The Poor Have to Live With High Rents

The poor in Australia are doing it tough. While the economy is booming the price of housing has continued to rise. Despite the recent levelling off, further increases are forecast. With the higher valuation come higher monthly mortgage repayments and rental payments must keep up with this. Only one per cent of low income earners can afford to pay such rents. If you are on welfare and cannot get public accommodation forget it - you have to live on the street, unless you live with relatives and friends who can put a roof over yours head.

The real problem is not the cost of actually building a house. Modular housing can be purchased, but people who have new houses put up do not chose such basic designs. Rental housing is largely designed for the wrong people. Unless government takes the lead and actually builds modular housing for the poor the situation will stay the same. Costs involved in getting land ready for construction is the real problem. Land levelling and servicing is very expensive. Councils are the main reason for this. There is no competition is regard to charges. A builder must pay fees to councils at council set rates.

Without established affordable housing it is virtually impossible for a person to contribute to society by holding down a job. Even when learning job skills rents are very high for accommodation near educational institutions. User certainly pays in this regard. Low income earners are also competing with each other to get the cheapest third of advertised rentals. Plenty of houses are available in rural areas of course. Living off welfare payment is almost mandatory there because there is no work. By definition where there is work rents are high.

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Society

The Government Should Publish the Real CPI Figure

It is about time the Government informed the public about the true rate of inflation and increased payments to those who are entitled to it. Okay, unemployment is low but those living in rural areas depend on it to survive. They can continue to to rely on the unemployment benefit, or they can move to the city. That is the last thing we want - more people living in the major coastal cities.

The problem is that non-essentials are included in the CPI. This offsets the real inflationary increase in the necessities of life. Many do not know that essential goods have increased by a massive 8 per cent over the past year. The high dollar is "hiding" this by making imported non-essentials cheaper. Prices of such goods have actually fallen. Those on low incomes spend a higher proportion of their income on essentials like food, electricity, water, fuel and rent.

Oddly, interest rates are not in the CPI package. Curiously, it was taken out in 1998. In other words both political parties have been covering up the cost of living. Furthermore, Price rises in property are out as well.

Another important thing that the public is not informed of is the practice of discounting a price that hasn't changed (quality adjustment). If the price of something has not increased over a year you would think that this would have zero effect on the the CPI. This is not the case. The price of an electronic product will reduce the CPI even if it has not gone up. How does this happen? It is because the Government discounts the price of this non-essential by saying it is a better product due to technological improvement. It says you are getting more for your money and the price has fallen when it has not. This is purely a value judgement. Measures of inflation should contain factual data only. This is no more nor less than doctoring of figures which benefits the Government. Both political sides alter the CPI to make things seem better. Note how the Coalition passed over the CPI when the GST was introduced? A fully independent body should regularly revue the way the CPI figure is evaluated and this nonsense should stop.

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Economics

Australian House Prices Will Remain High

An IMF spokesman has a crystal ball and says house prices will crash in Australia. Me-thinks he is completely wrong. He says this will happen because houses in Australia are overvalued in relation to income with a large gap between rent and house values.

ANZ representative Paul Braddick says that low rents to average mortgage repayments is not an indication that property is overvalued. House price to income is also not a good guide to what house prices should be. Australians are still buying despite interest rate rises, but interest is still quite low. Obviously people feel their income can cover the cost. Prices are high in Australia due to one very important factor - property is in short supply. Nothing can be done in the short term to correct this. Indeed, tradesmen are holding buyers to ransom making them wait and pushing up labor charges. These factors also increase price.

The availability of land close to centers of employment is tight and supply is virtually fixed. The government is looking to free up land. Not much is out there though. IMF specialists have got it wrong in predicting a slump in Australian house prices. That's a certainty.

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