In their ‘theses on the crisis’, which I posted a month ago, Panitch and Gindin present the ascension of bank nationalisation onto the political agenda as an opportunity for some revolutionary leverage: it “provides an opening for advancing broader strategies that begin to take up the need for systemic alternatives to capitalism”.
This doesn’t have much resonance in Australia, because the banks here are not in big trouble; in fact they’ve been strengthened by the collapsing fortunes of their finance company rivals. Bank nationalisation is not on the agenda.
I wonder if housing isn’t a better focal point here. Australia hasn’t seen a housing bust to the extent the US and UK have, and it doesn’t seem likely to, except in the top end of the market. The reason is that housing demand has been outstripping supply, due mainly to population growth. According to Treasury, the increase in demand for dwellings started taking off above the supply of new dwellings in 2005.
New housing construction has fluctuated around a fairly constant mean since at least the early 1990s. The construction slump of the mid-1990s reflected a housing stock that had grown faster than the demand for it. But demand caught up, and for most of the next decade, supply and demand circled one another. So far, so good, the economist might say, supply and demand correcting each other and tending towards balance.
But the market adjustment story has some problems. Between 2000 and 2006, the median first-home price doubled. Why, when underlying supply and demand for dwellings were reasonably matched? The answer lies in the investment demand for houses and the easy availability of finance for it.
Meanwhile the supply of new dwellings moved up and down around its long-run average. Why didn’t the rather deafening price signal motivate an equivalent expansion of supply? Presumably because the construction industry has limited capacity, and faced workforce and materials constraints on its growth.
Now, given projected population figures, a decent case can be mounted that housing demand is going to outstrip supply for the foreseeable future, which is bad news for people who don’t own houses. The real estate industry can argue that there was no bubble in Australian real estate, that investment buyers were correctly forecasting the future. But if this is true, the price mechanism has epically failed to increase the capacity of the construction industry to provide for society’s housing needs.
If Treasury’s population projections are accurate, the construction industry needs to be much bigger, in absolute terms and as a proportion of the workforce, if these needs are to be met. There are those who see that as Australia’s way out of the recession – a movement of workers out of manufacturing and mining and into construction… But that requires a (financed) boost to construction demand from somewhere, which so far exists only in government and industry prayers.
The alternative is demand-side adjustment, which is what’s taking place now. This means the burden falls predominantly on renters – a pool of renters swelled by frustrated would-be homebuyers (although house purchase affordability has increased to some extent with the fall in interest rates and the increased first-homebuyers’ grant). Renter adjustment means some combination of more crowded households and an acceptance of higher rents. Higher rents are a flexible pressure valve because rental demand is pretty inelastic since everyone has to live somewhere, so it will crowd out other items in the household budget before households exit the market (to live with relatives, in caravan parks, etc. – which, incidentally, are already trends too).
Finally, demand side adjustment could come from reduced immigration. This is the reactionary solution. While I don’t doubt that this is going to a chronic pressure point in Australia, it’s not a nice way to go. (Disclosure: author is an immigrant and renter.) It also just shunts pressure elsewhere in the system, into the pensioner quagmire, since increased immigration is Treasury’s solution to an ageing population.
It’s obvious all over the world that housing is a fragile point in post-2000s capitalism. Housing is both a human need, and a financial vehicle for savings and speculation. House prices in Australian politics are what Americans call a ‘third rail’, i.e. what governments stay clear of for fear of instant electrocution. The Labor government’s strategy on housing focuses entirely on that small subset of policies that can be portrayed as simultaneously supporting house prices and making them more affordable. Unfortunately, ‘more affordable’ means ‘cheaper’, which, you will note, is synonymous with ‘lower prices’.
For a large proportion of the populace, including much of the working class, the house is almost as important as a financial asset as it is a place to live, given the uncertainty of living standards after retirement. Therein lies a deep contradiction, which only a radical socio-political shift can resolve.