At 11:55 AM on 9 November 2001, Senator Marise Payne replied to an email I sent her inquiring about where she stood on bailouts and low interest rates fostering land speculation. (I thanked her for her reply.) It’s pretty clear that all Australian politicians agree with her anti-land tax stance. Land tax isn’t popular.

That’s very much to be regretted, because it explains why Australia has built up an enormous bubble in land prices since 1996. Accordingly, whilst bank profits have burgeoned and land values have increased on average at 11% pa since 1996, these are extractive unearned profits, coming at an enormous cost to wages and earned profits.

And, by definition, bubbles do eventually burst …..

Dear Mr Kavanagh,

Thank you for your email of 23rd September 2001. I apologise for the lateness of this reply.

In your email you state “…bailouts just do not work. Not only are they pernicious, but it is morally wrong that business privatises its profits but seeks to socialise its losses”. I could not agree more with this statement.

Recent calls for the Federal Government to intervene in the Ansett fiasco are indeed very misplaced. Governments cannot be held responsible for every firm that goes out of business. Recently Ross Cameron MP, Member for Parramatta made the comment that small businessmen in his electorate would never be bailed out if their businesses went bust.

With regards to your other comments on the possibility of Land Tax being used by the Federal Government as a way of depressing the housing market at times when interest rates are reduced, I am very much of the opinion that this could have many deleterious effects on the economy. I have never agreed with Land Tax in any case, as it is in essence a punishment for owning property. The reason why I believe that it is wise for us to pursue lower interest rates, is that while the price of land may fluctuate according to land price speculation, the only way that we can actually directly assist home buyers is through seeking to reduce the amount they have to pay to the bank in mortgage repayments.

I hope that this letter has given you a clear understanding of where I stand on these issues.