Peter Dutton part of the cynical charade on house prices

It was a pretty big kite the government launched before the budget. You know the drill: raise a topic, canvass various policy responses, see how the public — read media — reacts, and decide on the fate of the strategy at that point.

In this case, the kite was called housing affordability and we were being directed to expect a decisive set of measures from the federal government to deal with what was being described as a very significant social and economic issue.

The Treasurer gave several speeches in which he outlined his concern about housing affordability, all the while steering our attention to the plight of renters and the scope for government to promote social housing — not that anyone really knows what that means.

At some point, it was clearly decided that the kite had to be reeled in. The potential package of measures was just too meagre to warrant the big sell. There would be no special booklet in the budget papers. There would be a few initiatives, but none of sufficient magnitude or import to move the dial on housing affordability, either for potential home buyers or renters. It was best to go quietly.

Last week, Michael Sukkar, Assistant Minister to the Treasurer, wrote a feeble op-ed article outlining what the government had announced in the budget on housing.

There was the release of some Defence land (useful but not overnight); the limited use of superannuation to allow individuals to save for a house deposit; some concessions for wealthy retirees to downsize; penalising foreign investors in housing in small ways; assisting in the provision of concessional financing for social housing; and reworking the housing and home­less agreement with the states and territories.

The list may seem long but the impact on housing affordability will be negligible and the government knows that. Most of the real determinants of housing affordability simply are not controlled by the federal government: land release, planning and development approval processes, interest rate policy and availability of credit.

But there is one lever the federal government does control, but it was not prepared to make any adjustment. That lever is the number of immigrants allowed into the country. Population growth is a major explanation of surging house prices as supply struggles to keep up with demand.

I was hunting around in the budget papers to find out what the government had decided in relation to numbers under the migration program, which sets the annual intake of permanent immigrants under the skilled and family reunion entry categories.

In frustration, I actually went and asked an official from the Department of Immigration and Border Protection.

The response was there had been no change to the migration program numbers — 190,000 a year for the coming financial year and in the next three — so there was no mention of this fact in the budget papers. Being a suspicious type, I concluded there was an attempt being made to hide this fact.

You get the distinct impression that Immigration Minister Peter Dutton quite likes playing the tough cop on the beat when it comes to certain immigrants. But we are effectively being asked to look over there — we are deporting a few hundred failed asylum-seekers — while the large-scale immigration program is simply allowed to roll on without adjustment.

At 190,000 a year, immigration now makes up more than half of our population growth, and Australia has one of the highest rates of population growth among developed economies.

In fact, our population growth of almost 1.7 per cent is more than double the growth rate of many other countries including Germany and the US.

So why wouldn’t the government make the obvious call and reduce this number, particularly as this would have given substance to the claim that the pressing issue of housing affordability is being ­addressed?

There are several reasons, all of them depressing. The first is that Treasury advised the government that reducing the number of immigrants (and hence the net overseas migration figure) would reduce the observed rate of growth of gross domestic product. In an arithmetic sense, this is true.

But this is surely economics at its most cynical. What we should be concerned about is GDP per head of population and it is not at all clear that high rates of immigration are associated with growth in this preferred figure.

And while the government is happy to brag about the more than quarter of a century of continuous economic growth, if you care to measure growth more accurately as GDP per capita (there are even better measures than GDP such as gross national income minus depreciation), the story is actually different. There have been at least two episodes in the past 25 years when we have experienced technical recessions in GDP per capita (two successive quarters of negative growth).

Another reason the government refused to reduce what is clearly an excessive immigration intake is the pleadings of the business sector to keep the numbers high. After all, if your firm is in the game of property development, building houses, fitting out those houses and selling the white goods and furniture to fill them, what’s not to love about high immigration?

Then there are the firms that find it easier to recruit migrant workers than train up the locals.

I guess this is one of the “advantages” of having the newly created (and vastly expensive) Melbourne and Sydney offices of Treasury — those self-seeking business men and women can easily get into the ears of the bureaucrats through the process of business engagement and consultation.

And don’t forget the universities in this policy space. To sell overpriced degrees to overseas students, it is necessary to be able to offer the byproduct of permanent residence for graduates. Any reduction in the immigration numbers would make that sell quite a bit harder. No doubt, there was a bit of wink-and-nod between the government and the vice-chancellors on this topic.

So when you next hear Dutton blathering on about getting tough on refugees and 457 visa holders and the like, bear in mind that on the big issue he has simply squibbed it.

If the government really had wanted to demonstrate its determination to improve housing affordability and the related pres­sures on urban infrastructure, it would have slashed the migration program numbers, but it was clearly too hard. The vested interests have had their way.