By John Haly

In July, Treasurer Jim Chalmers announced an independent review of the Reserve Bank of Australia, and in September, the Bank Review panel released Issues Papers and calls for Public Submissions. The Review Panel – comprising Renée Fry‑McKibbin, Carolyn Wilkins and Gordon de Brouwer. As I said to the panel, I have written it as though writing to Treasurer Jim Chalmers. The closing date was the 31st of October, and because this will make for a long article, I will simply say, what follows, is my submission.

* * * * *

Dear Minister Chalmers,

Thank you for the opportunity to contribute to this review of the Reserve Bank of Australia.

Themes

This submission covers Monetary policy frameworks such as adherence to the NAIRU and neoclassical “gold standard” mentality over that of monetary sovereign fiat economies. It covers RBA and Government communications about the Finance Franchise myths on Banking, in general. It is critical of the Board composition based on bias in inappropriate neoclassical education and the selection of business representatives instead of economists trained in the issues of fiat economies. Finally, it reviews the Interaction of monetary and fiscal policy with respect to RBA’s performance in applying monetary policy where fiscal policy is more appropriate. As a former employee of the Reserve Bank, I have some knowledge of the inner workings of the Reserve Bank.

I understand the review of the Reserve Bank of Australia is underway to improve monetary policy and its success at realising its goals, governance by the Board, culture, leadership, and recruitment practices. Such a broad range of objectives has yet to be approached since the smaller incidental 1981 Campbell inquiry and before that, presumably at its inception in 1960.

Curtin

Over the last century, Australia’s Central Bank and economy have undergone many changes. In the previous World War, the Curtin Government asserted Commonwealth power over banking, which led to Ben Chifley’s later decision to legislate to nationalise the banks, effectively asserting Commonwealth control over money and credit as per the Commonwealth Bank Act of 1945. However, such nationalisation was later defeated in 1949, as the book “Curtin’s Gift” by John Edwards says on Pg 141.

“Though the postwar Menzies Government amended Chifley’s central banking legislation to reintroduce a board, the Commonwealth’s last-resort power to direct the bank was retained in the legislation and remains today. The Commonwealth Treasurer has conferred on the bank an independent authority to make monetary policy, but it is a conditional independence to pursue a policy of low inflation, sustainable output and employment growth.”

Curtin had also argued for two other changes,

1. Commit to a full employment policy to improve living standards and raise national development.
2. a floating exchange rate to free Australia from the fixed exchange rate with the British pound

Ben Chifley implemented the Full employment policy following Curtin’s full employment paper being submitted to Cabinet in March 1945. Until the rise of Neoliberalism in the 1970s, unemployment would remain dominantly at 2% (notably without substantial inflation).

Unemployment rate and NAIRU

This leads to the Reserve Bank’s first failure, which is its commitment to the NAIRU. Interestingly Albanese’s claim of the Job Summit was to seek a “Full Employment Summit”. But unfortunately, the neo-liberals of both the political Party and the Bank adhere to the conservative myth of the NAIRU. Instead of a NABIER – as a better alternative perspective, the Bank incorrectly suggests we are already “fully employed”. [See Prof Mitchell’s analysis: Never trust a NAIRU estimate]. A goal that has been achieved if you conclude ABS measures domestic unemployment, which, as you can see from the graphs and my articles covering what should have resulted from the Job Summit [my article and graphs: Stagnating Summit’s Shortfalls]. This is why “what gets measured” is essential. I will not go into detail about the shortcomings of the ABS statistics as they are probably already well known, and if not, the article aforementioned herein, should inform you.

