Scott Morrison, Australia's Prime Minister. Photo / Getty Images
Scott Morrison, Australia's Prime Minister. Photo / Getty Images
COMMENT:
Scott Morrison's latest plan to revive the economy shows that he has reverted to his old self – putting his re-election and the interests of those who voted for him above the economic health of the nation and the welfare of the most needy.
The Australian Prime Minister ishoping to kickstart Australia's economy with a home renovation boom, which he has named HomeBuilder.
Morrison won plaudits from even his harshest critics for his response to the coronavirus crisis. He put politics aside and supported the most vulnerable and hardest-hit Australians with generous JobSeeker and JobKeeper welfare payments. (If we could have a compound noun-led recovery, we would be in boom times.)
He also listened to the scientists and locked down the country to save lives, and stared down the self-interested business lobby calling for loser restrictions.
But his latest policy will deliver help to people who don't need it and is unlikely to deliver much benefit to the economy.
Morrison's "tradie-led recovery" provides $25,000 for homeowners to substantially renovate an existing home or build a new house. The government expects the policy will cost only A$688 million but will deliver a $15 billion boost to economic activity and "support" 140,000 direct jobs.
There are strict conditions underpinning eligibility for the grant. The renovations must be worth between $150,000 and $750,000 and the house can't be worth over $1.5 million. For new homes, the value of a property, including land, can't exceed $750,000.
It raises the question as to why this group of people is receiving government support.
Anyone who is contemplating buying a house clearly hasn't suffered too much from the coronavirus. Likewise, anyone who already owns a house and can rustle up $150,000 or more for a home renovation is clearly not struggling.
Yet at the same time, there are hundreds of thousands of Australians who have lost their jobs who could really do with the additional support.
And after a 30-year decline in social housing and rising home prices, there are many underprivileged Australians who don't have anywhere at all to live. This is the biggest challenge in Australian housing, but Morrison is ignoring it and instead spending money to improve the homes of middle-income earners in outer suburbs – in other words, marginal electorates. These are the people who need to vote for him if he is to win the next election.
The construction stimulus boost comes after official data showed building approvals in April fell by 1.8 per cent in seasonally adjusted terms to 15,294 new dwellings, although it might fall further. Even so, compare that to the devastation suffered by the tourism, hospitality and entertainment sectors and the fall seems pretty minor.
There's another problem with Morrison's policy.
Contracts have to be signed by December 30 and building has to start within three months of signing. For people already planning a renovation this may not cause too much difficulty – they'll have builders and plans ready to go. For the most part it will bring forward the economic activity, not create new activity.
Anyone who hadn't been planning a renovation and wants to get their hands on the $25,000 bonus will be in an almighty rush that will only push prices up if they can get their plans through councils soon enough to get their hands on the cash. Tradies will push up their prices and the homeowners risk ending up with shoddy renovations that will cost them and the economy more in the long-run.
Any pick up in construction activity is likely to be followed by another lull thanks to the bringing forward of projects.
Geoff Harmer, adjunct professor of architecture at the University of Adelaide, argues the HomeBuilder package isn't big enough or broad enough to reignite residential construction. To be useful for jobs, it would need to deliver an extra 60,000 housing starts, he wrote in an article on the academic news website The Conversation.
"Given the only people who will benefit from the grant will be those some way down the track to either buying or building, it is hard to guess what the additional outcome will be, but it would be surprising if the scheme generated much additional activity."
Certainly the economy will need support.
The policy comes after the Australian economy contracted 0.3 per cent in the March quarter which means, with the steep drop off in economic activity in the June quarter, we are in our first recession for three decades.
It's a shame Morrison has responded to this news by spending more than half a billion dollars on making his core constituents a little wealthier rather than using the cash to help the economy and people who desperately need the assistance.
