Housing industry ploy

To finish off we note from p74:

a $500 million reduction in most state, property specific taxes such as stamp duties, land tax and rates on dwellings, and replacement with a $500 million GST on food would increase national welfare (national consumption) by over $350 million due to reductions in distortions across the economy, but it would also increase the supply of housing considerably more, by over $400 million...

We ask:

• Whose consumption would increase by $350 million? The poor who face less discretionary income due to higher regressive GST charges or investors benefiting from lightly taxed capital gains enjoyed by the tax trickery of Self Managed Super Funds (where property investment is exempt from capital gains tax)?
• Small business who would no doubt face even higher rents when holding charges are removed?
• Why would there be less distortions in the economy? Simple and easy to administer taxes in the property sector would be shifted onto the retail sector where the administrative burden would increase.
• We are asked to accept that this will increase the supply of housing by $400 million. This implies that the retail sector should be slugged with this burden so we can build a whopping extra 800 homes (valued at $500,000 each).

Without some form of holding cost, there would be little encouragement for developers and speculators to put housing on the market to meet the prevailing market conditions. Those in control of our crucial housing supply have the upper hand. They can simply hold the market to ransom.

Should an anonymous think tank be widely quoted that it is more efficient to allow one sector of the economy to enforce higher rents in the retail, commercial and household sectors as if this is solid economic theory? The property industry can act in this manner because they have an un-natural advantage over the productive economy. Their responsibility to shareholders demands that they engage in drip-feeding the market to maintain high prices, a practice that is ignored by the CIE report.

Lastly, the importance of Land Taxes is paramount when considering the consolidation of the Australian housing industry. Holding charges are vital to counter-balance the market power of the property industry.