Raising interest rates as a strategy to deal with inflation is problematic at best. The link between spending and interest rates is unreliable and unpredictable. Interest rates affect both supply and demand. Economic modelling of “supply and demand” is only relevant to highly atomised markets with many participants, like the primary sector. Secondary and tertiary sectors of the economy follow different models. Changes in interest rates can have a reverse effect on inflation. Higher interest rates only affect people with variable interest rate debts. They don’t affect fixed interest rate debt and people with no immediate financial obligation. Higher interest rates increase the income of creditors and redistribute income to the wealthier, rentier class, exacerbating inequality. Fourth, higher interest rates reduce the incentive to undertake debt and may cause “distress borrowing” to service existing debt or keep businesses afloat. The resulting Ponzi balance sheets do a disservice to the economy, and all of the above, risk yet another recession. The government should be applying fiscal, not monetary, policy to these issues rather than letting the Reserve Bank’s adherence to a disproven NAIRU theory collapse the economy into greater inequality.

FIAT economy

Paul Keating’s floating of the Australian currency in 1983 meant Australia entered a new economic space. We became a monetarily sovereign, fiat economy no longer tied to another currency or a gold standard (which even America had abandoned with the collapse of the Brenton Wood decisions in 1971). The implications of which even the Bank of England acknowledges even if neither our government’s political rhetoric nor Reserve Bank acknowledge. [Bank of England video: Money in the modern economy: an introduction – Quarterly Bulletin].

Instead of shifting into this new space and engaging with this new paradigm of fiat economies, the neoclassical economic conversation stayed with the decades-old “gold standard” economics model. Still, neoclassical economics guides the decisions of the Reserve Bank’s mission to “pursue a policy of low inflation, sustainable output and employment growth.” [“Curtin’s Gift” by John Edwards pg 142]

Problematically, even Board members of the Reserve Bank need to understand the basics of a modern monetary system. [Prof William Mitchell: The RBA has no credibility and the governor and board should resign]. The Reserve Bank’s role as the currency issuer for the government has been misunderstood by business board appointees blinded by the tunnel vision of their experience as currency users in the business community.

Most of the Board are business people (five in number), three are neoclassical economists (Dr Lowe, Michele Bullock, and Ian Harper), and Dr Steven Kennedy is economics adjacent given his Doctorate was in the Economic Determinants of Health, which is not precisely about the Banking systems. None of the Board has any formal training in the economics of fiat economies or Modern Monetary economies, although that isn’t to say their experience on the Board has yet to give them insight. Some suggest the RBA is best served with Board members selected based on expertise in modern monetary fiat economics rather than as political appointees because of their relationships with former Prime ministers.

To this day, neoclassical economics still guides the decisions of the Reserve Bank’s mission to pursue a policy of “low inflation, sustainable output and employment growth” but has universally failed to achieve what Curtin (and even Menzies) did for nearly three decades.

Banking is widely misunderstood as a heavily regulated franchise industry acting as an intermediary between scarce private capital and borrowers. Modern finance is relatively scarce, and depositors are the source of money supplied to borrowers. [Cornell Law School paper: “The Finance Franchise”].

Misperceptions

This is among many common public and media misrepresentations of the banking system. In these areas, it should be incumbent upon the government to educate the public through public broadcasting so that the expectations upon the Reserve Bank are properly evaluated. These myths include:

• Banks can only lend out money they have from depositors.
• Credit is an extension of a money multiplier based on deposit reserves.
• Quantitative Easing is printing free finance into the money supply.
• Federal Treasury deficits are a liability to taxpayers.

At a Keystroke

Money in Australia’s economy has two sources. First, that which the Government Treasury supplies through its fiscal agent, the Reserve Bank. In short, that money is spent into existence by the Federal Government. This money is called “Vertical” money, which exists as an Exchange Settlement Account between the Reserve Bank and the Private banks. As the public is not a joint holder of that account, it is not available for lending to the public. Its only purpose is for interbank transactions.

Secondly, a larger pool of credit via lending is generated “ex nihilo” in the economy through private banking, referred to as “horizontal” money. [Also, the Bank of England video: Money creation in the modern economy – Quarterly Bulletin]. When banks lend, they create deposit IOUs within that bank. Bank’s customer deposits are their liability, and the loan is their asset created by keystrokes. Deposits are fundamentally an IOU from the bank. Similarly, when a bank makes a loan, they generate an IOU deposit for the lender at that bank. The complementary asset for the bank is the loan. Banks create money for borrowers and profit (the interest) for themselves.

