Category: Podcast episode

This episode of Economics Explored features a deep dive into the ongoing housing crisis in Australia with John August, a Pirate Party of Australia official and Sydney radio host. Gene and John discuss the significant influence of immigration rates and building restrictions on housing availability and prices. They also consider potential policy solutions to ensure more equitable housing access, including developing a charter city named Turing. 

Please contact us with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored. 

You can listen to the episode via the embedded player below or via podcasting apps including Google Podcasts, Apple Podcast and Spotify.

About this episode’s guest: John August

John August is the Treasurer of the Pirate Party Australia. John does computer support work in retail and shareholder communication. He is passionate about justice and ethics in our world, particularly as it plays out in law generally and intellectual property in particular. He has stood on behalf of the Pirate Party in the Federal seat of Bennelong and also as a Councillor for Ryde City Council.

Along with technology and law John is also interested in spoken word and poetry. He broadcasts on community radio and hosts the program “Roving Spotlight” on Tuesdays from noon-2pm on Radio Skid Row Marrickville Sydney, and writes about his ideas on the website www.johnaugust.com.au. You can keep up to date with what John is up to via his Facebook page: https://www.facebook.com/profile.php?id=100063805005395

What’s covered in EP236

• Introduction. (0:00)
• Housing crisis in Australia, with focus on supply and demand issues, affordability, and government policies. (2:44)
• Population growth, immigration, infrastructure, and housing affordability in Australia. (8:04)
• Housing affordability and land value taxation. (13:40)
• A Georgist approach to taxing land. (22:05)
• Immigration and foreign aid in Australia. (31:24)
• Reducing immigration and addressing housing challenges in Australia. (37:46)
• Immigration policy, infrastructure, and zoning regulations in Australia. (41:45)
• Potential for charter cities (e.g. Turing) and high-speed rail links. (47:34)
• Foreign aid, shipping, and taxation. (53:35)

Takeaways

1. The housing crisis in Australia is exacerbated by high immigration levels and stringent building restrictions, which together affect affordability.
2. Policy debates are intensifying around whether to restrict immigration to ease housing demand or to relax zoning restrictions on development to boost supply.
3. The concept of “upzoning,” similar to Auckland’s approach, could be a viable solution to create more housing in existing urban areas.
4. Proponents of high immigration levels often overlook the infrastructural and social costs associated with a rapidly increasing population through high immigration rates.
5. The discussion around housing is not just about economic metrics but also about the quality of life and housing accessibility for all population segments.

Links relevant to the conversation

• Leith Van Onselen on immigration and housing: https://www.macrobusiness.com.au/2024/04/albo-lies-his-way-out-of-rental-crisis/
• Previous episode with Natalie Rayment: https://queenslandeconomywatch.com/2021/04/16/missing-middle-housing-podcast-chat-with-natalie-rayment-of-wolter-consulting/ 
• John’s conversation with Cameron Murray on housing: https://www.mixcloud.com/Johnorg/roving-spotlight-28-november-reviewing-a-pirate-look-at-the-housing-market-with-cameron-murray/
• Freightened documentary about the cost of shipping: https://thoughtmaybe.com/freightened/

Lumo Coffee promotion

Lumo Coffee Discount: Visit Lumo Coffee (lumocoffee.com) and use code EXPLORED20 for a 20% discount until April 30, 2024.

Transcript: Housing Crisis and Immigration: Australia’s Tough Choices w/ John August – EP236

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

John August  00:04

I try to be careful with my language I try to be descriptive but not provocative or sensationalist. You know. It’s a hard thing to be disciplined and do that because I know how tempting it is to just say something outrageous and think, oh, this will attract some attention.

Gene Tunny  00:28

Welcome to the economics explored podcast, a frank and fearless exploration of important economic issues. I’m your host gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, and welcome to the show. In this episode, I catch up with John August, a Sydney radio host and Pirate Party of Australia official. We dive into the topic of Australia’s housing crisis and we explore the impacts of immigration and building restrictions on the situation. I’d love to hear your thoughts on our discussion today. Do you think we need to restrict our immigration levels to improve housing affordability? What about the situation in your own country? If you’re outside of Australia, let me know. And how about up zoning to have more development in low density residential areas similar to what they’ve done in Auckland in New Zealand. And what do you think about the cheering chatter city idea? Let me know. My contact details are in the show notes. Also, please don’t hesitate to reach out with any ideas or suggestions you may have on how we can improve the show. our episode today is sponsored by Lumo coffee, or seriously healthy organic coffee with three times a healthy antioxidants of regular coffee. WeMo coffee is offering a 20% discount on economics explore listeners until APR 3020 24. Be sure to check out the show notes for more details. Without further ado, let’s dive into the episode. John Auguste Welcome back on the programme.

John August  02:10

Yes, thanks, Jane. It’s good to be back. I got a lot of interesting things on your podcast. And I guess it’s lovely to be back. And I hope you’re interviewing lots of other people the second time or third time as well, I suppose that’s

Gene Tunny  02:21

yes, yes. You’re my, this is your fifth time on the show. I think I had Dan Mitchell on the last week. And I mean, Dan must be up to about four or five. So yes, yes. But it is good to have you back on the show. We keep in touch and you’re always providing good feedback. And you’ve got, you know, really informed and interesting positions on different issues. So I always enjoy chatting with you. And one of the things I wanted to talk to you about today is this issue of this housing crisis that we are having here in Australia where we’ve got rental vacancy rates of around 1%. Whereas normally they’re about two to 3%. We’ve got we’ve got people, you know more people homeless, who are people living in tents up on Wickham terrace near where I live in Brisbane. It’s it’s absolutely diabolical. And there’s a big debate about immigration, to what extent is immigration causing and to what extent is it being caused by building restrictions? So there’s a there’s a big policy debate going on at the moment. So to start with, John, I wanted to get a sense from you. How are you? We’re seeing this current housing crisis. Do you see it as a as a crisis? And what are your thoughts on what’s driving it? Okay,

