January 01, 2017 1 Comment
There seems to be a level of broad-based bipartisan concern about property prices in the capital cities of our nation, at present. Comments from Minister Stokes and Premier Baird have captured media attention, trailing a popular article which suggested that avocado breakfasts might be part of the problem.[i] Some commentators focus attention on foreign investment, some on housing supply, some on the trough in interest rates, some on taxation; most agree that we have an issue worthy of serious discussion.
Sydney ranked as the 2nd least affordable city in the world in 2016.[ii] Melbourne ranked 4th. Almost all of the great megacities of the world seem to house their populations with less financial cost. Germany has seen real house prices decline by 10% in the 30 years to 2012, on the back of a very intentional set of policies.[iii]
As I think about the issue of unaffordability, my mind goes to Philippians 2. In the prologue to one of the great christological passages, Paul writes ‘Let each of you look not only to his own interests, but also to the interests of others.’ The model for Christian disciples, in the context of which we are to ‘work out [our] own salvation with fear and trembling’, is this narrative of sacrificial giving of ourselves, and sacrificial embrace of the interests of those in need.
Similarly, the American philosopher John Rawls suggested that we lay aside the particularities of our interests when considering the morality of political issues. We should look at politics as if from behind a ‘veil of ignorance’ and not prejudice our analysis by inserting our own personal interests.
And so, with such division in the national media, it strikes me as noteworthy that economists, attempting to operate objectively and impartially, are surprisingly unanimous in some of their views. The McKell Institute, for example, surveyed 51 of Australia’s leading economists.[iv] They provided a selection of statements, including the following:
The Financial Systems Inquiry was correct in stating that the combination of negative gearing and the 50% capital gains tax discount are major tax distortions that lead to an inefficient allocation of resources in the economy.
I note the strong adjective ‘major’ in the statement, expecting that it might dilute the number of economists who would agree, and yet 32 economists Strongly Agree while 14 merely Agree. Only one chose Disagree and one Strongly Disagree.
America’s National Public Radio recently rebroadcast an interesting conversation between five economic experts of widely differing ideological persuasions, from the left to the far-right. They went looking for, in their words, ‘no-brainer’ economic policy proposals—things that even those who habitually disagree, find agreeable. The complete removal of the tax deductibility of interest won consensus from all pundits.[v]
In Australia, the Reserve Bank tries mightily to avoid anything that might be construed as political action. They too, however, have left a trail of bread crumbs suggesting that they are far from happy with the current system, particularly for financial stability reasons.[vi]
With wealth inequality rising around the world, it seems to me that we have policy conditions that are already serving to financially segregate future generations. We are witnessing a growing distinction between a property-owning class, and a class that is missing out; not on the basis of the free market, but on the basis of intentional policy. Contra James 2, we seem to me to be showing partiality to some, at the expense of less financially fortunate peers. Behind the veil of ignorance (a veil I am very familiar with!) I struggle to see Australian house price policy as anything close to fair and moral.
Stephen Driscoll studied Finance & Economics, and taught as a Head Tutor in the Finance faculty at the University of Sydney before working briefly for an investment bank. After leaving banking he moved to Unichurch at the University of NSW where he currently works as a ministry trainee.
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January 02, 2017
January 02, 2017