Unlike the banking franchise myth, deposits or reserves do not create or limit loans. The perpetuation of this myth in public debate and political pronouncements does a disservice to the public good.

Deposits/Reserves relevancy

Credit creation is simply about a bank finding a credit-worthy customer with whom it can create a digital deposit as an account with that bank with the expectation of future interest payments. The loan to the borrower becomes a bank asset, with an accompanying liability created by a computer entry, which generates the deposit for the borrower. None of the aforementioned Bank reserves is touched, and neither are deposits. The exchange settlement Account reserves are used only when the borrower spends that deposit in another bank. The reserves held at the Central Bank of the lending bank are transferred to the account of the person being paid in the other bank. This is how all bank transfers work; by using the central bank’s reserve accounts.

Instead of adequately describing this in High School and economics education, the government needs to explain how the monetary system works adequately. The government and a properly educated Board of the Reserve Bank need to address these realities.

Regarding my familiarity with this, I worked at the Reserve Bank between September 2001 and October 2002, where I worked on both the operations and technical security teams at the Reserve Bank. In that capacity, I aided reversing the RITS system’s previous outsourcing of AlphaServers operating OpenVMS, previously managed by AustraClear/SFE. Back then, the money churned between banks via their reserve accounts oscillated between $9 to $16 billion daily. The monitoring of that transfer between private bank accounts is the RITS system at the Reserve bank running on an Alpha-VMS mainframe that monitors all account exchanges between banks, which is the system I helped bring back in-house.

Quantitative Easing

In a financial crisis – such as the Pandemic – excessive needs for Exchange Settlement Reserves become evident. The overused strategy of Central banks globally during the Pandemic has been Quantitative Easing. Despite the talk of “printing money”, that is a red herring. Printing money depends on the demand for cash in the private sector – generally around 3% – and never reaches a point where it even approaches a small portion of the digital money supply. Hard currency demand during the Pandemic reached 17%. Digital money is the normality between the Reserve Bank and the private banking systems.

Quantitative Easing affects the money supply by increasing the banks’ ESA reserves at the Reserve Bank. This is done by the Reserve Bank repurchasing Treasury bonds from the private non-bank sector (i.e. pension funds and asset managers) and the private banks. The purchases from the private banking sector rise in digital money extend the ESA reserves. Many private sales of Government Bonds mean more money is circulating in the private sector that may be used to pay off bank loans, reducing the likelihood of borrowings. Technically, increased reserves, while facilitating extensions of interbank transactions, have no direct impact on any credit creation expansion.
Precisely what area of the economy Quantitative Easing serves is also of concern, as “employment growth” wasn’t one of them. The inequality of protecting financialised assets amongst the wealthy ruling class financial markets rather than the working class who lost jobs in the millions. As Adam Tooze, in his recent publication, “Shutdown”, observes

“For the central bank, that meant holding interest rates down. Once again, it came down to financial markets. As far as anyone could figure out, QE worked by driving government bond prices up and yields down. Lower interest rates helped to encourage borrowing for investment and consumption. Lower yields also prompted asset managers to reallocate funds from Treasury markets, where prices were driven up by central bank buying, to riskier assets, like equity and corporate bonds. This boosted corporate borrowing and the stock market. It increased financial net worth and boosted demand.