John August  03:45

well, goodness me, I think the word crisis is so much abused. I don’t think we’ve not had a housing crisis for the last, you know, one or two decades, but it’s fair to say things are getting worse. And look, I’m sympathetic to the people whose position is suddenly so dire. But you know, I’m reminded of the old statement that a recession is when someone else loses their job, and depression is when you lose your job. And like, it does seem to me that for a lot of people, you know, housing affordability has been an issue for decades, but people nod shrug and go, Oh, yeah, well, I guess these things happen. But then suddenly, when their children are having difficulty getting into the housing market and getting a property of their own, then suddenly people start to say, oh, my gosh, this is a problem. And, you know, what’s been said is that there’s a decent number of people who do own property want to maintain their values, and they’re the people who were swinging the vote at the moment. But there are what you might call real supply issues at the moment that are real and tangible. But then there’s supply issues which are a smoke and mirrors Shall we say, they’re a distraction, they’re a sideshow. They’re they’re an excuse for vested interest to peddle their, their interest. So let me try to explain that. But we do have supply chain issues with the builders. And there’s also a lot of builders who are in precarious positions. And I do believe that’s credible, they’re in precarious positions, their margins are tight, the cost of their inputs is rising, and they are actually struggling to build stuff that people want to have built. And that is certainly an issue just at the moment, we’ve got to say, this is a, you know, there were COVID Supply Chain disruptions, and it’s continuing. And I don’t know why. But it seems that so many construction businesses, you know, on on dire financial ground, you know, just just one or two notches away from bankruptcy. And that does seem to be a real thing. And I think that’s really only raised the tent over the last few years. And that is real, and that is substantial. But the other side of it is that there are supply issues, which I think are artificial, or a smokescreen. Now, Dr. Cameron Murray, that you’ve sometimes interviewed, now, he, he’s actually saying that there’s an absorption rate. So, you know, you can only build so much. And he’s also saying that developers are going to sort of drip feed property. And you know, they basically winch to government and say that there should be land releases. And then when they make a report to shareholders, they talk about all the land assets and say, you know, this is an asset that we are coveting and maintaining. So there is this whole story of land banking, there’s a story of people having properties which are held unoccupied. Now, I think it’s the PROSPER people in Melbourne, they did the sort of surveys were people running around with bicycles paying attention to property, lots that weren’t didn’t have buildings on them, they were looking at the water consumption of units and saying, Look, how many of these things are unoccupied. You’ve probably heard the one about the ratio of median value property compared to median income has gotten a lot worse over the decades. And that’s certainly true. And that what why that’s happened is basically my assertion, it’s sort of developed by some people in the Pirate Party like Mark Evans, he’s sort of saying, like, look, we made changes to taxes, there was a time when we introduced the capital gains tax discount, and property prices double. And then that fed in with lower interest rates. And that sort of basically pumped up the prices a lot more. Because on the one hand, we do have that statistic of median price of accommodation compared to median income. But over that time, interest rates have gone down. So like, what you have to look at, is not now what that number, I think, is scary, I think it’s bad, and it’s scary. But from the point of view of someone paying off their mortgage, their mortgage is going to be a certain amount on the Capitol and a certain amount on the interest. And if the interest is lower, then you can actually bid up the price of the property. And you know, as interest rates go down, the values of properties are going to go up just because you’re able to bid in that way. And so I would say it’s comparatively low interest rates, it’s sort of tax schemes, that sort of mean people, you know, it’s a good idea to invest in property. And of course, you know, I know people who will say, No, say that you’re investing as property is a bit of a misnomer, really, investment is building a new factory, to some degree, maybe even building okay, maybe even building a new apartment block, that’s maybe investment because it’s actually changing the economy. But if all you’re doing is changing ownership, that’s, that’s not really investment in a deeper sense. And I do feel that there’s this incentive towards building stuff, but not actually to letting it out. Because, you know, the PROSPER report has been that there are a lot of vacant properties. There are a lot of people doing land banking. So I think that it’s a specious argument that, oh, we just need more land releases when there’s so much land that’s held out of use as a result of the decision by the people who own that property. Now, so there’s lots of narratives here. Now, one of the things I’ve said is this thing about, you know, the capital gains tax discount the low interest rates, but going back further, you’ve had Menzies who sort of I think he’s sort of changed things so that land or land ownership was a lot more attractive. And I mean, I’ve heard narratives that there was a crash in the 1890s. And that really only recovered, I think, you know, when Menzies came in, and when there was also a deal of immigration. So that if you look at the the one gross picture is that sure immigration did actually push up the property values as well. So I would also say that if you listen to some of our overseas commentators, and they talk about, you know, the Asian economic miracle or the Irish economic miracle, then they might talk about the Australian economic miracle. And they say that our economic miracle is based on population growth, and in construction, and I’m sure that like mining and farming, and then maybe a little bit of niche manufacturing do not hurt along the way. But that’s a story that is told. And so I do think that population is a part of the picture. But before you think that I’m sort of trying to say we shouldn’t look out for your refugees, or we shouldn’t do our bit. As far as the globe is concerned, I think if we actually increased our foreign aid 2.7% of GDP, we could at least say, Look, we are being a decent global citizen who are trying to do good in the world. But when you have people coming into our country, and putting load on the infrastructure, you know, that is going to cause its own problems. Now, unfortunately, that that’s hard for me to give you now hard references to all of these things. But yeah, there is a view that like if you do more than 2% of maintenance, and new construction of infrastructure, you end up tripping over your shoelaces, there’s just so many roads being dug up so much disruption to what’s going on. So and then the other story is that retrofitting infrastructure into a city isn’t easy. I mean, you know, we had one harbour crossing in Sydney, and then we had another harbour crossing, and certainly in the Sydney CBD, you can’t really plug more lanes into, into our CBD without ripping down buildings. And it’s like a hideously difficult task. So and I know, Dr. Kendra Murray, again, you’ve had him as a guest, he has actually put a report on the immigration population growth. And he’s also saying, Look, you know, in for infrastructure, it’s hard to sort of retrofit infrastructure down the track. So we’ve got now, how does this relate to housing? Okay, I acknowledge that there’s all these different parts of the picture that I’m ringing to bear. But you know, what, one of the things we can say is, look, the level of immigration certainly isn’t making life easy as far as making housing affordable. But I’m also trying to say, look, we can, as a nation, be gracious, pump up our foreign a 2.7% of GDP. And at least, the cost of being a good Global Citizen, falls moderately fairly on all of this, through the taxation system, we’re not suffering because of our infrastructure catch up, or various other things. Now, at least it’s contained, there is the text, some of its going to GDP. But the other thing is, I think refugees are about five or 10% over intake and people so we could actually double our refugees and have our immigration input. And, you know, this is a matter of such detailed debate that you know, all the skilled people coming in now, is there really a shortage? Or is this basically business not being willing to pay the going market rate, and not being willing to train people? Now, one of the bizarre things is, I think, on the list of scarce professions is actually shifts. Now, they do actually say, Look, this is not fast food workers at your local supermarket, but more chefs working in our refills or any actual restaurants. Now I have to say, look, if the Hilton wants to import another high end shift from like, France or something Well, fair enough, that’s understandable. But when you’re saying there’s a sort of shift to work in establishments, like the RSL, or whatever, you start to think, hang on, there’s something wrong with this picture. You could say that what what’s going on here is that businesses are benefiting from cheaper labour, and the rest of us are paying for it in terms of the infrastructure difficulties that we have, and the difficulties with the housing market. But but you know, there’s so many threads to this narrative, because, you know, people will talk about capital gains tax negative gearing, this sort of thing. But you have actually had property booms in Japan in the US, and they haven’t had those systems there. And they’ve still had issues with his property. So my more general thing is like, you’ve got some issues. They’re different in each country, but they do actually add up to making things unaffordable. And so. So my story is that, you know, you’ve probably heard me say it before that we do want to have land value taxation. We do want to sort of limit our immigration. And we do want to have a policy where we are actively catching up on infrastructure and doing a bit better job of running our cities, rather than just basically having all these different things because there’s so much development, and they say, oh, we’ll make some Got a charge on the development. And that’s how we’ll get our our infrastructure. But, you know, we’re not in a sense, we’re not paying for our infrastructure properly. And that’s causing problems. And we’re basically letting people pump up their property values, and not getting any of that. And I think that’s sort of making the economy unbalanced, and that sort of a georgeous picture. But, you know, one of the things about the affordability of housing is, as I said before, it’s not just ratio of median income to median price, it’s the interest rates, and then there’s how much of your weekly income, are you actually paying any interest plus capital payments, and my suspicion is, our loans are getting longer in duration. But people who can afford a loan are still, you know, they’re struggling, but they’re paying them off because the interest is lower. And there’s this bigger picture, which also includes interest rates. And that’s basically prices have been beat up because people can pay them. But I think it would be better if rather than these payments going into increase property values that actually went to the government in terms of land value taxation, as far as a lot of people are concerned, they’re still paying the same amount of money, but at least that money is going into helping the government afford infrastructure, rather than the pockets of people who are watching their property values escalate. Yeah,

