RBA Governor Philip Lowe: “We need more people on average to live in each dwelling, and prices do that.” Photo: Senate Estimates screenshot.
Reserve Bank Governor Philip Lowe may believe he was stating the obvious about the high price of housing in Australia when he suggested that part of the solution lay in people staying with their parents or finding a share house, but his comments only confirm how out of touch and hapless our decision-makers have become.
“The way that this ends up fixing itself, unfortunately, is through higher housing prices and higher rents,” Dr Lowe told Senate estimates.
“Because as rents go up, people decide not to move out of home, or you don’t have that home office, you [get] a flatmate.
“The increase in supply can’t happen immediately, but higher prices do lead people to economise on housing.
“That’s the price mechanism at work. We need more people on average to live in each dwelling, and prices do that.”
He also said there needed to be more supply, especially in the face of population growth, but that would be a slow process.
But his sage advice to tenants facing steep rent increases is about as useful as his tough love message to mortgage holders who are likely to face another round of interest rate rises next week due to the latest inflation numbers, fed perversely by the cost of housing, including rents.
Dr Lowe’s troubled term at the Reserve Bank is coming to a close and many will say good riddance.
His assertion that ultra-low interest rates would be with us until 2024 sent a false signal to borrowers that have landed them in mortgage traps as the Reserve declared war on inflation and jacked up rates month after month in a dizzying climb.
Now his big insight for struggling tenants is to bunk in with anyone you can while the well-heeled take to the skies paying anything they want for the holidays they missed out on during the pandemic, also feeding the inflation fire.
Tenants didn’t need Dr Lowe to tell them that staying in or returning to the family home, or finding a flat or house to share the rent burden might be a strategy.
Those who can are doing it already, putting family loyalties to the test and exposing some to the risks that come with living with strangers.
About what others should do who can’t pursue that option, Dr Lowe is silent.
That’s the single parents, the families who have no room for a boarder anyway, students locked out of what previously would have been cheap share houses but are now let for prohibitive amounts and pensioners.
Dr Lowe may be well-meaning, but his tin ear and naive faith in the market when housing is one of the biggest market failures in the nation’s history is galling.
His views reflect a whole cadre of economists who are out of touch with the reality of people’s lives but whose theories continue to guide the policies that have helped deliver this mess.
He is right about one thing, though. It is going to take a long time to really fix this problem with such disparity between incomes and home prices and rents.
It won’t be enough to just boost supply in the hope that the market magic will work to bring down prices and rents because that is not necessarily a given.
What is required are affordable houses and apartments for those who need them.
That will require government intervention and unwinding three decades of policy settings that have turned the housing market into a casino and created an entitled landlord class unwilling to admit it is part of the problem.
Something Dr Lowe won’t be telling us.
Loading ...
