Hockey’s comments on housing affordability last week managed to offend everyone… but was he wrong?
Joe Hockey is an idiot. That seems to be the general consensus.
Last week was another nail in Hockey’s political coffin. He went off script. He told us what he really thinks. He pointed out the bleeding obvious.
What on earth was he thinking?
And now Hockey is the scapegoat for every young Australian who can’t get in to the house they want.
What happened to Hockey shows us exactly why politicians don’t speak their minds anymore. You can’t say what you really think, and you can’t point out the obvious. The game is all about style over substance.
Try to say as little as possible, with as much style as possible.
And in this sense I think Hockey is an idiot. I think he should of known how the media and the public would receive free-range thoughts on housing affordability from him.
Hockey is a divisive character. He should know that. If people had their doubts, images of him smocking cigars the night before budget, or saying that poor people don’t drive that much, cemented his image as one of the ‘elites’.
I don’t know how much substance there is to that perception, but he should know that that’s the perception he’s working with.
And in that sense, a hot-button topic like housing affordability is a massive danger zone for the Treasurer. It is the last place he wants to go ‘off-script’.
When asked about housing affordability, he should have made some comforting noises, nodded his head in concern, reaffirmed his government’s commitment to the Australian dream, and flagged some intention to have another enquiry at the appropriate time.
Which is what every Treasurer, Housing and Finance Minister for the past 20 years has done.
But no. Hockey had to tell us what he really thought. You bet he won’t be doing that again.
And what does he really think? What vile opinions lie in his dark and loathsome heart?
These were the take-homes…
If housing was unaffordable in Sydney nobody would be buying it…
The starting point for first home buyers is to get a good job that pays good money
I workout on a punching bag filled with live kittens.
Ok, so in the context of a hot-button topic like housing affordability, these comments could have been delivered with more sensitivity. Sure. But are they wrong?
What’s he saying with the first one? I think the point he was trying to make, in his own ham-fisted kind of way, is that what we’ve got in Sydney is prices determined by a market system.
The price is set by what people are willing to pay. The government doesn’t set the price of housing. The market does. So if you’ve got a problem with the outcomes, then you’ve got a problem with the market.
And I think Hockey’s right to remind people of that. People seem to forget it. People seem to want the government to step in and just say, from now on, all houses will cost $200,000.
Maybe the government could do that, but we’re now talking about a radically different economic model – a model that just hasn’t worked anywhere else.
Because if you set the price too low, then you just create black-market outcomes. I’ll sell you my water-front home for $200K, if you make a $1.4m donation to my mum’s charity.
So prices are not unaffordable in a purely economic sense. From the market’s perspective, prices are exactly right. Not too high, not too low. Just right.
(Of course people only see markets through their own eyes. If I can’t afford it, then the market is unaffordable. No lectures in first year economics are going to shift that perspective.)
But Hockey is responding for calls for the government to “do something”. But Hockey’s saying, if we rule out setting price ceilings and messing with the market, what do you want us to do?
The only option that’s really available to governments is to increase supply. More supply takes some of the competitive pressure out of the market. But as Hockey points out, that’s (mostly) a state issue.
“As I’ve said on numerous occasions, we have to increase the supply of housing in Australia…
I raised it with the state treasurers who have primary responsibility for housing stock in Australia…
And that’s why I said repeatedly yesterday, the response has to be to build, build, build. Because we have a supply problem.
There’s no shortage of demand, there is a supply problem in Australia, and particularly in Sydney and Melbourne, to a lesser degree in Brisbane over time.
I steal children’s lunch money and invest it in stock options.”
And that’s mostly right. Mostly in the sense that the Federal government could do something to help the States with their business if they really wanted to. They could set money aside to help with infrastructure costs that make fresh land more readily available.
If they really wanted to do something they could. They can’t completely pass the buck.
But people are looking for a quick fix. And to those people he’s saying, there is no quick fix. The market is doing its thing and we’re not about to mess with it.
The second point he made which drew howls of outrage from do-gooding pen-pusher in the country, was:
“The starting point for first home buyers is to get a good job that pays good money”.
But in what world is that not true?
If you don’t have a job, it’s hard to get a mortgage. And I don’t know if you remember the 80s, but even if you had one of those ‘jobs for life’ you still had to beg your bank manager for a mortgage.
It’s a lot easier now.
And the point he was making is that interest rates are at record lows. So if you’ve got a job you can take advantage of ultra low interest rates. Those rates are available to everybody.
To me, it’s the bleeding obvious. Hockey’s right. But he’s still an idiot to go wading into a hot-button topic with a media looking for any excuse to jump all over our ‘fat-cat’ Treasurer.
These are the times we live in.
Is Hockey right? Is he an idiot?
What should the government do about affordability?