Gene Tunny  16:22

yeah. Okay. John has been there’s a lot there. And I think what you’ve, what you’ve done is I mean, you’ve highlighted just all of the relevant factors here in this supply factors as demand side factors, and they’re both going to be relevant in determining the the market outcomes that we see. So I think that’s, that’s fair enough. There are a few things I want to pick up on and, and talk about. But first, can you remind us about the whole Georgist movement, please? And what land what you mean by land value taxation, and what you see as the benefits of that, please? Okay,

John August  16:59

well, this is something where we are distinguishing, I guess, real investment from speculation. And let’s say, Look, if first off, building large blocks or units is a bit controversial, some people say that there’s all these horrible limiting regulations. But then other people say, the council has this limitation. And then the developer wants to have the council break their limits, and basically have extra floor space or extra floors or extra floor space ratio. And they say, Look, if you break your rules, we’ll give you this extra wad of money. And, and then if the council refuses, they take it to the land and Environment Court. So there’s this whole dodgy picture around development. But let me try to say that, obviously, if if a block of units is welcome, and the locals are getting pissed off, you know, you can actually say, look, you’re increasing the density of, of habitation. And that is actually investment and improving things equally, building a new factory, or doing various things that’s investment. But other thing is just transfer of ownership and speculation. And the other side of speculation is you own property, and the value goes up because of the efforts of somebody else, then you have a benefit that you haven’t actually worked for. So this is making a distinction between what you might call genuine economic worth, which is like opening a new factory, getting it started employing things running the production line, things are actually happening, you have brought stuff together, you’ve invested, you’ve actually done something, those workers are actually doing something on a day to day basis. And that’s, you know, in the Georgia’s framework that is real economic activity, but putting your money in something and then just watching it grow in value, that is, I guess, less morally worthwhile than than actual investment. So that’s one part of the story. But the thing is, if you grab some property, and while other people do stuff that grows in value, you haven’t actually done anything. Now developers will say, Aha, it’s a strategic choice we develop here. We are helping the economy go. You know, I guess I do sort of, for the most part, challenge that. But let me try to tell a bit of a story that sort of encapsulate some of what’s going on in the Georgia’s picture. Let’s say that you have a property. And I don’t know that the council builds a garbage dump next to it. And you all then complain and try to get compensation for the fact that there’s a garbage dump there and say, oh, you know, you’ve reduced my property value. But let’s imagine that you build your property, and then about a kilometre away. Either someone builds a shopping centre or somewhere or the government builds a railway line and puts a railway station there. And both of those things increase the value of your property. By now, while in the first case, you went on to the council complaining look, you have reduced my property value. And now with the case of the shopping centre, that’s a bit more murky, because you know, the private end industry isn’t doing it. But in the case of the case of the railway station, while you will see a queue of people at the council complaining about the fact that they garbage dump nobody and accuse up at the government saying oh, my gosh, you’ve increased the value of my property, I feel so guilty that you’ve done this, and this is a bonus. And look, here’s your share, I know you’re taxing me. But here’s a bit of extra money, because of what you’ve done for my property. Right, notice the asymmetry there. So what GA is the same in a lot of cases, people just own property, what’s the value grow, and they’re not actually doing anything. So because they’re not doing anything, really, the public is entitled to that. And so now we get into the thing of like, does the government represent the title, the people doesn’t represent the state, but let’s just say the best approximation is to say, let’s let the government claim some of that, like I was imagining that person doing voluntarily. And notice, you do actually have, I think, some situations where when when people do do infrastructure, they’re trying to charge businesses, but that’s sort of an ad hoc thing. It’s not really, you know, full on land value taxation that’s uniform, and trying to capture this on an ongoing basis. And also, vacant property is no invite and mill Melbourne, they were trying to put on a vacant property tax, because one of the things that people are noticing is, all these people, either land banking, or having units that they’re holding out of us. Look, if you really want to do that, really, you should be paying for the privilege, I suppose. And in France, my understanding is, if you have one property, that’s cool. But if you have two properties, your second property is taxed as though you’re renting it. So you’d better well be renting it because if you’re not, you’re really paying paying through the nose for that privilege. And I suppose the thing about a lot of things in France is you can have one of anything. That’s the sentiment. But once you have more than that, see things change. And I think that’s a lot of the way that that that is constructed. Now, the whole Frank system. But what about but to try to summarise the Georgia sentiment is that rather than imagining developers and speculators and people who are who are making Gamble’s that pay off both them and society, it’s saying look compared to actual economic activity, people who just own property and watch it grow in value without actually contributing to that to themselves where that what’s its other people’s or the government’s actions that are contributing to that, really, that’s not a fair and equitable earning, that money really should be going to the government. And the other thing is, there’s all these theories of taxation and deadweight loss and, and distortions and so on. And I have Okay, I have to admit, I don’t have the arguments on my fingertips. But my understanding is that there are a lot of economists who will say, land value taxes are the least distortionary taxes in an economic sense. Now, certainly people who own properties, and also particularly pensioners who, I guess, you know, facing an uncertain future, obviously, they will be concerned about paying taxes on their land. But even in New South Wales, I think the government was looking at giving people the option of swapping from the stamp duty to land by your taxation, and it would be sort of a more a better thing for them. And I know the year the then a liberal state government was looking at going in that direction. And I was actually making tweets saying good on them. And then there was a thing that they were sort of chucking rocks. And I mean, this sort of approach has been used in the AC T for a very long time. But the other thing is, Jean, I’m surprised that in all your meandering through the the world of activism or intellectual circles or whatever, you’ve never met, Axe grinding georgeous, because where I come from here a dime a dozen, but anyway, nonetheless.

