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The data is now five years old and anecdotally has obviously worsened since then -- house prices closer to the CBD, especially in Sydney and Melbourne, have continued to rise faster than those further out, so the gap between them is almost certainly much wider now than it was in 2009-10.
Last week I spoke to one of the people who did the research, and he agrees.
The beautiful thing about this research is that it clarifies something we all know already -- it’s obviously true.
But it also stands as an indictment on Australian governments.
The reason inner-city prices have gone up much faster than the outer suburbs, and that capital city house prices generally have almost doubled in 10 years, with Sydney prices in particular surging 35 per cent in three years, is because a lack of infrastructure investment has made it unviable to live further out.
Here is another set of charts, this time from the Australian Railways Association. They show government expenditure on road and rail infrastructure (not including private toll road projects).
The failure of Australian governments to invest in public transport -- apart from in Victoria -- has become a national disaster by raising house prices and therefore all other costs.
Partly as a result, the cost of doing business in Australia is at least 50 per cent higher than almost anywhere else in the world.
As we showed last week with research from JP Morgan, wages are 70 per cent higher and the other basic business cost -- energy -- is roughly double.
The question is: why? And more importantly, what can be done about it.
The easy answer to the second question is to devalue the currency and thereby reduce export prices at the cost of increasing import prices, and therefore Australians’ real incomes.
That’s superficially easy, but note the lengths to which the new Greek government is going to avoid it, and instead to stay in the eurozone and reform its economy.
It’s far better to do what’s necessary to improve productivity and reduce costs.
So what’s the problem in Australia? Why are costs here so much higher than elsewhere?
The answer, in essence, appears to be under-investment in land and over-investment in gas and electricity transmission.
Gas and electricity prices in Australia are soaring even though oil and coal prices have crashed and the carbon tax has gone. Why? Because network operators overestimated demand and spent too much on upgrading the delivery system, and the cost of that has to be shared among fewer and fewer customers.
As Tristan Edis wrote recently in Climate Spectator, “declining energy demand thanks to the growth of solar PV and improved energy efficiency is hitting not just the power generation sector but also, importantly, the retail side of the power sector.”
The forecast increase in demand for both power and gas, due to the increasing size of homes and installation of air conditioning, simply didn’t happen because of energy efficiency and solar PV.
This article first appeared on www.theaustralian.com.au
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