For decades, the Australian "Great Dream" of home ownership has slowly transformed into a complex national crisis. While politicians of all stripes regularly offer "solutions," independent economist Saul Eslake argues that the reason the problem persists is far more cynical than a lack of policy ideas. The reality, as Eslake suggests in a recent interview, is that most Australians—specifically those who already own property—don't actually want housing affordability to be fixed.
The Math of Political Survival
The political calculus is stark. At any given time, there are approximately 150,000 aspiring first-home buyers in Australia. Even if we account for a million more who wish they could enter the market, they are vastly outnumbered by the 11 million Australians who already own their home and the 2 million who own investment properties.
This creates a "double standard" in our national economy. We celebrate when the price of almost any other consumer good falls, but when the cost of housing—the largest component of the Consumer Price Index—drops, it is treated as a national disaster. Politicians, well aware of these 11 million votes for "more expensive housing," are terrified of claiming credit for making homes cheaper.
A Shift in Purpose: Shelter vs. Wealth
Eslake highlights a fundamental shift in the Australian psyche that occurred about 35 years ago. Following WWII, housing was viewed as a basic human need for shelter and community. Today, it is primarily seen as a vehicle for wealth accumulation—a way to "get ahead".
However, Eslake poses a poignant question: "Ahead of whom?". The answer is uncomfortable: we are getting ahead of our own children and grandchildren. This intergenerational inequity is staggering. People over 55 currently claim 45% of all rental income and 62% of all capital gains in the country. Meanwhile, fewer than 5% of individuals under 35 have any rental income at all.
The Recent Budget: A Step Toward Reform?
The latest federal budget introduced by Treasurer Jim Chalmers attempted to address some of these imbalances by scrapping negative gearing for everything except "new builds" and adjusting capital gains tax discounts. Eslake views these as meaningful reforms—the kind of bold policy shifts rarely seen since the 1970s.
Yet, even these reforms are hampered by "grandfathering," which ensures that existing property investments maintain their old tax treatments. While Eslake dislikes this because it privileges people based on "birth order," he acknowledges the political necessity. Without it, the government would likely face an electoral wipeout from voters unwilling to have their "snouts taken out of the trough".
The Path Forward
If Australia is to truly address affordability, we must accept that the solution to expensive housing is, quite simply, cheaper housing. While a catastrophic crash is undesirable for banking stability, a moderate cooling of prices—perhaps 5% to 10%—would be a healthy development for society.
Until we stop viewing our homes as ATMs and start viewing them as places to live, the "crocodile tears" shed by politicians for the next generation will continue to ring hollow.
The following points summarise of the limited pathways for first-home buyers -
- Financial Support from Parents: Accessing the "Bank of Mum and Dad" (BOMD) remains a primary method for young Australians to enter the property market.
- Elite Career Trajectories: High-income roles, such as those following a double degree in law and commerce followed by employment at major firms like Goldman Sachs, represent one of the few professional paths to self-funded entry; and
- Intergenerational Wealth Transfers: Inheritance or "birth order" privileges play a significant role, as many younger buyers rely on wealth accumulated by older generations through existing tax benefits and property value growth.
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