6 June 2023

Another Lowe blow: Reserve Bank governor's rental advice shows how out of touch our leaders are

| Ian Bushnell
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man at senate estimates

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.”

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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.

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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.

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devils_advocate12:28 pm 05 Jun 23

Raising the cost base for landlords should fix the rental inflation aspect, lmao

Inb4 “but competition will constrain the ability of landlords to raise prices”


Peter Herman12:50 pm 03 Jun 23

Gov.Lowe dosent care…he owned his own home
It’s time that ACT govt subsidised ACT housing with funds so that they (ACT housing) can repair and fix homes, instead of worrying about Calvary hospital
As usual this ACT Got have got priorities up their nose
There are so many vacant apartments in Canberra, but these Pollies have got homes, so do they care …I don’t think so and neither does Gov Lowe
They are all as bad as each other and basically ……stuff the taxpayer

HiddenDragon8:45 pm 02 Jun 23

“What is required are affordable houses and apartments for those who need them.”

Of course – but that’s not going to happen in an economy which has become so reliant on gouging as much revenue as possible out of housing.

State/territory and federal government finances, along with our banking sector and much of our domestic economy have been built on the twin pillars of rapidly growing population and ever-growing (in real terms) housing prices which keep the majority happy, or relatively so (particularly if they’re easily distracted), allow Dr Lowe’s well-paid colleagues In Treasury to paper over Australia’s real income recession and abysmal productivity performance, and leave the rest to get by on the bread crumbs which fall from the table.

There is no good reason to think that this will change until the numbers surviving on bread crumbs reach critical mass and force substantial policy change through the political process, and/or a major supervening event – such as a CCP invasion of Taiwan, which would kicks the guts out of the mining revenues that prop up the current economic model, comes along.

In the meantime, the nicely paid economists (public and private sector), along with the various other members of the chorus line of explainers and apologists who front the current system, will keep on dispensing “do as I say, not as I do” advice.

Acknowledging a fact isn’t advice.

Didn’t he also say something along the lines that the government leaves it up to the Reserve bank? When the only tool they have is interest rates which affect everybody? And didn’t he say that the government could apply taxes in a more targeted way to avoid the strain on the parts of the economy that can least afford it?

Honestly, did people think there wouldn’t be long term economic consequences for locking down for two years? This is peanuts compared to what’s still coming.

I’m still waiting for someone to point out where Dr Lowe provided “advice” to renters?

He was simply stating the economic reality of what is and will happen in the housing market where supply is not keeping up with demand, which leads to higher amounts of people per dwelling through price impacts.

Acknowledging a fact isn’t advice.

The Reserve bank isn’t in control of building houses, they have a very limited amount of mechanisms they can use to control inflation and Dr Lowe is not a politician.

People are so quick to get offended (the Twits going off instantly), perhaps they should listen and read what he actually said first?

Mark Nutting5:39 pm 02 Jun 23

I see you doing the rounds with this copy and paste response across various sites.
One wonders what your vested interest is?..
If you want to play the reductive semantics game and devolve to technicalities of language to mitigate his clear and obvious meaning and intent, then I guess that is your right, but I wonder to what end?

Do you support the ever increased pressure on vulnerable renters or are you a landlord who is also out of touch?

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