Cost of living crisis revisited

Public Private Partnerhips are costing Australian tax payers and consumers billions: the consequence of inefficient private financing and bad judgment, and arguably exercises in favouritism the legitimacy of which must be called into doubt.

The cost to tax-payers and consumers for wasteful private infrastructure is palpable: and has a heavy impact on Australia’s cost-of-living crisis.

Public provision of essential infrastructure, however, in the form of natural public monopoly, can provide a cost-effective framework around which the broader economy can thrive.

Further aspects of the cost-of-living crisis: housing, wages, welfare …

For years the Howard conservative government neglected the crisis in housing affordability. If anything, policies such as the “First Home-Buyers Grant” exacerbated the crisis as the program attracted regular abuse.

Research shows that at least 300,000 Australian families are facing “severe” levels of mortgage stress, and “face a significant chance of defaulting on their home loan”. Such was the influence of the housing bubble that, even with unremarkable rates of interest, “over the past 10 years” houses became “nearly twice as expensive relative to income”.

Further studies have shown that about half the typical family’s after tax income was “swallowed up” in mortgage payments. Meanwhile in the rental market vacancy rates have hovered at around just 1 to 2 per cent.

What is worse, some families slip through the cracks, often struggling on exploitation wages, or with mental illness and/or trying to survive on welfare. For these the trauma of homelessness is a brutal reality.

There is an obvious, desperate need for expanded outreach services and public housing. But in Melbourne alone, public housing has declined to less than 4 per cent of housing stock.

With the impending global downturn, though, impetus is building for a correction in the Australian housing market. Some suggest price drops of up to 20 per cent, while others believe devaluation of about 10 per cent across Australia over the next year. Such a correction could be catastrophic for those who took out exorbitant loans without much or anything in the way of a deposit.

Australian Property Monitors (APM) General Manager, Michael McNamara recently commented that such people: “may find themselves in a situation very soon where they're sitting on negative equity”. Despite this very real crisis confronted by investors, however, there still remains a need to expand housing supply, boost vacancy rates, and provide affordable housing for those most in need.

Immediate public investment in quality public housing - perhaps in the vicinity of $8 billion over the current term of the Rudd Labor Government - could address the homelessness crisis, and provide a structural basis for a long term correction in the housing market - including rental.

Final concerns: wages, welfare and the cost of living

Australian Bureau of Statistics (ABS) figures, drawn over the 12 months to July 2008, show that: “petrol prices increased by 8.7 per cent in the three months to June.” The price of milk rose by 12.1 per cent, cheese (up 14.2 per cent), bread (up 6.8 per cent) and poultry (up 11 per cent)”.