The Kickstart scheme is a tiny drop in the great scheme of government, but it is a great example of confusion and inconsistency in government objectives.
We often wonder whether the left hand of the government knows what the right hand is doing. But it seems the complexity of government is such that it is more a question of whether the seventh tentacle knows what the eighth tentacle is doing.
Last Budget, the ACT Government changed the Kickstart scheme and those changes have come under fire in the past week.
The original scheme gave people wanting to buy an ACT Housing dwelling a $5000 discount.
There was some merit in that. The Government had a poor mix of housing for its social needs. It needed to flog some off. It was a good idea to flog it off to existing tenants at a discount. The tenants did well because they were helped into private ownership. The government did well because it no longer had to house those tenants.
Anyone who has had anything to do with housing knows that tenants are far less likely to look after a place than an owner. Giving someone $5000 to get off the government list and in to ownership is a very small investment for government. Once in ownership, self-interest drives the rest and people fix up their own housing; no more whingeing for the government to come and clear the gutters, change the tap washers and so on.
Then the home-building industry lobbied the government to extend the scheme to purchasers of new dwellings. And the government accepted.
The home-building industry clothes itself in he mantle of doing Good Things in getting Australians into home ownership so they can live the great Australian dream. In fact, there are fewer more selfish, environmentally destructive and socially irresponsible industries than the housing industry. It will happily promote high immigration, the destruction of good agricultural land and wild country and the expansion of cities until they are intolerably congested in the name of short-term profits. It cites job-creation in the building industry as a Good Thing which governments should subsidise. The ACT Government fell for it and thus the Kickstart scheme was applied to new dwellings.
Make no mistake, it had nothing to do with the social good of putting people into their own homes. It was all about kick-starting those making good money out of the building industry.
If it were about getting people into their own homes, why preclude established houses from the scheme? The reason for that, of course, is that people moving into their first home (especially in the inner suburbs) are hard to eject when the medium-density redevelopers are on the move.
I don’t want to bag this government on its own. The seeds of the problem lay with the previous Labor Government which naively thought that the economic salvation of the ACT lay with housing development (and to a lesser extent tourism). At least the present government has had the sense to see the need for more and has promoted hi-tech, an international airport, the fast train and to a lesser extent the education industry.
In the financial years 1992-93 to 1994-95 (essentially Labor years), 6000 houses and 5750 units were built in Canberra, outstripping demand by 30 per cent. Further, the handing over of raw-land development to the private sector by a federal Labor Government resulted in about 10,000 blocks of raw land being on the market at the beginning of 1995. Over-supply causes market prices to collapse, so we cannot blame the Visigoth attitude of the Howard Government to the public sector for all of Canberra’s property-price slump.
None the less, the Carnell Government has done a band-aid job with Kickstart. There are a couple of reasons for that. One is that it either too beholden to people in the housing sector or naively believes that Kickstart will create enough jobs to offset its costs. The other more significant reason is that it is trapped, like all state and territory governments, into a foolishly narrow tax system.
The federal governments hog income tax and through a decade and a half of political expediency have failed to expand into a broad consumption tax. State governments have been prevented by constitutional requirements from imposing consumption taxes on anything but booze, smokes, petrol and gambling. So the states have had to concentrate on those few taxes plus one other: stamp duty. It has meant that those taxes have been far higher than they ought, causing distortions in the markets where they apply.
In the case of stamp duty, significant distortions take place. And ordinary bottom-end $160,000 home attracts more than $4000 in stamp duty. It makes the Kickstart scheme a piece of giant hypocrisy. Governments give with one tentacle and take with the other. More significantly, the stamp duty in general is an impediment for people to move to more suitable housing as they age and children move out.
While stamp duty stays so high, all the government talk about efficient housing, in-fill, more choice, more medium density housing should be dismissed for the humbug that it is. Government cannot at once pretend to be encouraging the exercise of choice and efficiency on one tentacle while on the other tentacle imposing a fine of $4000 on those who exercise it.
Federal governments have been worse, particularly the Hawke Government. It was happy to go through the vote-buying exercise of large increases in immigration as a sop to the ethnic lobby, yet it passed most of the costs (particularly in housing) to the states.
All the states could do was a poor second-best vote-buying exercise with fatuous schemes like Kickstart for first home-buyers.
And while we are on housing, what about the six lonely old people who died alone in their homes in the ACT in the past week? One of the reasons most were alone is damn-fool federal government policies that cut the pension rate for pensioners who live together.
A government tentacle moves one way and another government tentacle moves another. And every now and then it spews forth a lot of black ink to make sure no one knows where the government octopus is going.
And this is just housing. Let’s not talk about health.