Analysis: Home ownership dream flickers as governments fuel inflation fire | Paul Starick

A bleak sight in Adelaide may provide a depressing glimpse of Australia’s future, writes Paul Starick.

The terrible human face of the national housing crisis hit home when walking the dogs in my neighbourhood park before dawn one morning this week.

Several cars were parked there – they’d obviously been there throughout the cold and wet night. Shabby clothes and blankets acted as makeshift blinds, screening some windows.

The lyrics from Bruce Springsteen’s 1995 song The Ghost of Tom Joad popped into my head: “Welcome to the new world order; Families sleepin’ in their cars in the southwest; No home, no job, no peace, no rest.”

Springsteen’s title character is drawn from John Steinbeck’s Pulitzer Prize-winning epic novel, The Grapes of Wrath, which harrowingly documents the economic torture of the Great Depression.

In Adelaide, and throughout South Australia, too many people are on the brink of homelessness.

Families are sleeping in cars and tents – or just crashing wherever they can.

The soaring cost of housing – paying off a mortgage or renting – is the chief culprit fuelling a cost-of-living crisis.

Code blue outreach case manager Trung Cao near a tent in the West Parklands. Image/Russell Millard

Households with an average-sized mortgage are paying an average $1560 per month extra since May, 2022, since when rate rises have added 62 per cent to repayment costs on variable-rate loans.

Mortgage holders are paying an unfair price for believing former Reserve Bank governor Philip Lowe’s 2021 guidance that interest rates would remain at historic lows until “at least 2024” – which in May, 2022, he said was an “embarrassing” error.

Instead of responding, governments have mostly been taking the politically easy option of doling out cash concessions – paradoxically fuelling the inflation fire that set interest rates ablaze.

Independent economist Chris Richardson told The Advertiser on Wednesday that “big-spending federal and state budgets were “a key reason why you now can’t rule out rates going up in August”.

“Between them, and including the tax cut, the feds and the states are tipping $46bn into the economy, starting on Monday. Given inflation is caused by too many dollars chasing too little stuff, that’s a problem,” he said.

The cost-of-living crisis, spearheaded by housing, will be the central issue at the next federal election, due by early next year.

Opposition Leader Peter Dutton has seized the agenda with a nuclear energy policy he argues will reduce electricity costs.

Prime Minister Anthony Albanese would be well-advised to pursue a substantial housing policy, perhaps involving a major summit spearheading an infrastructure spend and tax breaks for boosting home supply.

Premier Peter Malinauskas announcing his Housing Road Map in a major speech at the Adelaide Convention Centre on Tuesday. Picture: Keryn Stevens

In South Australia, Premier Peter Malinauskas played catch-up footy for years of water infrastructure neglect on Tuesday, when he announced average water bills would rise by $85 annually to fund a $1.5bn water and sewer infrastructure surge to unlock 40,000 home allotments within four years.

In response, Property Council SA executive director Bruce Djite correctly said: “Announcements are fantastic and the ambition is great. We really need to see the rubber hit the road …

“After Adelaide last week became the ninth-least affordable city in the world, the success of this announcement will be measured by more stable and sustainable median house price and rental growth.

“We must mitigate the explosion in house prices and rents that threaten to lock out an entire generation from owning their own property.”

Property Council SA executive director Bruce Djite. Picture: Tom Huntley

Opposition Leader David Speirs accused his rival of breaking an election promise not to impose new taxes, or increase taxes.

“Instead of curbing his wasteful spending, Peter Malinauskas has chosen to squeeze even more money out of hardworking South Australians during a cost-of-living crisis,” he said.

These are reasonable points.

But Mr Malinauskas had few, if any, alternatives.

Surely, we want today’s young people to aspire to home ownership, not to be resigned to sleeping rough in cars.

The Great Australian Dream is a flickering, distant vision for many. Let’s act now to ensure it is not killed off for future generations.

Originally published as Analysis: Home ownership dream flickers as governments fuel inflation fire | Paul Starick