Gene Tunny  23:54

Right? No, not Not really. But you know, I’ve heard the arguments over the years. And you’re right. I mean, the argument is that well, because land can’t move, right. There’s a tax on land is, if it’s the if it’s on that on the rent, so to speak, the that unearned increment, then it’s going to be non distortionary. So that certainly is the argument and and then you’re talking about their proposals to tax vacant, vacant properties, etc. And that French, that French tax measure that are their policy? That sounds interesting, I’ll have to look at that. And so do you see that this is a way this is? I mean, it’s obviously it’s not going to solve the whole problem. But do you see measures such as this part of the way that you can address the housing affordability problem?

John August  24:55

Yeah, I would say there are short term and long term issues. Notice, okay, just briefly going on a diversion. I mean, these fine companies are struggling, I mean, you know, a nice thing to do would be to have a government fund where they can make special loans to sort of keep a given government given business afloat. And look, you still want to look at the business and say, Look, if we give you some help, is there’s this rough patch that you will get through, and then you’ll come out the other end, and have the same some confidence in that. So sort of a bit of an easier way to get a loan than a regular bank, but you still want to keep a little bit of a sense of, you know, these are things that are going on. And as far as supply chain issues, look, I just hope that construction methods will get a bit innovative over the next next half year or year. And they’ll work out ways of getting around the shortages that they have. I mean, you know, there’s all these ideas for like 3d printing of this, that and the other and sort of hempcrete. And, I mean, there’s there’s a lot of avenues that people could actually go down to try to try to address these issues. But okay, that’s sort of your short term thing. And certainly, Georgia’s reforms would be a part of it, because the government at least would have more of a chance to catch up on infrastructure, and there’d be less of this upward pressure on on properties. Now, one of the things is, I think, you know, there’s some economists have identified that, you know, it’s like, very difficult to think of a certain number of voters want to maintain their asset values, and the other people who don’t yet own property, want those asset values to not not at least not rise up as much as they have been. So you’ve got this fundamental political dilemma that this is going away from economics, and my gosh, it’s all propaganda going around, but it wouldn’t surprise me if like the trucks have come home to roost, and things over the next five years will go really topsy turvy politically, as so many people who wanted to get property have been sort of frozen out of it by circumstances, and they’re, they’re looking for answers. And, you know, oh, gosh, you know, maybe that will happen. I see so many people who are a lot more confident than me, and they’re, I guess, your political propagandists. But let’s say I wouldn’t, it wouldn’t surprise me if that happened. But what I guess I’m trying to get is, paradoxically, if you tax property in a more effective way, the whole economy goes into a bit more balanced, and you actually have more property available to live in. And you have better infrastructure in the city. And I know, it’s a bit paradoxical. But now my assertion is, if you tax land properly in the right way, then that will help to rebalance the economy to the point where things become more, more, more affordable. And the other side of things is that, you know, it’s sad thing is, I don’t know what the problem is, I don’t know how to fix it. But it does feel like investment in the real economy to actually do stuff is just so boring as complete or so tiresome as compared to investing in property. In a sense, investing in property shouldn’t be something that happens over there in the corner, just to keep people in accommodation, it shouldn’t be a dominant thing in the economy. When people think of investing, they should be thinking and investing in, in real actual economic activity. And, you know, that’s part of the thing is that our economy is out of balance in that way. But yes, I’m going off on a mountain of a bit of a tangent, I know, population is part of the issue. But I know cam was actually saying, Look, we had this whole COVID thing with a lack of immigration, and the property market was still still moving ahead. Now, one of the things to keep in mind, that was actually the top end of the market, where I guess people were still shuffling their, their money around. And my understanding is it didn’t happen at the bottom end. I think cam has his own explanations, but I tend to think that it’s the bottom end of the market, where people are competing with the immigrants. So So part of the thing would be to actually control our rate and immigration gets get serious about the catch up on infrastructure. But we could also move towards, you know, point 7% GDP on foreign aid, and perhaps even doubling our refugee intake just to show Look, we’re not being narky, about this humanitarian thing, we’re just trying to manage infrastructure and manage what’s going on in our economy. But I would also say there’s all this tooing and froing, politically, and I would say, Look, we do want to manage our flow of people into the country, but it’s not going to be a magic one that fixes the problem. And we know that because when there was COVID, and we had a serious lack of people coming into into Australia, it didn’t really change things that much though, there is that particular example of Victoria and Melbourne, where I guess there’s a very interesting outcome. They’re sort of saying, hang on, you give a whole bunch of supply and it doesn’t really improve affordability. that much. So, you know, there’s something deeper going on there?

