A very good speech on the housing market from Treasury's Dr Steve Kennedy, which clearly aligns Treasury with my own views as first articulated in the 2003 Prime Minister's Home Ownership Task Force report. This also accords with the recent shift in the RBA's position on the housing demand/supply debate. My only quibble is the spelling mistake in the speech, which I have brought to Treasury's attention ("ize" should presumably be "size"). This is the second such mistake I have found after identifying a similar error in a Ken Henry speech. I would suggest Treasury make use of a spell-check before posting this stuff up on their website. Anyways, this is Steve's conclusion, which gives you a feel for his views:
"There is no doubt that an inefficient housing market leads to lower wellbeing. While it is difficult to be precise about cause and effect, the Australian housing market does appear to lack flexibility and seems unable to respond effectively through increased supply to sustained demand. Moreover, it seems likely that in order to improve housing outcomes for the less well-off we need to enable a more efficient market that would lead to an increase in the supply of housing and in turn lead to lower housing costs.
I have spoken about only one area where policy makers might reconsider their approach to improve the flexibility of the housing market and that is in the area of infrastructure charges. And this may be only one of a number of blockers along the housing supply chain.
I have not had time today to discuss the inter-linkages of the housing market with other areas, namely its dependence on infrastructure and concentration in cities. The housing market does not exist in isolation; it must be connected into other areas through a range of utility, transport and telecommunication networks.
The Secretary of the Treasury raised some of these issues in a speech earlier this year when he asked what our major cities would look like if they were more intelligently planned with supporting infrastructure in the form of utilities and transport networks that were designed carefully and priced accurately.
One of the outcomes entertained was the potential of such arrangements to engender lower per capita natural resource usage. Other outcomes are likely to include improved housing supply, increased productivity and greater social cohesion.
Of course, it is much harder to provide solutions to these complex challenges than it is to identify them but there is no doubt the solution begins with good communication between all levels of government and their advisers. In this light, thank you for the opportunity to talk with you today."
