much that can be carried.  I want to emphasise though that it's on all purchases because there's been a focus in the States that have done this, on first‑home buyers and for the reasons that I've mentioned that's not the whole game.  It's not just first‑home buyers we need to think about, it's job mobility and it's downsizing.  So I would do it for everyone up to a certain level or around the middle.  

We also, I think, should cap the age pension assets test exemption at about mid‑price levels.  That's mainly to encourage downsizing and it's better to do anything there in relation to assets, to the extent that the means testing on the pension should be tightened, it should tend to focus on assets more than income.  I think actually that's a case, frankly, for dropping the income test entirely on the age pension and fuelling the cost - funding the cost - out of tightening the superannuation concessions.  Because as many of you may know from your parents or grandparents, it's not only the income test, it's not only a deterrent to some part‑time work or to some useful use of their capital, it's also an incentive to fiddle. 

And quite contrary to what I and many in the welfare sector thought 20 years ago, I like most people thought means testing the pension was a great idea.  I'm very skeptical about it now, at least in relation to income.  But it's a different situation in relation to assets. 

Well the other thing in relation to principal residences and in my view, the most important, tax reform and the thing that should absolutely dominate tax reform discussion, not the GST, which is frankly the lazy way of trying to achieve tax reform and doesn't provide any economic or social benefits, all it provides is revenue; and tax reform really should often be aimed at least as much on influencing economic and social behaviour, not just on getting revenue.  

The land tax exemption, which applies in all states, nearly always, there are some exceptions, uncapped.  So no principal residence has to pay it.  I believe that that exemption should be removed for the, sort of, roughly above mid‑price houses because the land tax is a good way of getting a share of the benefits that the public has actually provided all home owners from the surrounding environment that's generated by public spending and other things.  It's also relatively easy because the valuations are already done for rates purposes, in fact, you could call it a rate supplement and allocate it to state governments or whatever.  It's the same thing. 

 Now that was recommended in a sort of limited way because he'd been appointed by the Commonwealth government by Ken Henry in his report on land tax.  And you'll find newspaper editorials, you'll find even last week in The Economist it was strongly recommended, but unfortunately the sort of front‑page media and the news media generally completely overlook it and keep going back to GST.  But land tax is a much higher priority.  And it's important also because Ken Henry also pointed out in an international world, we really need to focus on taxing immobile assets which can't be taken overseas because competition between countries makes it harder and harder to tax financial activities and assets for fear of capital flights, so called.  

So it's terribly important that we tax immobile assets properly and so I think reducing the land tax exemption is a very, very high priority and I think fairly easily the most important priority for tax reform, not just in relation to housing, but everything else.  But you do need to allow options to partially delay it for people who are asset rich and income poor.  We could cap the capital gains tax exemption.  A lot of people used to do that.  That's you know, getting at the end, at the point of sale.  

The advantage of that is that it's only the one hit, as it were, and it's when people are getting a lot of money or quite a bit of money, so there might be less political resistance and it would be easier to introduce because it's one government doing it, the Commonwealth, rather than the state, each state.  But it does deter sales and it can lead - it can also be very unfair and that if someone has to sell a house at a time when the market is relatively high, then they'll be paying perhaps excessive tax.  And it distorts really, people's behaviour in terms of when they sell and can be haphazard in its impacts.  

Well I'll move on then to rental properties and we need there to reduce the inflation in house prices and private debt, limit the unfair advantages for investors over home‑buyers and improve rental occupancy.  At the moment as a result of a change introduced by Peter Costello of which he remains unfathomably proud, it's very clear that the surge in house prices happened almost to the day when capital gains discounted 50 per cent was brought in.  It hugely increased the attractions of negative gearing and continues to do so and again, Ken Henry recommended that it be reduced.  I won't go into all the details.  His proposal was moderately complex, but I think quite good, to reduce that discount; to have greater parity between capital gains and other income. 

It's bizarre incidentally, that the more you've worked for your income, the more tax you'll be.  Labour income, work income, there's tax at the full marginal rate.  If you speculate, it's taxed at half the marginal rate if you just sit back and, you know, play with some shares or whatever.  If it's given to you by gift or death, you pay nothing.  So as I said, and one of the few times I've managed to persuade someone from The Centre for Independent Studies to agree with me, I said that people from that environment should firmly agree with what I'm saying about reform here because they're meant to be in favour of, you know, reward for effort.  No freeloaders, no sense of entitlement.  Well our tax system on savings and on income is completely the wrong way around.  So we need to change that.  

We also need to limit the deductibility of payments.  That's at the heart of negative gearing and incidentally, it's why we have now, until the last week I used to say we had the third highest level of household debt in the world, we now have the highest.  It's been like that for 20 years.  The media focus almost entirely on government debt, which even now is very low.  The problem is high household debt, private debt.  The highest in the world and that's a huge cause of future vulnerability; not just for individuals, but for the nation.  And it's largely caused by negative gearing.  

