I should have added that Saul Eslake is one of the very few commentators who has admitted that immigration could have a downside, in this case contributing to the escalation of house prices and rents. Politically correct editors and politicians would have swept that bit of information under the rug.

Well said Cornflower!

I guess we have strayed from "housing" which the original article was about but it seems that the urban sprall, traffic jams and resource degradation are all a result of housing and population increase. The rorts engendered by the existing immigration policies are an extra burden born by our tax base and social structure.

If we wish to change the system I feel we have to get the economists of the calibre of Mr. Eslake to realize where the social problems lie and then think of their children and grandchildren. When we get people of his standing in the business community to wake up and see what is going on we will get somewhere.

I am seriously impressed with your, shorbe, and others comments about the issue. This does not have to be an "us and them" debate. It has to do with quality of life and choice and who is in the best position to demonstrate what can be achieved. We in Australia are perfectly placed to work out a system that will work in the long term. All we need is the political and social will to make it happen.

Saul Eslake has the ability to put things in clear straightforward non-emotive language. I agree with his explanation of the state of the housing market, but disagree with his final statement;

“...policy needs to focus on increasing the supply of housing”.

Policy needs to focus on stabilizing the overall supply of housing and the overall demand, and certainly not just forever providing more and more houses.

This is where a national population policy comes right into the picture.

I am pleased to see that this debate went straight into the bigger picture issue of population growth. That is most definitely the context in which we should be looking at what is happening in the real estate scene.

I fully agree with concerns expressed by Guy V and support his call for Saul and other economists to concentrate on how we best manage our economy and quality of life while quickly diverting the nation off of the continuous expansion paradigm and onto one based on a stable population and a strong sustainability ethic.

Saul appears to be quite open to this concept. He has responded positively to concerns that I have raised in response to other articles that he has posted on this forum. But it really does needed to be done with urgency.

Haa!

I check in here once in a while. It's good to see you 'sustainable population' crowd finally drove off all the free-thinkers! Now you're left chatting amongst the six or so narrow-minded fools. You probably think the whole world these days is in agreement with you! Nope, they've just walked away from this once constructive and potentially influential forum and left the few of you that remain walking in circles and patting eachother on the back.

"Q: "Why does this problem exist?"
A: "People!"
Q: "What's the solution?"
A: "Fewer people!*"
(c) Mercurius 2006

* 'Furrenners' specifically.

Pat-pat. There you go.
Cheerio, F.

Saul,

Thanks for this rather facile synopsis of events long past.

I must admit I’ve heard most of these opinions elsewhere from other economists, so I’m not sure much is added to our collective wisdom from their repetition. Particularly given the lack of timeliness of the discussion.

Contrast these backward looking pontifications with the foresight of Macquarie Bank economist Rory Robertson who, quite some time ago, predicted the transition to a low inflation / low interest rate environment and its implications for house prices and asset prices generally.

Mr Eslake is actually painfully careful not to make any specific call on housing in his commentary at all and that which appears to be implied in his analysis is sufficiently qualified to maintain room to wriggle out of later.

His position appears to be that: house prices are rising at a “much more subdued pace” (it seems to be implied that they will continue to do so) unless and until “interest rates and/or unemployment start rising by amounts sufficient to force some existing owners to become sellers”. Not a forecast I would bet my house on.

While the policy prescription in the last two paragraphs is clearly original thought, it defies the logic of his earlier arguments. How is providing the financing cost of an interest free loan on the “value of the profits from new land sale” economically different to the “grants or stamp duty concessions” denounced earlier as simply exacerbating the problem by putting “additional cash in the hands of buyers”?

The forgone financing cost of the loan is again simply a subsidy, albeit one that is delivered by a more indirect means and would do little to effect an increase in the supply of housing. Furthermore, no one would be naive enough to think that the price of existing residential dwellings would be “unaffected” were the policy to have its desired (but unlikely) effect of releasing more land for housing.

(continued)

(continued)

All this leads me to wonder whether Saul is being genuine here or demonstrating his venality. Perhaps he was asked by John McFarlane to write an op-ed piece on housing and was told to propose the described policy position. I’ve been around long enough to know how these things are done and it does look rather tacked on at the end.

Such a scenario appears even more reasonable when one realises that Eslake doesn’t dare to question the key factor that he himself acknowledges is driving housing demand, namely, “rising immigration”. Population growth underpins housing demand which inflates house prices which supports ANZ’s balance sheet.

The ANZ bank gains nothing and loses a great deal by advocating a reversal in current immigration policy, despite this being an obvious choice in terms of policy levers. On the other hand, a cleverly disguised subsidy that adds to housing demand and boosts prices is much more likely to suit ANZ senior executives, albeit to the profound detriment of most Australians. I wonder what Saul might say in his private capacity over a few drinks on a Friday? Probably nothing if he wants to keep his job come Monday morning.

Good luck trying to get anything sensible out of Saul Eslake, he is a paid man.

I think we are right to ask ourselves whether our current immigration policy and the modest increment to GDP growth it contributes every year, which is zero to negative on a per capita GDP basis, is worth a generation of young Australians being unable to afford to own their own homes. Not to mention the myriad negative impacts on quality of life indicators not recorded in GDP: congestion, environmental degradation, finite resource depletion and increasing social unrest, to name but a few.

If young Australian families can barely afford a home, how will they afford to raise children? Choking off the existence of the next generation of Australians to shore up the profits of the banking sector and property developers hardly seems enlightened policy. We can’t all earn half a million dollars a year like Saul Eslake.