Gene Tunny  30:02

Well, yeah, on the Georgia State proposal, I think I’m gonna have to come back to that, because it’s an interesting idea. And there are economists who are who have looked at it and Henry George was is obviously, he made some, you know, an important contribution to to economics or political economy, as it was called then

John August  30:21

we we in Australia have actually pursued Georgist ideas to some degree, and also the fact that our council rates are actually based on the unimproved value of the land. My understanding is that people were thinking of Georgia’s principles, when they actually figured out look, how are we going to implement this whole rates thing? But you could equally argue that that while our rates are related to our property values, it’s not it’s not trying to grab the our unearned income. It’s more this is how we’re going to pay for the libraries and the roads and the rubbish and the this and that. And we’re just going to sort of tax it proportionately in this way. But it’s not actually trying to grab that value. Yeah, it’s but anyway, so there’s a few things going on there. And yeah, I mean, let’s say, look, it’s not going to be a magic wand. It’s not a single solution. But by golly, I reckon it would help to sort of turn our economy around to a way that’s basically fairer overall. And I do embrace that part of the Georgia’s narrative.

Gene Tunny  31:24

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  31:30

If you need to crunch the numbers, then get in touch with adept economics. We offer you Frank and fearless economic analysis and advice, we can help you with funding submissions, cost benefit analysis, studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world, you can get in touch via our website, www dot adapt economics.com.au. We’d love to hear from you.

Gene Tunny  31:59

Now back to the show. John, I want to go talk about the migration numbers. Again, I think you did make a good point. And this is not necessarily endorsing what you’re saying. But you’re saying you could actually double the number of refugees. And that’s not that doesn’t necessarily mean you’re going to Well, you could actually reduce the title migration numbers, but double categories or increased categories that we think are good for Australia or that were that we that we value or the community would like to see more migration in those categories, rather than, say foreign students who seem to be making the bulk up the bulk of the immigration title at the moment?

John August  32:43

Well, certainly, I mean, please, I, I hope I’m not not having a go at foreign students. But you know, there is the thing that where you have a university with lots of foreign students, it does rather disrupt the property market in the proximity of the university. And I think that is the experience. And that’s why I was saying that if our GDP is it points out wherever foreign aid is point 7% of GDP, at least the burden of that ethical, ethical decision falls moderately evenly on all taxpayers, which I think is fairer than the current situation. But But yes, yeah, that the thing is like, immigration is a few things like one of them is refugees, where we basically say, look, it’s a rough world, we’re going to give some people refuge from those difficulties. Okay, fair enough, then you’ve got, you know, basically businesses claiming that there is a shortage. And I think we can look at that a bit more carefully and say, Look, this is a different definitional issue. Look, maybe business is actually short on on particular forms of employees. And that means we when we go to the shopping centre, pay a bit and pay a bit more for something. Well, in a sense, so what you might say, this is a consequence of how we run the country. And that’s the outcome there. And then you have, I guess, sort of family reunions. And you know, it, I suppose, in a sense, it would be lovely if our world were free of conflict, and everything was sort of reasonably on an even keel. And people could just move around as they see fit and come to Australia, because they thought it was a nice place to move to, but I suppose, you know, I don’t think we can do that. And one of the other things is that when we’re talking about foreign aid, now, if we actually have, let’s say, people, doctors, nurses, whatever coming from less well off countries to us, and we’re not paying for the training costs, then in a virtual sense, the cost of that training should be subtracted from our foreign aid. So we have our actual foreign aid number, and then we subtract from that the cost of training people that we have gotten from countries less well off from ourselves, and then we actually end up with our our actual corrected foreign aid number. And, you know, I’m not the only person living in a country observation. So, you know, this is one of the things where, look, you do want to be a part of the world, you want to be compassionate, you want to do your bit. But obviously, you want to do it in a way where you’re managing your own situation, your own economy. And I think that we can, you know, ethically sort of look at controlling our immigration numbers. And as I say, look, there’s people who’ve told this story that no, there was a crash in the 1890s. And the property values really only went up, you know, with Menzies and immigration and so on. And that’s when you notice that first sort of lift from that doldrums coming out of the 1890s. So there’s certainly some interesting stories there. And yeah, it’s hard for me to hit you with a whole bunch of figures to actually prove these assertions, but I can say I’m doing my best.