The supportive cooperation between central banks and treasuries in the common struggle against the coronavirus was thus, the central bankers adamantly insisted, no more than an incidental side effect of their frantic and clumsy efforts to manage the economy by way of financial markets. Despite the relentless accumulation of government debt on their balance sheets, the central bankers insisted that this had nothing to do with financing public spending. Their priorities were to manage interest rates and ensure financial stability, which in practice meant underwriting the high-risk investment strategies of hedge funds and other similar investment vehicles. Rather remarkably, they insisted that tending to financial markets was a more legitimate social mission than openly acknowledging the highly functional, indeed essential role they played in backstopping the government budget at a time of crisis.” [pg 149]

When Financial markets become more important to the Reserve Bank than the well-being of the vast majority of Australians, then the bank’s philosophy is served and managed by too many businessmen and women with a neoliberal ideology to serve the interests of the few above that of the whole economy. As Curtin espoused, the Reserve bank’s original social mission is to “pursue a policy of low inflation, sustainable output and employment growth”. This mission has evidently fallen, by the way, because of the people chosen to run the Board of the Reserve Bank.

Taxpayer’s money?

Finally, It can be demonstrated simply by viewing the balance sheets (irrespective of the accuracy of dollar amounts) of the entities known as

• the Treasury,
• Reserve Bank,
• the collective private banks and
• the collective non-bank private sector

that the federal deficit of the Treasury is the surplus of the Australian economy’s private (and foreign) sector. Deficits are just the government’s way of provisioning the private sector. If a government wishes to pull the spending of an economy back and throttle the growth of an economy, it pursues a surplus for the Treasury, depriving the private sector of funds. John Howard, for example, achieved that when he throttled back the economy to provide the Treasury with a surplus. Consequently, the private sector, desperate for money, borrowed heavily from the Banks. Private debt expanded considerably under John Howard. [See here: The Howard impact or here: Debt, home repossessions portent for Australia poll]. But of course, Mr Chalmers, you should already know this.

Simplified Australian monetary system

Taxpayers are not on the hook for a government’s treasury deficit as that deficit just boosted taxpayers’ finances. The government’s debt is your problem, not ours, since the Treasury and Reserve Bank issue the dollar (which taxpayers don’t because that is a crime called “counterfeiting” with which you would charge us). The currency-issuing government can pay their debts off any time they choose by issuing the dollars to cover them. Admittedly the wedging by political opponents and the Murdoch media would require of this government political courage, not financial inability.

Knowledge is power

The problem is, if submissions for a public review of the functions of the Reserve Bank are to be effective, it is incumbent on the reviewers to have a realistic appreciation of how the banking system works and the Reserve Bank’s role in our financial system. Holding to the public franchise myth, the NAIRU myth, and the Taxpayer funds myth, as many in the media (and possibly members of the Bank Board), will limit the usefulness of any submissions. Providing faulty recommendations to politicians who frequently use the analogy of a household budget to describe how fiat economies work is a recipe for disaster and subsequent legislative policies that will hamper the workings of the Reserve Bank to aid post-pandemic financial recovery.

So we need governors and heads of departments within the RBA who know and understand inflationary causes, recognise the differences between supply vs demand causation and know that raising interest rates is an over-zealous intervention that cures symptoms by killing the patient.

Thank you for the opportunity to submit this letter for your review.

Yours sincerely,

John Haly.
(Auswakeup Media)

This article was originally published on AUSTRALIA AWAKEN – IGNITE YOUR TORCHES.

[Correction: An earlier version of this article was not “absolutely pedantic accurate” as inflation from 1945 to 1970 was so small compared to what followed, as to be negligible, but as it wasn’t nonexistent, the phrase at the end of the section on Curtin has had the word “substantial” added.]

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By 2353NM

It was probably co-incidental that the Australian Conservative Political Action Conference (CPAC) was held in Sydney around the time the NRL and AFL finals were occurring. CPAC originally advertised the conference would be at Luna Park – until Luna Park claimed they had never had a booking. The Conference was then ‘relocated’, together with claims of discrimination, to a secret venue (which was the International Convention Centre) so that protestors wouldn’t know where to mobilise. The protestors found out and chose to protest rather than watch the football, but that’s another story.

One of the ‘headline acts’ at CPAC was Nigel Farage, of the Brexit movement. He was ‘ably supported’ by some people with a link to the Trump end of the Republican Party as well as the usual suspects comprising of former Prime Minister Tony Abbott, the ‘talking heads’ behind SkyNews‘ night-time opinion shows and some of the more conservative Australian political figureheads.

