One former Labor leader and Prime Minister in the headlines this week was Paul Keating, who reportedly called for Australian first home buyers to be allowed to dip into their superannuation funds in order to buy their first property. Reported the UK Daily Mail:
"Former Prime Minister Paul Keating has suggested a solution for young people who can’t afford their own home – to allow them to access their superannuation earlier.
The 70-year-old one-time Labor party leader, said a shortage in financial help and houses available for first-time buyers was a position 'we cannot persist with'.
Speaking at property investment company MaxCap Group’s Developers and Dealers Forum last week, Mr Keating said we are in a situation ‘where our children cannot afford to house themselves’.
Offering up superannuation funds as a solution, he said: ‘Superannuation funds will have to do things in the spaces traditionally left to banks, such as property development, and we will see a shift in the balance in financing this industry,’"
Granted I wasn't at the forum in question, so it is hard to know whether Keating's statements were taken in their intended context.
Allowing first time buyers to use their pension to buy a house would be a "band aid" solution to housing affordability issues, but would also clearly do little to solve anything over the long term.
It's important to differentiate between the camps in the housing affordability debate - those who want there to be a housing crash so they can buy their first house, and those more interested in long term solutions to affordable housing supply for younger buyers and families.
Stalling the housing market would be easy enough and could be facilitated in any number of ways (e.g. punitive taxes) but since this would also kill dwelling construction dead in its tracks, it would hardly be desirable for the economy nor a long term fix for anything in a country with a rapidly growing population.
Without hearing Keating's points in full, it is hard to make an assessment of the thrust of his arguments, but as mentioned previously I do think that pension funds should form a key part of the solution to housing supply issues.
Given the margins and profitability data reported by Australia's major listed developers, it is clear that simply throttling demand for housing in order to push prices down will also choke supply in aggregate in the process.
A longer term solution to housing market supply issues should therefore, I believe, make use of the billions of dollars tied up in Australia's superannuation industry, which may be what Keating was driving at.
Australians said farewell to another former Labor leader and Prime Minister yesterday, Gough Whitlam, who passed away at the age of 98.
A giant of Australian politics, Whitlam will be remembered for being dismissed as PM by the Queen's representative in 1975.
A charismatic Prime Minister, Whitlam was once said to have been irked by a follower who continued to bark questions in his general direction concerning his stance on abortion, to which Whitlam famously retorted:
"Let me make it quite clear that I am in favour of abortion, and in your case, Sir, we should make it retrospective."
Mourning Whitlam's passing, observers wondered yesterday whether he would prepare for meeting his maker by taking the view that "I will treat him as my equal".