Negative gearing only works if you borrow.  If you pay cash it doesn't work because you’re wanting to claim your interest payments.  So it's a huge distortion, not only in house price inflation, but in debt inflation and we need to limit the deductibility of interest payments, at least if there's not much rent being generated and of course, in quite a lot of cases, there's no rent being generated.  And as you probably know, a lot of these apartments are being deliberately left vacant to the extent that they can escape the very, very loose attempt of enforcement by the tax office to see whether they're generally available for rent.  

A very, very large number of apartments are vacant, deliberately vacant because there's nothing in it for the investor.  They're wanting the losses, best to avoid any wear and tear on the apartment by actually allowing people into it.  I'll skip the other aspect of that, but just come to the last one to do with rental properties, which is the National Rental Affordability Scheme.  Now I might say more about that if there are any questions about it in the interest of time, but it was a scheme, and I have to declare to some extent an interest because although the design of the scheme was not what we proposed, the housing summit group that I shared for quite a few years, did propose a scheme, which led to the adoption of the scheme.  

But this scheme, although actually has worked recently well, contrary to what you'll read in at least one newspaper, it needs to focus much more on bringing institutional investors into the provision of affordable housing.  Institutional investors, not the so‑called mum and dad.  And the way in which our scheme was changed by government when they brought it in, totally moved away from that.  It's got to be aimed at getting superannuation funds and others into the provision of affordable rental housing.  

And also, you can engage in what's called disaggregation.  Land tax at the moment is based on the total value of all your properties.  Now that's a real deterrent to a few of the smaller investors.  I recall someone from Melbourne write to me about this saying look, I inherited a 12‑apartment walk up block of flats, I'd be very happy to let it out for affordable housing, but because of the aggregation of that for land tax purposes, I'm paying land tax on it.  Now if, provided that I complied with requirements about affordable rental housing and who was in the housing to low, middle income, how about allowing the units to be dealt with separately, which means they would all be exempt, rather than bulking up in which case they get over the threshold.  So this sort of disaggregation has a lot to be said for it.  

In relation to transport, I won't say much there because I think that's pretty well known.  You know, some efforts to reduce carbon emission and congestion, very important for people that are having to travel lengthy distances, but particularly - and there may be many of you who don't agree with me on this - we really need to reduce the scope for salary sacrificing and avoiding fringe benefits tax on vehicles.  Fringe benefits tax is a rort and so is a lot of salary sacrificing.  

It's extraordinary that at the time when the intergenerational report was introduced again with much trumpeting by Peter Costello, at the same time, he and John Howard brought in a whole swathe of things which aggravated the costs of older people.  Extraordinary.  One of the biggest disjunctions I've even seen between alleged policy priorities and actual policy adoption.  And one of them was, you know, tax-free after the age of 60 et cetera and those sorts of things.  

Well just finally, options for planning and investment; we need to set a long-term goal for increasing the share of natural population living in medium-sized cities.  We're a freak in international terms.  In the tiny proportion of our population that live in medium‑sized cities, way below US, Canada et cetera and if you add to that the problem, problem in very heavy quotes, that our cities are low density, we really need to encourage regional cities more.  We've got the land.  We need to provide the transport et cetera.  The Internet makes it easier.  

The biggest cities have got well beyond economic and social efficiency.  One of the indicators of that is the transport congestion, et cetera, and the house prices, but there are others as well including the upward pressure on wages because of the high cost of living in those cities.  So we need to, I think, as a major national goal, do that and the appointment of the new Minister For Cities may help in that respect.  We need targets for affordable housing in the National Affordable Housing Agreement and we need major developments to have to provide a percentage.  

South Australia already requires a percentage of new developments must be affordable, with definitions of affordable.  It's 15 per cent.  In the UK and the US, it's often 30, 40, 50 per cent and developers do it.  Lendlease for example, have said to me we develop projects in the UK with 50 per cent affordable housing requirements.  We're not worried.  We knew about it when we bought it.  The price came down because of that, so we don't have to pay as much.  So we really need to move in that direction.

I won't dwell on the others, public investment and housing through the National Affordable Housing Agreement, happy to come to that if there are any questions; and also public investment in transport, particularly rail and of course, there's some hope for that now with Malcolm Turnbull.  I hope you won't think me too skeptical if I point out that because of his wealth, he's actually able to live - his electorate office is 50 metres from a train station, where he owns the whole building, which is two stations from Martin Place, which is about 200 metres from his office.  So it ain't much of a surprise that he uses public transport quite a lot.  That's too cynical, but just an observation, in a sense, about how life can be a hell of a lot easier for people that are in the inner cities and on railway lines and that can pay the money to live there.  

And high-speed intercity rail, why we dropped off on that in the past, I don't know.  Again, it's the danger of following fashions.  And Melbourne can be proud here because Melbourne hung onto trams when other people got rid of them; hung onto rail services.  Other places, especially Sydney tried to get rid of them.  Rail was regarded as passé and treasuries didn't like the long-term high investment approach preferring more short-term things.  Other countries have got a little bit more wise in these areas and we need to too.  We really need that more to help develop the regional cities.  

All right, well I must finish there.  

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