Gene Tunny  35:48

Yeah, no, I think I think you’re telling the broad story correctly. As far as I can tell. Now, I’m interested in your thoughts on foreign aid. I mean, you’re talking about more than you’re talking about tripling, like three axes. Now, foreign aid, aren’t you? Because at the moment, if I had a look on the parliamentary website, it says our official do So Australia’s ODA, so our official development assistance, as a proportion of GNI, it’s expected to remain at the 2021 22 level of 0.2%. So that’s for 2223. And you’re talking about 0.7%. Now, we see the average is point three 2%. What

John August  36:33

well, point 7%? Is my understanding that that is the UN recommended level. And obviously you you kind of wonder like, is the UN rational? Are they this Are they this, but sometimes, an international body has the objectivity that you would like. So that’s sort of why I’m thinking about point 7%, at least something to aspire to. Or if we could be reaching towards point 7% and do better than any other nation on the planet. Then if we were limiting immigration, or doing various other things, we could say, well look at our foreign aid. Now, keep in mind, you got to be careful that your foreign aid is not just a hidden subsidy for construction companies to build stuff that these third world countries don’t actually need or can use. There are some subtleties there. And look, notice, tell you the reason why I brought up foreign aid is in the shadow of immigration and controlling immigration and saying, look, there’s refugees, there’s immigration, how do we demonstrate that we are doing our bit as a global citizen to make the world a better place? And it’s in that shadow that I’m talking about foreign aid? So you know, it hasn’t it hasn’t been totally out of left field? It’s sort of sort of the trend. Yeah.

Gene Tunny  37:46

Okay. And, and I think your point about how you can actually, like we could, we could massively lower or substantially lower the number of the amount of immigration because we had 550,000. Net overseas migration, that’s the figure for the last 12 months, if I’ve got that, right. And, I mean, that’s just extraordinary. Yep. So, record, this is from Leith van Sullens, one of his latest pieces, elbow lies his way out of rental crisis. I love her. I love all their titles. Well, I

John August  38:21

try to be careful with my language. I tried to be descriptive, but not provocative or sensationalist? You know. It’s a hard thing to be disciplined and do that, because I know how tempting it is to just say something outrageous and think, oh, this will attract some attention.

Gene Tunny  38:42

Yeah, but I mean, I quite I mean, I’ve been following them. And I think this, I think their time has come. So for a long time they’ve been, you know, running these lines, and they have the public hasn’t really been receptive to it, or they have it hasn’t been a popular position. But now I think, given the challenges that we’re facing in housing, given this, the absorption problem that it seems that we’re, we’re facing, I think they’re getting a lot more the reception to their line is is is it’s a lot better,

John August  39:14

as well. Well. Keep in mind, I think I’ve already said this, that I do not believe that, you know, just reducing immigration is going to be a magic one. We have to, in some sense, aggressively pay catch up on our infrastructure. And another thing I’ll point out is, I don’t know what it’s like in Brisbane, but certainly in Sydney, you’ve got the issue where you’ve got the rich suburbs, and the people who are like the nurses, the fire is the police officers, the people doing cleaning the people doing whatever, can’t afford to live there. So they’ve got to basically travel all the wire across Sydney, and they’re putting a needless load on the road network that doesn’t really need to be there. And for the rest of us that are not in that situation. We’re obviously coping with congested roads. So you You know, for me, that’s a side effect of that sort of asymmetric wealth distribution. And one of the things that may be happening in in Brisbane, I know some councils in Sydney, are looking at getting into public housing, not in a grand sweeping way. But key worker accommodation. This is a, this is accommodation that will be there for the police officers and their families, for the nurses and their families, for the firefighters and their families, and perhaps for the cleaners in their families that are actually servicing that area. And, you know, you’ll basically have to say, look, either I have a job, or I will be getting a job in the area. And I mean, one of these professions, so the council will then give you some subsidised the place to live. And, you know, that’s interesting that councils are even contemplating doing that. I mean, I mean, I guess this is, this is sort of a, I guess it’s a bit of an issue around infrastructure and housing, I guess, a few steps from, from your original question, but nevermind can’t help myself. I’m

Gene Tunny  40:58

going to understand the logic of it. So I’ve seen that in, in rural towns in particular, so you’ve got a visited a potato processing facility in one of the Riverina towns, and they actually own some houses in the local town, so that they’ve got places for the, I think, you know, the migrant workers who come into work at their processing facility, so they’ve got somewhere to live when they’re, when they’re in the area. So I can see the logic of that, and why it might make sense for some councils to look at that awesome. Well,

John August  41:34

I know that, you know, just travelling around country towns, it’s interesting, when there’s some sort of development and all the tradies have taken all the motels or, or there’s some sort of running festival or something like that. Yeah. By golly, you know, you notice that when you when you go to a country town thinking, Oh, this is a quiet, sleepy country town, there’ll be lots of vacancies at the motel and Well, anyway,

Gene Tunny  41:58

that’s very true. Okay, I want to go back to those numbers. So migration programme, so they’re in the permanent migration programme. So remember, I talked about how our net migration has been running at about 550,000. Okay, the permanent migration programme, which is what you’re talking about, which is refugees, or the family reunions, and skilled migration that’s set at 190,000 places. So that’s just a fraction of the total net overseas migration and a big part of it are our students over foreign students coming to universities, and also, the students who stay on they get an extension, so they do a degree, and then they stay here for a couple of years after that. And you know, some of them will have work rights, and they’ll be they’ll be in our labour for so I’ll and you know, a lot of it is that and so we’ve got this big temporary migration number. So I’ll put a link to leiths post in the show notes, because I think it’s a nice summary of all of the relevant data. We’ve got around 700,000 student visa holders in Australia, but in terms of temporary visa holders, so that could be students, their families, people who are who did a degree and then they’re still staying here. That’s at 2.2 to 2.4 million people. So depending on whether you use the city as a quarterly, seasonally adjusted number, that’s about 2.3 million it looks like and I’ll put that in the show notes. So is that

