June 17th 2017

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Articles from this issue:

COVER STORY The Great Barrier Reef is dying? ... Again?

CANBERRA OBSERVED McCain, Keating wade into South China Sea

EDITORIAL No heads roll despite quarantine foul-ups

EDUCATION FUNDING With Gonski reboot, Turnbull taps in to way to lose Catholic vote

INDIGENOUS AFFAIRS Aboriginal recognition in the constitution?

NATIONAL AFFAIRS Low job prospects keep a generation at home

INTERNATIONAL AFFAIRS Donald Trump has the world in a spin

EDUCATION FUNDING Gonski numbers shrink in the light of day

SAME-SEX MARRIAGE Qantas bans pensioner: an abuse of process

MUSIC Jim Black: accent on rhythm

CINEMA King Arthur: Legend of the Sword: The East End treatment

BOOK REVIEW Apocalypse and redemption

BOOK REVIEW Poems exhibit delicate strength


ELECTRICITY Bad science + bad economics = bad policy

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Low job prospects keep a generation at home

by Chris McCormack

News Weekly, June 17, 2017

A perfect storm of unaffordable housing, high unofficial unemployment rates and negligible wage growth are conspiring to drive down the standard of living in Australia and abroad. It is fostering resentment as many young people are forced to live with their parents well into their 30s. Moreover, their resentment is leading to the rise of populist political parties.

Thirty-one per cent of 18 to 34 year olds and 53 per cent of 18 to 24 year olds have never left home, according to the Australian Bureau of Statistics 2012–13 Multi-Purpose Household Survey, an increase from 27 per cent and 47 per cent respectively since 2006–07.[1]

It is a trend that is not unique to Australia. According to the Census Bureau’s American Community Survey, in the United States an estimated 24 million 18-34 year olds lived in their parents home in 2015, an 8 per cent increase from the previous decade; the rate had increased in every U.S. state except North Dakota since 2005. In California the increase in the last decade was 10.2 per cent. An estimated 9.3 million 18-34 year olds in California live with their parents.[2]

The high cost of living, in particular of housing, is being blamed for the rise. According to Megan Joseph from San Francisco-based organisation Rise Together, many families were being forced to move to other, less expensive areas of California.

“ ‘What that does for young people is that they’re moving from areas from where there are high opportunities to areas where there’s low opportunity,’ she said. ‘It all comes down to the common denominator underlying all the displacement for young people and their families, which is cost of housing.’ ”[3]

The survey also reveals men’s earning capacity. It is estimated that, in 2015, 41 per cent of men aged 25-34 earned less than $US30,000 a year; the percentage that earned the equivalent to that amount in 1975 (allowing for inflation) was 25 per cent.[4] Americans are also postponing marriage and starting a family. In 1970, eight in 10 people married by age 30; in 2015, eight in 10 married by age 40.[5]

It could be argued that the lack of employment, wage stagnation and higher cost of living is preventing many from realising their desire to marry, form a family and buy a house or even afford to rent.

Recently in The Australian (“Be honest about unemployment: it’s above 15 per cent”, May 22, 2017), Adam Creighton argued that several factors are masking the real unemployment rate in Australia, almost tripling the official figure of 5.7 per cent to 15 per cent. Once the underemployed are taken into account, the figure jumps to more than 23 per cent. Creighton claims the number of unemployed in Australia at more than 2.26 million persons.

A couple of counting peculiarities are heavily skewing the unemployment figures. For instance, people who work more than one hour per week are classed as employed, and a narrow definition of those who count as being in the labour force is used. Creighton even cites Senator Penny Wong, who in 2007 admitted that the unemployment numbers were not all they seemed and who suggested that the real number of unemployed was around 2.3 million.

The Australian Bureau of Statistics conducted an annual survey between 1993 and 2013 of those considered “not in the labour force”. It regularly showed 22 per cent of them were unemployed but did not qualify because they had not applied for a job in the last four weeks or couldn’t start work immediately. The survey has not been done since 2013.[6]

To a lesser degree, the wage stagnation that has blighted the U.S. is affecting Australia. The last 12 months of wage growth to March 2017 was the slowest since ABS records began in the 1990s, at 1.9 per cent.[7] In a vicious circle, high unemployment and job insecurity means workers’ bargaining power is neutered.

