The pollsters claim that the coming federal election will be decided on cost-of-living issues, and there’s pile of speculation that Anthony Albanese’s Labor government may call an early election to take advantage of the long-awaited Reserve Bank of Australia (RBA) interest rate cut on February 18.
There will be some relief for borrowers from a lowering of interest rates, but will it significantly ease the cost-of-living crisis?
The graph above says no. Let me explain.
People struggling to pay off a home mortgage might be relieved, but people wanting to buy a house might will find prices going up as more buyers (speculators, as well people looking for homes) enter the market because borrowing becomes cheaper.
For the majority of households, housing is their single biggest cost. A recent survey of key marginal seats in Western Sydney found that between 84%–88% of people were in financial stress because of housing costs.
As the graph shows, wages have fallen way behind housing prices.
In addition, rents have risen, nationally, by an average of 36% in the past four years, while incomes have only risen 13%, according to a survey by CoreLogic.
The small interest (and the RBA warns it may only be temporary) rate cut will simply not close the gap.
Neither of the major parties has proposed any real solutions to this fundamental aspect of the cost-of-living crisis — and they won’t.
Why? Because it will cut into the profits of the billionaires and big corporations they loyally serve (and which they hope will donate big bucks to their respective election campaigns).
To really address the cost-of-living crisis, here are four key things that need to happen:
1. Increase wages and social security payments to close the gap with housing and other essential household costs;
2. Impose a nation-wide rent cap;
3. Liberate housing from the speculators market with a publicly funded program to build good quality, ecologically sustainable public housing, that is available to the most marginalised, as well as all who need it; and
4. End tax breaks for landlords and speculators that have made housing unaffordable, and put that money into building public housing. The Australia Institute calculated that negative gearing and the Capital Gains Tax discount cost the budget around $20 billion a year, more than twice the $8.4 billion state and territory governments have spent on public and community housing over 2022–23.
[Peter Boyle is running for the NSW Senate for Socialist Alliance.]