Ross Stevenson and Mark Allen interviewed the Commonwealth Bank of Australia’s Chief Economist, Stephen Halmarick, about housing unaffordability on Radio 3AW this morning.

I suppose it’s the immutable law of supply and demand?” queried Stevenson.

Of course!” (or words to that effect), replied Halmarick.

And Victoria’s land tax makes housing more unaffordable and deters builders?”, volunteered Stevenson, (Mark Allen agreeing).

Yes” fulsomely replies the CBA economist.

Now right there’s the big furphy, guys: You got that completely arse-backwards! To the extent that land tax captures part of a site’s rent, so must its capitalised land price diminish; not increase. Cheaper access to land aids developers, and the average land component of residential sales is currently 87% according to ABS data! So we need higher land taxes, not lower. Maybe an all-in land tax, as suggested by the ‘Henry Tax Review’? (“Australia’s Future Tax System“)

I agree with your conclusion, however, boyos: The “bank of mum and dad and grandma and grandpa” is most certainly being called in to help our children to buy a home! 

….. And that’s going to be more than problematical, come the 2027 property crash!


When do we realise that RBA cash rate increases assist to crash the economy, not to deter cost-push inflation?

It seems counter-intuitive, but an 18% mortgage rate certainly didn’t deter borrowers–nor escalating land prices–towards the 1989 real estate peak (before the 1991/92 recession); nor a still quite heavy 8% in 2007 (before the GFC).

Meanwhile at the RBA: “We’re meeting today, folks, to decide whether tweaking our cash rate will do anything productive, other than satisfying, or not satisfying, mainstream economists & financial journalists.”

Future generations will look upon this period of financial entrapment with wonder. Here we are in the 21st century still believing that we’re at economics’ leading edge.

Unfortunately, the Henry Tax Review’s recommendation for an all-in land tax molders on a shelf somewhere or other.