Australia’s severe housing affordability problem is borne out by evidence adduced in the 13th annual Demographia International Housing Affordability Survey: 2017. Contrary to what some Canberra politicians are spouting, housing affordability is not just a problem in Sydney and Melbourne. The survey uses a measure known as median multiple, that is, the median house price divided by median household income – with 3.0 or less being affordable and 5.1 and over being severely unaffordable.

The survey found that of the 406 housing markets surveyed worldwide, Australia was the third most expensive (5.5) after Hong Kong (18.1) and New Zealand (5.7). Sydney rated as the second least affordable major housing market, that is, with a population over 1 million (12.2), the highest ever recorded, after Hong Kong (18.1) and Melbourne (9.5), the sixth least affordable out of 92 major housing markets worldwide.

Of the 406 markets, 100 were deemed affordable, four of these in Australia. These included Karratha (2.1), Port Hedland (2.3), Kalgoorlie (2.6) and Gladstone (2.8). Of the 94 severely unaffordable markets worldwide, 33 are in Australia, including every major housing market, with an overall score of (6.6).

Of the 406 housing markets surveyed, four out of the 10 least affordable markets were in Australia, including Sydney (12.2), Wingecarribee, NSW (9.8), Tweed Heads, NSW (9.7), and Melbourne (9.5). Overall, Australia’s 54 housing markets received a severely unaffordable Median Multiple of 5.5.[8]

The survey noted that Australia had a generally affordable housing market (with a median multiple below 3) even in the late 1980s, before urban containment policies were implemented. Urban containment involves limiting development around an urban area and limiting or prohibiting greenfield housing development on the urban fringe.[9] Today all of Australia’s major housing markets have urban containment policies.

“In effect, governments implementing urban containment policy choose pursuit of a particular urban form at the expense of a better standard of living and less poverty,” the survey said. It continued: “By severely limiting or even prohibiting development on the urban fringe, urban containment eliminates the ‘supply vent’ of urban fringe development, by not allowing the supply of housing to keep up with demand, except at prices well above historic norms.”

It went on to point out: “High house prices are not a sign of a city’s success but a sign of failure to deliver the housing that its citizens need.” Moreover, it pointed out that such high housing costs were signs that governments were enforcing policies that specifically raised, not lowered, housing prices; and that, while “there has been no shortage of rhetorical concern … serious initiatives have been absent”.[10]

Housing affordability must be moved urgently to the top of every government’s agenda. Liberalising urban containment policies and combating rising unemployment and underemployment by stopping the flow of manufacturing and processing jobs to lower-cost nations would go a long way to accomplishing that.

In addition, our Government should pay close attention to U.S. President Donald Trump’s decision to pull out of the Paris climate agreement and end the ideological obsession with renewable energy. This is an obsession that is already destroying our energy security and driving businesses to the wall, even as taxpayers fund billions in renewable energy subsidies.

Until hard decisions are made along these lines, resentment will continue to rise, fuelling societal unrest and populist political parties. Maintaining the status quo is neither an option for the government’s survival, or the country’s.


[1] Jason Thomas, “More than half of Aussies aged 18–24 still live at home: ABS”, SBS Online, February 26, 2015.

[2] Tatiana Sanchez, “Most young people are living with parents, postponing marriage and kids, study finds”, The Mercury News, April 19, 2017.

[3] ibid.

[4] ibid.

[5] ibid.

[6] Adam Creighton, “Be honest about unemployment: it’s above 15 per cent”, The Australian, May 22, 2017.

[7] Wage Price Index, Australia, March 2017, Australian Bureau of Statistics, May 17, 2017.

[8] 13th Annual Demographia International Housing Affordability Survey: 2017, Rating Middle-Income Housing Affordability.

 [9] ibid.

 [10] ibid.

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