Intergenerational Report 2023: Australian economy built on rent seekers who produce nothing
Intergenerational Report 2023: Australian economy built on rent seekers who produce nothing
The current housing pain might feel like an acute moment, but it is really the culmination of decades of policy in which every factor has pulled in the direction of making housing unaffordable.
I've been thinking about this perspective for a while now, so it's good to see the topic raised in the mainstream media. If you compare a business investment or buying shares in Australian companies with investing in property, there is much greater value to society and positive flow-on effects from business investing.
A business can use the investment to hire staff, produce more goods / services for export, and growing revenues mean more tax revenue for the government.
With investment properties, the owner buys a property by outbidding someone who may have just wanted a home and they then proceed to charge that same group with a rent burden. No additional jobs are created from the investment property and a cost burden is placed on the renter, reducing their disposable income.As a society, we need to start thinking about investment properties in the way that we would think about fossil fuels. We know it is easy and it makes money, but it's bad for future generations and we need to transition to alternatives.
The distinction is land vs capital. Plenty of economists talk about the problem you mention.
Completely agree. That property value grows over time in a fixed area is natural behaviour, as an area develops, density grows and demand increases. But that growth is not necessarily "productive". The only time that value is productive is if it incentivises redevelopment into higher density dwellings to meet the demand in that area. However this has been perverted into property owners who have paid off their property to just sit on the valuable land and reap the capital gains.
Capital gains from land value really needs to be taxed in a special way as you suggest. I would propose two approaches:
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Adding land tax (and abolishing stamp duty on property) that's not based on your property value but on the value of a property you're on (so high density apartments would end up with minimal land tax
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increasing capital gains from land tax by either having a progressive taxation rate on capital gains due to land value (which would ignore increase property value from renovations etc) or capping it entirely (so gains above that are taxed at 100%).
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I find it hilarious when people only do half the equation like u just did and then attempt to justify some kind of rhetorical utopia.
Finish the equation. When anyone buys a house there's a person selling. That person often buys a house or starts a small business. The point is you can't say with a straight face that the money spent doesn't go towards gdp at least and often times it does stimulate new growth and spending.
Why do u think new houses are built? Lol.
People love to trash landlords and sometimes rightfully so, but fuzzy math isn't fixed by confirmation bias...
Do you have any data or research on the profile of sellers? I find that there is not a lot of research out there, so I'm curious to learn how I would explore your claim that most sellers use their proceeds to invest in small business. Selling a property just to buy a property helps the real estate sector and some banks, but I think that calling it a valuable contributor to GDP is a stretch.
What we do know is that people in older age brackets typically own their own home (78%+ for the 65+ age group). However, people in that age bracket also demonstrate a decline in consumption, spending about the same as someone in the 15-24 age bracket. This could be interpreted to show that older sellers are not freely investing the returns from their property sales back into the broader economy. Instead, they are conserving their money to last through retirement.
Not to mention a good (yes, perhaps not even most are good) landlord is supposed to spend money up-keeping, updating and maybe even upgrading residential properties, therefore spending money on goods and services to do just that. There are hard working people who make a living working in industries that come from this market, but providing them some consideration doesn't mesh with the current zeitgeist.
I'm not going to read this because it will just make me grumpy. I see you waleed.
You didn't miss anything. The article could be summed up by its headline. He offers no insights or solutions. Merely asks this question in detail.
Another interesting fact is that coal and natural gas production makes up about a third of all the money coming into the Australian economy, yet it wants to claim being "net zero" by 2050. I say no way José!
Given that mining (all mining) has always made up less than 10% of Australia's GDP, how are you coming up with that 'about a third' figure?
He's talking about exports
https://en.m.wikipedia.org/wiki/List_of_exports_of_Australia
There won't be anyone to sell those resources to well before 2050, so we have no choice but to transition. Thankfully, we have an absurd amount of renewable resources and iron ore and rare earth minerals will still be needed. And we can do a lot of "value added" type work by not just exporting raw materials but at least building part of the final products.
Are you seriously discarding all those underdeveloped and developing countries which will not "hit the target" by 2050? If countries with millions of people they can't even feed properly need coal or gas to simply keep the lights on, there will be a market and governments will look the other way while exporting hydrocarbons. It is what it is. Also, cobalt mining, look it up. Tragic stuff.
Paywall irony
I mean this isn't really surprising when there's a policy structure in place that incentivises rent seeking. It's interesting how all of these people are like shocked when they realise neoliberalism isn't that great. Like what's next, realising that Marx bloke might have made a few good points about capitalism.