The most recent issue of Family Matters paints a bleak picture for home ownership in Australia.
Ian Winters, a senior research fellow at the Australian Institute of Family Studies, bemoans what he sees as an end to explicit social policy support for home ownership. Attached to the article was a graph of home-ownership figures over the past 40 years. The graph and a report about Winters’ comments were published earlier in the week and the graph is reproduced here.
Winters acknowledged many factors in the rate of home ownership. Nonetheless he emphasised the social policy and policy aims of government as critical.
I am very sceptical, however, that government policy has much influence at all. Indeed, it is often the case the government policy more often than not has completely the reverse of the intended effect.
A good example has been the Howard Government’s attempt to increase the rate of private health insurance. They have literally chucked billions of dollars at it and achieved virtually nothing. The incentives, tax rebates and now the sliding aged scale have had little or no effect. This month there was a slight turn around of 57,000 extra people in health care. At $1000 a head, that would cost $57 million. But the Government is chucking $1.7 billion a year at the problem. Much easier to pluck 1.7 million names out of the phone book and give them health insurance. Then at least you would have 1.7 million extra people in health insurance, compared to the pitiful 57,000 the Government has managed to attract with all its hoopla.
It seems the same is true in housing.
As a general principle Labor Governments are more keen on housing as a social policy that conservative governments. Labor is more committed to public housing and home ownership as a stated aim of government policy and programs.
But what is the result. The table illustrates the point. Coalition Governments moved home-ownership up from 63.3 in 1954 to 71.4 in 1966. There seems to be a bit of a fall in the Whitlam period. A rise after the conservatives under Fraser took office and then a steady decline under the Hawke-Keating Labor Governments, from 70 per cent to 66.4 per cent. The correlation is fairly constant. Conservative Government with no social aim of home-ownership results in higher home-ownership than Labor Governments with that state social aim.
I cannot find later figures than 1996. The figures in the table are all census years, so we may have to wait until 2001 to get the recent picture.
I suspect, however, that if a government sets out with a social aim of increasing home ownership, it will not happen. Or the position will get worse. Just as this stupid Government cannot see the folly of its health insurance policy.
Winters need not worry about government’s social policy. Indeed, he should be grateful that the present government does not have such a policy. And the social policy of past Labor Governments has not delivered.
No; the real determinants of home-ownership seem more likely to be interest rates and growth in real wages (that is, productivity). The graph shows a correlation between falling home-ownership and the banana republic and the misuse of high interest rates as the main weapon of monetary policy – the home-ownership crash we had to have.
Home ownership is a desirable end for many. It can be an escape from inevitable poverty in old age. It can give security and a sense of community. The only question is how to get it. It seems sound economic policy is more important than some woolly social policy.
And here we are in 1999 with a Government just getting its head above water with a surplus. Interest rates and inflation are low so home ownership is within easier grasp. But as soon as the Government projects a surplus to pay back the debt that threatens interest rates and home ownership, what happens? Everyone starts screaming for it to be spent. They are like kids in the back of a station wagon demanding ice-creams.
The demands are for the surplus to be spent on new social programs, like housing. But they forget that in fact the surplus has already been spent, long ago in running up debt. And it was spent on social programs anyway. Often ones that did not work.
The temptation is for governments to be seen to be doing something. The temptation is to start programs and spend money on misguided social policy. This way they can get direct credit from the direct recipients of government money. Alas, running good economic policy, however, results in only indirect credit, if any, for the spin-offs. But the spin-offs might be more socially useful than meddling with direct programs.