Housing Stimulus Must Hit Home
Housing stimulus must be timely and actionable to succeed. Labor’s plan is neither. By Tim James.
There’s no denying that housing stimulus is vital right now. That is common ground across the political divide and everyone can see our economy needs it.
The divide arises as to how best to bring it about. That is what presents an illuminating contrast of policies and programs at present.
“The question we should ask ourselves is where do you get the biggest bang for your buck. For every dollar you spend building a house you create three dollars flushed around the economy.”
So said Labor Shadow Minister Jason Clare. He later added: “In terms of bang for your buck, you can’t beat investing in housing.”
Any student or practitioner of economics can speak to the important lessons of multiplier effects in spending, and housing does rate highly on this score.
However, to state the obvious, housing stimulus must be timely and actionable to be successful. Dollars must actually be spent. Work must actually be done. Tradies must actually be engaged and paid. And, in Labor’s own words, it should actually deliver maximum “bang for buck”.
This is where the Labor approach falls down on many levels. Whereas the Government’s initiatives are working. Let’s take a closer look.
As last week’s Watercooler outlined, Labor’s $500m Budget in Reply social housing commitment fails on a number of counts.
For starters, social housing is a state government responsibility and Federal Labor has said nothing more about how the commitment is cut across Australia. Aside from seeking to shift responsibility to the Federal Government, good luck getting agreement from the states on how it’s to be allocated and what money state governments would contribute right now. So far none have come out excitedly in response to Labor’s plan.
Secondly, do the maths and it’s easily apparent that Labor’s “plan” amounts to only $5,000 per residence. A lot of tradies won’t come to the party at that level and it’s far from shovel ready. Did Labor even consult with tradespeople on this policy before announcing it? 100,000 small jobs, too small for many tradies, could also easily turn into pink batts 2.0. At the same time, what about timing given the need for tenders, state procurement processes, approvals and the like in Labor’s plan? It’s inconceivable that tradies could be on site in “a couple of days” as Anthony Albanese said, maybe second half of next year at best.
Thirdly, Labor’s plan won’t stimulate the economy. This is so both in timing, as outlined, and in quantum. Under Labor, $5,000 worth of renovations is said to generate $5,000 of work for tradies, hardly a big boost. It could also see large numbers of flat pack IKEA kitchens being installed across the country which simply isn’t smart.
In all, this quickly becomes something of a classic case study in party philosophy and clear policy contrast. Labor thinks that housing stimulus happens through a big government program of big government spending in a manner that government will decide. As in it knows better than the market and the people within it.
The Coalition, on the other hand, is backing and incentivising individuals to make their own decisions in relation to their own properties. That is how to build confidence and business in the housing market. HomeBuilder has been designed to be labour intensive and to engage multiple trades onsite – not just small jobs. At the same time, and despite state responsibility, the Federal Government has partnered with governments and strongly supported social housing in recent years.
The Coalition’s current stimulus plans, namely the HomeBuilder program and extending the First Home Buyers Grant, are working well. HIA new home sales data in the three months to August 2020 show new home sales have risen 61.3 per cent compared to the previous quarter. August 2020 ABS building approvals data shows private sector house approvals are at their highest level since February 2019 with over 9,000 approvals recorded.
Labor’s plan takes taxpayer dollars and pays tradies, that is, a $5,000 job generates $5,000 in work for tradies. Whereas with HomeBuilder, one $25,000 grant unlocks at a minimum $150,000 in work for tradies (being the minimum threshold for a major rebuild) and even more for a new build. Across the economy, industry says HomeBuilder could generate between $10 billion - $15 billion in construction activity, namely 20 to 30 times Labor’s plan. Now that’s bang for buck.
Labor Leader Anthony Albanese this week tweeted that his plan “means jobs” and “is just what we need right now” but “the Morrison Government doesn't seem to care”. Wrong, wrong and wrong. If he and Labor cared then their policy would actually deliver, but it can’t and it won’t. Labor never seem to learn.