John August  43:33

that at the moment, or per quarter or per year? Or what are we what are we saying here? Yeah, that’d

Gene Tunny  43:38

be at the moment. So that’d be the stock of them. Yeah. stock at a point in time. Yeah. Yeah. And so we’re well above where we were at COVID. And you could argue that we’ve actually, you know, some of the people will say, I actually it’s just catch up and we’re just on the same trajectory. Okay. Maybe so, and this is something that Leif addresses here. And his his point is that well, okay, this this argument, the the refers to a tweet from Bill, is it a bill Rizvi, who was a former immigration bureaucrat, where he was saying, Our look, we’re just we’re actually where we would have been if we’re on the same trajectory pre pandemic and then so Leith goes recipes arguments ridiculous because the pandemic completely constipated the supply side of the housing market by sending material costs through the roof sending builders boss so you’re talking about this before John, and reducing building capacity by months of lock downs, deliberately engineering a record immigration rebound into a supply restricted market was the height of idiocy and is why we are suffering from the worst rental crisis and living memory

John August  44:46

led to a well articulated position, I suppose I’d have to think about it much more carefully to say look, is it right or is it wrong, but it sounds very reasonable on the face of it, you know, pretty prima facie is the legal people would say and but my broad position would be, look, we were playing catch up on infrastructure before, if we’re actually going to get some breathing space, we’ve got to have a commitment to catch up on infrastructure at the same time as we limit immigration. So we can actually get ahead of the curve because I think a lot of this, this silly bugger games of like he’s a development will divert some of the benefits from that to building infrastructure that’s not getting ahead of the curve. And like, look, just a bit of an anecdote from like, history of Sydney, is way back when our first rail lines went out to Sydney to service the farmers, okay. And that was why they were built. So if you wanted to build a settlement, you know, 10 or 20, KS out of out of the City Central, what would it then be in the city centre, you just build a railway station on some part of the railway track, and boom, boom, there’s the start of your community, your infrastructure has led your community rather than the infrastructure coming sometime later based on some deferred payment schedule, you know, so you know, where where? Yeah, I mean, let’s manholes and may well have a good point. I’m not going to disagree with it. But my position is, we were playing catch up before and if we’re going to be serious about playing, doing actual proper catch up, then we can’t just do business as usual like it was however many years ago. So that but yeah, he may well have a good point there.

Gene Tunny  46:23

One other thing I want to talk about before we wrap this up, is I want to talk about zoning, heritage character protection. Now 20% of Brisbane lots are protected by character, protection or heritage of some kind. So most of the pre war housing that well that’s protected all the old Queenslanders, it’s very difficult to redevelop those old Queenslanders to knock them down and to, to build townhouses, townhouses are now banned in low residential suburbs in Brisbane. So we’re, we’re limiting the supply side in that way. And Peter Tula has made my colleague at Centre for independent studies, he’s made a strong case for relaxing these restrictions, because they are driving up the cost of house and he points to what’s happened in Auckland, in Auckland in New Zealand. And I think there’s an emerging view that we need to have a yes in my backyard a young beatitude rather than a not in my backyard, a NIMBY attitude. Do you have any thoughts on that, John?

John August  47:36

Okay, well, first off my, my original position was saying, look, there’s too much land banking going on, and too much drip feed into the supply from the developers. And you know, the and now that analysis by the Melbourne George’s people running around with Drupal while riding around with cycles, looking how many vacant blocks there are analysing of blocks that don’t actually have water usage corresponding to people actually living there. So look, there’s a lot of stuff being held out of views, and that needs to be properly identified and engaged with. But as far as your other story about zoning, my best idea of a compromise would be if someone is basically wanting to hold on to that property and saying, Look, we want this to have its heritage value preserved, then basically, maybe they should be paying for that. And they should be paying for the privilege of having that status. Now the one of the problems is, is this something that owner wants something that the state government wants something that the council wants something that the community wants? Because I think there are cases of people who really want to develop their property, and it’s been hit with a heritage order. And they are people who want to develop and they are constrained by this. And I do do me I might mind vague feeling on this at the moment is, if someone wants to keep their property and says, Look, I endorse this heritage status, then they should perhaps pay extra. If the heritage status is being imposed on them by council on may resent it, then perhaps the council should pay for increased maintenance costs, because it’s harder to keep these old places going. And then there’s a thing of like, does the community have a legitimate interest in keeping the vibe of the place now, we’re talking about a lovely little coastal community and you drive through it and it’s a bit bit sort of not not overdeveloped close to the coast and it really does have a charming feel for me as a tourist driving through it. And I do wonder if that sort of thing is justified, but as with so many things, you know, this is a balance and the point that you’re making that may be a lot of people and not so much worrying about their heritage. values so much as being selfish, I suppose that’s a thing between a legitimate interest in inherited value, and a certain degree of selfishness. And I tend to think that if we have something like the rocks in Sydney, or, or New Orleans in the US or something, and you’re sort of saying, Well, look, here is this part of the city, which we are going to preserve. And I think that’s right, in Paris, they’ve got old Paris and New Paris. And I think if you’ve actually been to Paris, and just seeing this sea of like, four storey buildings, or maybe they’re five storey buildings, and it’s just awesome to contemplate, and then you turn your head, and there’s new parents sort of thing. So you know, that might be a bit of a better compromise, rather than this, this sea of sort of heritage buildings. Now, in contrast to some other commentators who I guess a lot more politically exploiting, than me, notice, I’m willing to say, let’s put all these ideas on the table and look at them all. Look at them all at once on the table at the same time. Now, it would be a bit sad to lose this green space, but as far as like the surrounding areas, but okay, look, you’ve actually triggered a thought that actually came out of The Science Party, which is a relative of the Pirate Party under the fusion Alliance. And we were actually talking about charter cities, and there’s one in Honduras and this sort of thing. And, you know, I’m just going to be very brief and say, Look, Shenzen, in China worked. And this one in Honduras doesn’t seem to have worked, even on delivering on its own terms. But that’s not an argument against all charter cities, because Shenzhen seems to have worked. But part of the reason why Shenzhen may have worked is because of the culture of community that was created. You know, a lot of the people either they stayed there because they want to stay there, or they move because they just chose to. So there could be a social variable behind this. But anyway, trying to get to a conclusion here. The Science Party did actually propose a charter city in between Sydney and Canberra, I guess maybe The Science Party grew up in Sydney. But anyway, so this charter city of touring was, to some degree going to be privately funded, have a road network that was going to be below ground from the beginning, have a lot of tower blocks, and a lot of green space, and paradoxically have actually higher density than the average density of Sydney, and also be privately funded. And the amazing thing is that ticked so many boxes you wouldn’t believe. But it’s, I’m not, I’m not going to comment on how politically practical it is, or how practical practical it is. But by golly, it’s an intriguing notion, you know, and that’s, that’s the charter city of touring that the The Science Party was once maybe they’re still actively promoting it. But certainly at one stage, they were promoting it as a cute way of doing the thing. And from my point of view, I sort of say, Alright, there’s touring. So we started our fast rail link between Sydney and Canberra via touring. And over time, we extend that extend that south towards Melbourne, and north towards Brisbane. And we eventually have a high speed rail linkage between Brisbane and Melbourne. But that’s a whole other thing of, you know, the practicality of the High Speed Rail Link and, you know, the relative captive monopoly of rail track of air transport between Sydney and Melbourne and so on and so forth. But, but yeah, that’s, that’s, that’s its own sort of rabbit warren. But anyway, so But in talking about your lives, and no one has

