Angus Taylor warns entrepreneuralism at risk from housing affordability crisis
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The news: Opposition treasury spokesperson Angus Taylor is warning that a failure to improve home ownership rates could have knock-on effects for entrepreneurship, with founders typically relying on their home to secure business lending.
The context: In a 16-page speech for the Warren Hogan Memorial Lecture, Taylor further rebuffed the “traditional government response to an economic malaise” via stimulating demand, saying this is undertaken under the assumption that slowdowns are cyclical rather than structural.
He said that Keynesian “demand side thinking” has become dominant in policymaking, including central banks and treasuries, and at its extremes has spurred on modern monetary theory adherents and justification for more government spending.
To fix the structural challenges, he said the only solution is an “expansion of the productivity capacity of the economy” but pointed out that labour productivity has recently collapsed.
And he encouraged local economists to undertake further work in the Australian context on the impact of a ramp up in government spending alongside supply shocks.
In the speech, Taylor outlined five focus areas for the opposition as the federal election draws closer. He reiterated his “back to basics” economic agenda, which aims to focus on fiscal rules and spending reform, regulatory reform, energy policy, housing policy and tax reform.
For tax reform options, he re-stated the commitment to make the Instant Asset Write Off a permanent feature for businesses and he said the first priority of a Coalition government would be “driving sector neutral investment settings”.
But he said that of all the challenges on the list, housing was “the most important to get right”.
Taylor said there were “three dimensions” to the challenge of collapsing home ownership. At the top of the list is security, and making it easier for Australians to buy a property. This includes the Coalition’s plan to allow superannuation withdrawals to buy a first home. He wants to improve serviceability by “managing budgets and fiscal policy” to help decrease pressure on inflation and interest rates. And boost supply, as well as managing population growth.
What they said: "Locking Australians out of home ownership is not just morally wrong but economically reckless," Taylor said.
"With 50% of small business lending secured against the family home, it is also a threat to our entrepreneurial culture.
"The great Australian dream of home ownership is integral to our national character and the aspirational drive that fuels our economy."
Taylor spent a significant portion of his introductory remarks re-casting the inflation debate, and criticising government spending.
“In simple terms, a sharp growth in government spending combined with supply shocks make for a deadly combination of inflationary pressures and constraints on economic growth,” he said.
“Risks of persistent inflation or new surges of inflation are real, and inflation is the price we pay for overstimulating the economy.”
The source: Angus Taylor Warren Hogan Memorial Lecture
