State budgets tinkering around the edges of our housing crisis

Governments just aren't very good at building things or managing them. Lacking financial incentives to make a profit, they waste resources.

They also tend to build high or medium rise projects, which are much more expensive than single storey ones. And they use union labour, which is significantly more expensive and less productive than private contractors.

Still, there are ribbons to be cut and media appearances to make, so these projects appeal to politicians much more than private estates that can house more people, more cheaply, in a shorter time, and in a greater variety of dwellings.

High taxes slowing down construction

If house prices are so high, why aren't the private developers out there, with or without government help?

Well, some of them are, but not in the numbers we need when we are importing the equivalent of a Canberra each year.

The reason why they aren't able to cope, apart from the sheer immensity of the task, is the way states have loaded their tax systems onto the housing sector.

They do this via stamp duty, land tax, and infrastructure charges which interact not just with house prices, but with availability as well.

Some states also tax the uplift in value of rezonings, making it unprofitable to develop.

Stamp duty, which is levied on the value of a house when it is sold, makes it harder for people to buy, and less likely to move once they have.

State governments tend to discount stamp duty for first home buyers, then claw the foregone tax back from second and later home buyers and investors. This discourages down-sizing and moving for work.

Land tax has an impact on development and investment.

It's an efficient tax and Adam Smith, the father of modern economics, favoured it more than other taxes. But we only levy it on investors, and at high rates, starting at some threshold, generally around the median house price.