Gene Tunny  53:35

asked you about cheering Yeah. Just cheering It’s named after Alan cheer. That’s correct. Yes, you’d

John August  53:40

think that would come out of The Science Party. Darwin was actually named after Charles Darwin. So. But anyway, so yes, I’m willing to think about EMB zoning and those sorts of issues, but tried to put them on the table with all these other things at the same time. And as I say, in contrast to a lot of activists, I’m actually willing to say, look, let’s at least think about putting them all on the table at once.

Gene Tunny  54:01

Very good. And it’s not about getting rid of green space. I wouldn’t want to do that, I think. And it’s not about high rise towers, right, what they’re talking about, it’s about the missing middle housing units, six packs or townhouses because some of these old Queenslanders, you can we can get much better use of that land if we redevelop them. I think I think there’s a lot of merit in that because what we’ve got at the moment is we’ve got high density allowed in certain parts of the city that are former commercial or light industrial areas. And we have these massive towers. And yet we’ve got other areas which are close to the city with very low density, whereas we could have some nice missing middle housing, some medium density, which I think would really help us out a lot and I had Natalie Raymond from yimby, Queensland on in a previous episode, so I’ll put a link in the show notes to that. Right now, John has been has been great. Yeah, lots of issues. Ernie given me a lot to think about, we’re gonna have to come I’m gonna have to come back and chat with you about overseas development assistance. And the the the issues around that I liked how you mentioned or you were alluding to this concept of boomerang aid, because you know, aid that effectively just comes back to your country, because, you know, quite a bit of it is that, and it’s not necessarily beneficial to the, it may not be beneficial to the countries that receive it. So, yeah, I think there’s definitely some, then there’s a big debate about foreign aid and to what extent it is beneficial to the countries that receive it, or is it just beneficial to the elite and the countries? Does it help the poor? What What issues does it create? So I think we can we can have a good chat about that. And also about Georgia ism, and land value taxation. I think that’s something that probably warrants its own episode. Anything you’d like to say before we conclude anything else?

John August  55:54

All right, well, I’ll just give a plug for a film called a frightened Yeah. Which is as in freight, you know, that’s shipping. So you can get that to that at thought navy.com. And that’s talking about the nature of shipping because shipping is such, I mean, this film was made a while ago, but as far as I understand, shipping is still as dodgy as it once was that basically, people are working boring, risky jobs on shipping. And were sort of basically bought cheaper goods at the supermarket. But look, you know, hopefully, I’m not not a pretentious middle class guy, but I’m willing to pay for the dolphin safe tuna and the the, the the, the open range eggs. And, and certainly, if you know, this conditions on board ships are a bit more comfortable, you know, I’m happy to pay a bit more for my goods at the supermarket. And I think that, you know, basically there is the quite the possibility that in a sense, the shipping companies are offloading, you know, responsibility on to us when they themselves have gotten unfortunate work practices and flags of convenience and all this sort of thing, a bit of a metaphor to tax tax dodgers and Cayman Islands and so on. So but that that’s its own sort of, I guess, rabbit hole, but I thought I’ll give that particular film a bit of a plug. It’s certainly worth checking out.

Gene Tunny  57:12

Okay. John Agus, thanks so much for your time, I really enjoy the conversation. As always, you’ve given me a lot to think about. So thanks so much.

John August  57:21

Okay, well, well, you’ve also put forward your side of things. And notice I haven’t tried to dismiss it. I’ve just said, Look, we need to put all these things on the table at once. And I’m certainly willing to at least think about things so absolutely. certainly happy to do that. Very good. Thanks, John. Okay, thank you.

Gene Tunny  57:38

Right. Hi, thanks for listening to this episode of economics explored. If you have any questions, comments, or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact at economics explore.com, or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.

58:25

Thank you for listening. We hope you enjoyed the episode. For more content like this where to begin your own podcasting journey, head on over to obsidian-productions.com

Credits

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business, www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.