The Saturday Paper was at CPAC along with Crikey and the mainstream media outlets. Strangely enough, most of the mainstream media didn’t give CPAC a lot of attention. Maybe the football finals were perceived to be more important to most Australians? However, The Saturday Paper did pay attention. They had a long conversation with the former Executive Director of the Institute of Public Affairs (IPA) for 17 years, John Roskam.

Roskam told The Saturday Paper that the IPA was established in 1943 with sponsorship from BHP, Coles and the Herald and Weekly Times (owned at the time by Rupert Murdoch’s father). 20 or 30 years ago, the IPA had sponsorship from a number of the ASX’s top 100 companies. Today it has no ASX100 companies as sponsors and relies on some 8,000 private subscribers. Politically, Roskam admits that the IPA is now closer to the Liberal Democratic Party than the Liberal Party, despite a long list of former IPA staff that have subsequently become Liberal Party members of various state and federal Parliaments.

A contributing factor to the IPA’s political realignment is the belief amongst some conservatives that economic reform by the previous Coalition Government stopped after the disastrous reception to the Abbott/Hockey 2014 budget which would have implemented a

co-payment for Medicare; cuts to legal aid, including for Indigenous Australians and domestic violence victims; targeted family tax benefits and pensions; and a 20 per cent cut to university funding. It raised the pension age, capped redundancy payments, sought to raise prices under the Pharmaceutical Benefits Scheme and broke an election promise of a paid parental leave scheme, among other swingeing cuts. It was wildly unpopular and bits began falling off it almost immediately, either abandoned or defeated in the senate.

Roskam acknowledges that “the IPA is pushing against the mainstream, certainly in the case of economics”. He notes that to the extent it still has political influence, it is more with fringe players on the right.

Current Liberal Party Federal Vice President Teena McQueen was a speaker at CPAC and claimed it was good that all the ‘lefties’ in the Coalition had been voted out of Federal Parliament, presumably because it allows the Parliamentary Liberal Party to drift further to the right. Although shouted down by past and current Federal Parliamentary Liberal Party identities who chose to watch the football rather than attend CPAC, it demonstrates that there are differences of opinion, even within political parties.

It was also probably co-incidental that Crikey’s Guy Rundle wrote an opinion piece the same week suggesting that the current Government is not progressive enough for those on the left. Rundle makes the point that while there is now a somewhat more realistic target for emissions reduction, Australia has re-joined the international community and the October economic statement was going to remove a number of the Abbott/Turnbull/Morrison excesses and perceived rorting, there were still a number of the Coalition’s policies that are seen to be detrimental or regressive to the politically progressive that have been allowed to remain in place unchallenged.

But the uncomfortable fact is that Morrison wasn’t jacking up anti-protest laws, and Labor is. And this raises the hard-to-deny fact that Albanese Labor is getting a substantially free pass on a lot of stuff that is different in intensity, but not in type, from Morrison-era antics.

This is disturbing because Labor is getting away with substantial continuity on a range of issues – mandatory detention, First Nations incarceration, now the environment – with qualitatively less outrage than was applied to the Coalition. That leaves those on the sharp end of these policies in some ways in a worse position than they are under an explicitly hostile government. The smooth, efficient and compliant process that Labor is bedding down can completely obscure some of the horrors going on.

A month or so ago, we published They seem to have a plan where we suggested that the Albanese Government is working through a program and not everything that any individual wants will ever come to fruition. However, that doesn’t mean that there should be no adverse commentary on the government and the program at all.

As has been shown in the discussions that are still occurring around emissions reduction, the government has mandated an emissions reduction target of 43% by 2030 which is significantly higher than the former Coalition Government’s 26 to 28%, others claim that 80% by 2035 is not only possible but responsible. It can also be argued that Australia’s treatment of refugees either travelling to Australia by legal means (including boats) or held in endless detention on Nauru hasn’t changed for the better since May 2022. Generally the workers in service industries, traditionally female, lower paid and part of the the ALP’s historical base, are still undervalued for the work they do.

