The most basic rule of economics is supply and demand. When supply exceeds demand, prices drop. When demand exceeds supply, prices rise.
Currently, demand for housing in Australia far outstrips supply. Yet, everyone acts as if prices shouldn’t be rising. And rise, they have: stratospherically. Consequently, we have a housing crisis that is leading to unprecedented levels of homelessness. Worse, many of the homeless are not the traditional bums or drug addicts: they’re ordinary people who just can’t afford skyrocketing rents or mortgages.
Yet, the very people who agitate most loudly to bring down prices (if you’re a lucky property owner, rising prices are a pretty sweet gig) consistently ignore the basic rule of economics: supply and demand.
To cut prices, we must either increase supply or reduce demand. But, with its scarce availability of arable land, ever-expanding urban sprawl is a really bad idea in Australia. In any case, we simply can’t build houses fast enough to keep up.
Which means the only realistic option is reducing demand. Yet, we’re doing the exact opposite. The Albanese government is ramping up immigration to levels never seen in Australian history: 1.5 million immigrants, the entire population of Auckland, in just the next three years.
Almost no one in the political and business elite, or in the chattering classes, wants to point out the lunacy of this proposition. Of all people, the Reserve Bank is the only entity even close to grasping the nettle.
“Recent data indicate that the upside risks to the inflation outlook have increased and the board has responded to this.”
Its response is the only one it has to hand: raising interest rates. Which only exacerbates the housing crisis further. Still, one can imagine the RBA drumming its heels in frustration at the obtuse, inflationary stupidity of Anthony Albanese and his inept government.
“If we’re going to have two per cent more people in the country, we need two per cent more capital, and that requires investment by business and investment by government.
“Solving the housing problem, I think that’s the single biggest thing we could do. And then we’ve got to build the transportation infrastructure to support that.”
These are the two biggest outcomes of the mass immigration Ponzi scheme that the elite either don’t see or won’t acknowledge: migrants compete with existing Australians for houses and flats, and infrastructure is groaning under the weight of hundreds of thousands of more people, year on year. Houses crammed, cheek by jowl, for miles without end – once-country towns turned into outer suburbs. Freeways jammed with millions of cars commuting for hours every day just to get to work. Weeks, even months-long waits to see a GP. Schools bursting at the seams.
And just never enough houses.
“Are there two per cent more houses? No.”
The ruling dogma of the elite is that if you just shovel more and more people in, it will magically solve all our economic problems. This is, in a word, nuts.
This is called capital shallowing. As the RBA suggests, it happens when you forcibly grow your population without a plan to accommodate it.
We saw this phenomenon across the last cycle as cheap foreign labour displaced investment and automation. Now we have less capacity on the supply side owing to Covid stimulus, and the RBA is clearly concerned the shallowing is driving inflation in areas like housing, business investment and energy.
In short, the RBA is now hiking rates as a direct attack on Albo’s mismanaged mass immigration program.
This exposes how ideologically corrupt Albo’s plan is to deliberately run mass immigration into supply-side bottlenecks in order to inflate rents and house prices for vested interests.
As governments will, Albo and Treasurer Jim “Zippy” Chalmers are blaming everyone else for the economic agony they’re inflicting in direct contradiction of their election promise to ease the cost of living. Their biggest whipping-boy is the RBA.
The RBA should spell it out. Something along the lines of: ‘The Albanese government has no plan to accommodate its lunatic mass immigration wave and we are forced to hike rates as a result.’
MacroBusiness
Unfortunately, as economists will, the RBA is resorting to near-impenetrable economists’ jargon.
A bit of plain-speaking would go a long way to exposing just how economically clueless and damaging the obsession with mass immigration really is.