Is industrial strife a sign of housing stress?

Consider the cost of the $450,000 modest home they've bought. Within that price is roughly a $50,000 up-front 'developer levy' (better called a new home buyer tax). There's probably close to the same in inflated land costs, brought on by artificial land supply constraints in a country of unbelievably abundant land. There'd also be a raft of minor additional building costs introduced under the guise of 'green' or 'sustainable' building guidelines, in order to prevent the sky from falling. (Sorry, I meant to say 'to prevent the sea from rising'. I always get those two confused for some reason). Plus there's a hard-to-quantify compliance cost because getting the approval to develop the land for homes for the likes of our young couple now takes 10 years instead of a few months, and involves teams of town planners, lawyers, and other hangers on. Plus of course, there's a 10% GST – the money from which was supposed to have allowed State Governments to abolish stamp duty, which they didn't. If our hypothetical couple above weren't first home buyers, they'd be up for stamp duty also.

The total cost of all this that's been added to the price paid by our young couple could easily be well over $100,000. If you don't believe me, check out this old report, prepared back when I used to get paid to do this sort of thing.

A quick bit of math's now follows. That extra $100,000 (conservatively) has been funded via our young couple's mortgage. That's an extra hundred large they've borrowed, to cover the costs of additional taxes, fees and compliance – introduced under the watch of a State Labor Government. That $100,000 is worth an extra $720 a month on their repayments, or an extra $8,640 per annum out of their pockets. If their repayments fell by that amount, their mortgage costs would be around $26,000 per annum in total, or just under 30% of their combined household income – not 40% of it.

There you have it. At 30% of household income, not only the home becomes more affordable, but so do children. But at 40%, it's proving to be touch and go.

The point of all this is that there are two ways, simply put, to improve the cost of living equation faced by younger workers on largely fixed incomes. You can increase their wages (which the unions want and which businesses – and governments – resist). Or you can reduce their costs of living.

This is about as simple as economics can get but is has somehow eluded people working in State Treasuries and Planning Departments. I haven't even commented in this on the impact of rising motor vehicle registration costs and the cost of fuel (our young couple in this example both have jobs which are dependent on the private car and hence the cost of running them – both of them). I haven't touched on the impact of rising utility costs – especially electricity – on their household budget. And I dare not mention the insanity of the carbon tax, which is only going to exacerbate things (our young couple have a combined gross income of $108,000 and for housing and children to be more affordable it would need to be closer to $150,000 – the very point at which, our Prime Minister has declared, people are 'too rich' to warrant compensation for the carbon tax. Go figure!).

The simple economics of what we're talking about was summed up beautifully over 160 years ago, in Charles Dickens' novel David Copperfield, when Mr Micawber lectured the young Copperfield on the perils of exceeding budgets:

"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery."

Mr Micawber, you'll note, wasn't implying the need for more income... he was highlighting the important role played by expenses.

In the Australia (and Queensland) of 2011, the same still applies. Rather than push for more income, unions could do better to lobby their Labor Parties to reduce living costs. Reduce the housing infrastructure levies, relax the rigidity and ideology of urban growth boundaries, reduce compliance costs, cut green taxes and simply the provision of our single greatest cost – housing. When done with that, take on the militant green agenda and lobby for reduced retail energy costs and car registration fees, and don't let congestion charging even get a look in.

Fighting pitched industrial battles with employers for a few extra dollars a week in income seems futile compared to the lack of battles ever fought with governments over the introduction of tens and even hundreds of thousands of dollars in extra taxes and costs associated with the provision of one of life's essentials – a family home you can afford, the children you want to raise in it, the energy to power it, and the vehicles to get you to and from it.