Regardless of whether you think it’s a good idea that all the Liberal ‘lefties’ were voted out of Parliament or the emissions reduction target should be 80% or higher by 2035, the problem is that there is little room for criticism and commentary when it is commonly suggested that if you’re not 100% in favour of us – you are against us. There is always room to do better. Sometimes the way to bring a fresh idea to the table is to challenge a group that you fundamentally believe is on the right track by adversely commenting on the status quo.

To start a conversation about doing it better, ideas need to be brought to the table and considered rather than dismissed out of hand because it might imply criticism. Guy Rundle and John Roskam remind us criticism is often a valuable lesson in life.

What do you think?

 3,414 total views

By 2353NM

You’re probably aware of some who don’t see the need to reduce emissions. They have a lot of different reasons or excuses for the position, including the current systems have served us well in the past, we’re only a small population so our changes won’t mean much or just a general reluctance to consider the future. These people typically will not like Dr Saul Griffin who is Australian, an adviser to the current US President and a global advocate for net zero emissions using a really simple process – electrify everything.

Dr Griffin claims

The general idea is to replace technologies that still run on combustion with alternatives that run on renewable electricity: swap petrol cars for electric vehicles (EVs) and gas heaters with reverse-cycle air conditioners.

By electrifying everything that can be electrified, Australia could cut its emissions by 80 per cent by 2035, according to credible estimates.

And it wouldn’t need to invent any new technology to do this.

And how does Dr Griffin believe we generate the power for this transformation?

The main reasons Australia has an advantage in electrification is its geography and relatively small population, Dr Griffith said.

“We have the best solar resources, we have the best wind resources, we have a giant landmass so we can produce copious quantities or renewable energy — more than we need for ourselves.

“Our giant houses have very large roofs … we can generate enormous amounts of our residential and even our transportation loads off our own rooftops.”

While the Government’s 43% emissions reduction by 2030 is far better than the former Coalition Government’s 26% to 28%, clearly it’s not that hard to do better.

So now you’re thinking if it’s that easy to get to net zero emissions, we could have done it years ago. The companies that supply the items needed to get to net zero should just get their act together and have the right products available for sale. Sadly, it’s not that easy and that’s where the politics comes in. The ‘right products’ are in high demand.

Volkswagen’s Australian General Manager claimed in 2021 that the company sold 212,000 electric vehicles across the world in 2020.

Volkswagen didn’t ship any EVs to Australia in 2020, despite many Australians asking to buy them, said Michael Bartsch, general manager of Volkswagen Group Australia.

“There isn’t a day go by where we’re not answering a query on when we’ll be able to supply an electric vehicle in Australia,” he said.

So why not meet this demand?

Because his global head office, located in Germany, won’t agree to it, Mr Bartsch said.

“Australia has some of the most lax environmental standards in the world.

“We are a Third World dumping ground in terms of automotive technology.

“We’ll put those cars where we get the biggest commercial advantage, and the biggest commercial advantage of the moment, when you overlay the fines for not achieving the CO2 targets, is Europe.”

Fair enough too. If Volkswagen would be fined, it’s logical to expect that every other vehicle manufacturer that supplied cars to Europe would be in the same position. Volkswagen aren’t the only ones ‘making adjustments’ for our pathetic environmental record over the last decade, Hyundai Australia effectively conducts a raffle for the right to purchase one of their pre-configured new design electric vehicles while you will apparently be waiting for years for Kia’s version of the same car.

The leaders of the former Australian Government at the time were claiming that if sales of emissions intensive utility vehicles fall, the weekend would be ruined, or more disingenuously that there are no electric utility vehicles manufactured anywhere in the world. Why would Volkswagen and others attempt to sell ‘in demand’ electric vehicles in Australia (where the government of the day didn’t give a toss) while being fined for not selling enough electric vehicles in regions that are taking emissions reduction far more seriously?

According to The Guardian

In 2014, the Climate Change Authority recommended Australia adopt standards to reduce emissions intensity of cars. It failed to do so, and became an outlier, with countries representing 80% of the global market opting to impose such standards.

In 2018, the average emissions intensity for new passenger vehicles in Australia was 169.8 grams of carbon dioxide per kilometre, compared to 129.9 in the United States, 120.4 in Europe and 114.6 in Japan.

Clearly this was seen as another attack on ‘the weekend’ by the former government and nothing was ever done about it, except for some ‘promises’ around tightening fuel standards in 2027, which the Abbott/Turnbull/Morrison Government never got around to legislating (unlike the ‘Stage 3’ tax cuts). When the lack of fuel standards and emissions regulations are considered, the statement of Volkswagen’s Michael Bartsch is even more telling. Apart from Russia, Australia is the only country in the OECD that doesn’t have fuel efficiency standards. The Australia Institute released a report in August 2022 that

shows that $5.9 billion in fuel costs would have been saved and emissions equivalent to a year’s worth of domestic flights would have been avoided, if robust fuel efficiency standards were adopted in 2015.

At the same time, Australian Governments are actively subsidising fuel companies. The Conversation reported recently

Australia spends billions each year giving subsidies to the fossil fuel industry, despite our climate change commitments. The Australia Institute estimates that in the 2021-22 budget period, Australian federal and state governments’ total fossil fuel subsidies cost A$11.6 billion. That’s up $1.3 billion on the previous year.

Yet there are claims by the climate change skeptics that financial support to increase the uptake of electric vehicles should not be allowed.

Logically those that are arguing for no change are in a difficult place. The petrol pump was only invented around 100 years ago, some time after motor vehicles were introduced. A lot of people who had forged a career in looking after horses and carts had to re-skill. Prior to the advent of the motor car and suitable roads (which arguably have yet to arrive in parts of Australia), the way to ‘get away’ was to catch a train or walk, not jump into your car and drive for hundreds of miles. To seriously suggest that generations of families have hooked up the caravan or boat behind the oversized Tonka truck and driven for 500 miles without stopping as some politicians and climate change skeptics have attempted to do is ridiculous. It’s even more ridiculous when it suggested that the caravan is hooked up every weekend.

Albanese’s ALP Government is at least doing something to prepare for our inevitable future, unlike the Coalition Governments of the past decade who realistically did nothing except wreck a perfectly good emission trading scheme. Whether the government is acting fast enough is a discussion for another day, however faster is apparently possible. All kicking emissions reduction down the road has really done is ensured we gained a reputation of being seriously out of step with the majority of the world, we are worse off economically and we’ll have to work harder and cut emissions faster to get back on track.

What do you think?

 3,734 total views

By 2353NM

A local real estate agent rings me every couple of months asking if I am willing to sell my house. So far he’s tried the ‘look how much you could get’ strategy, ‘the market is moving, you don’t want to miss out’ strategy and telling me he could help me buy another house if I did sell; to which my response was something like ‘and you get two commissions – how does that help me’. He has now accepted that I’m not one of those people that move every few years to ‘climb the real estate ladder’. Although he persists in still ringing me regularly to check that I haven’t changed my mind.

The real estate agent’s actions are logical – his business is the sale of properties on which he receives a percentage of the purchase price – so he’s eager for the price of houses in my area to go up. Clearly the ‘look how much your house is worth now’ sales pitch works, otherwise the agent would be changing the sales patter to something that did work or be out of business.

While the sale and purchase price numbers may be ridiculously high to those who have lived in the one house for decades, the reality is if I was to take up the real estate agent’s suggestion of selling and buying again, I would be doing so in the same market, so the cost difference is relative to the amount of equity I have in the current house. Unfortunately, this isn’t the case to the person entering the housing market for the first time. Politicians also have used the property feeding frenzy to their benefit, claiming at election after election that they will ensure property prices keep rising, interest rates (a loan is necessary for many property ‘investment strategies’) will stay lower and there will be nothing done to alter the favourable taxation treatment given to rental property owners.

Australia has an unholy obsession with property. Effectively a house is somewhere for people to live. It shouldn’t solely be part of an investment strategy that shows regular growth and numerous tax advantages paid for in a large part by those who are forced to rent the property in an environment where they can’t afford to buy their own home. Our housing prices are some of the most expensive in the world.

That’s not to say there isn’t a need for rental properties; it is also a reasonable expectation for the rental property to be a healthy environment at a reasonable value and maintenance is attended to in a prompt and efficient manner. Sadly, that isn’t always the reality. Obviously, private investors generally will not happily make a loss on a property unless it is to make a ‘tax loss’. Even then, the tax loss has to fit a reasonably narrow definition as dictated by The Australian Taxation Office. Yet there are articles in the media on a regular basis discussing the ill-fortune of those that can’t afford the rent, so they are living in their car, on someone’s couch or have to relocate to find something affordable.

There are demonstrated benefits to having a ‘permanent home’. If someone has a ‘permanent address’, there is a greater chance of any underlying health, mental or social issues being addressed. It makes sense really, if the formerly homeless person doesn’t have to expend physical and mental energy in locating a bed for the night, there is a better chance for them to connect and retain engagement with support services. Employers are also more likely to employ people with a ‘permanent address’. Academic research supports the concept.

The problem is that if you have no or minimal income, it is difficult if not impossible to be able to afford a rental property. Anglicare complete an annual rental Affordability Snapshot across Australia and depressingly

Out of 45,992 listings, we found just eight rentals (0 percent) that were affordable for a single person on the JobSeeker payment. There was one listing (0 percent) in a share house that was affordable for a young person on Youth Allowance anywhere in the country. The most generous income support payment is the Age Pension. Yet for a couple living on the Age Pension, just 1.4 percent of rentals were affordable. Finding an affordable rental is even harder for single aged pensioners, with 0.1 percent of listings left to compete for. Many are rooms in share houses that might not be appropriate for an older person.

Working people are hardly better off. A single person working full-time on the minimum wage will find that 1.6 percent of rentals are affordable. Of all the households featured in this Snapshot, families with two parents each earning a minimum wage stand the best chance of finding an affordable home. Even they will only be able to afford 15.3 percent of the rentals we surveyed.

For better or worse, while the federal government has a seat at the table when interest rates and investment strategies are being discussed, social housing is a primary responsibility for state governments. There seems to be little interest in working across the three levels of government to produce any sort of solution, let alone an acceptable one where there is very few if anyone that doesn’t have a suitable roof over their head tonight or any other night.

This month Queensland is convening a forum to discuss how to build the 10,000 additional social homes that are claimed to be needed in the state. The next problem will be getting the materials for the homes as well as overcoming the negative perception of social housing in areas where there is a demand, but no supply.

It’s all very well to continue to expect that property prices will continue to rise far in excess of personal incomes and it’s nice to know that the decision you made to buy some years ago has paid off. However, for those that don’t have a property, the future is looking increasingly dire.

While housing summits and intentions to build 10,000 homes are worthwhile, the Albanese Government could do more in lifting the rental assistance component of various social security payments to a meaningful level so that people can afford to put a roof over their heads and stay there for a reasonable period. All levels of government do also have the right and ability to ‘encourage’ landlords not to choose to either leave their investment properties vacant or only available for short term rentals through strategic taxation levies and so on. Superannuation funds can choose to invest into social housing providers such as BHC rather than fossil fuel or gambling companies.

After all, if a person has a guarantee of a roof over their head for the foreseeable future, they can put some effort into finding appropriate healthcare, employment and social services so they can contribute on a meaningful level to society. A society that looks after those that are less well-off is a society that looks after everyone.

What do you think?

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