Floundering Liberals embrace interventionism as the walls close in

Conducting an intergenerational war on behalf of older generations against young people isn’t a good look for the government in a tight election contest. So the Liberals decided to make as a centrepiece of yesterday’s hoopla-free campaign launch a policy to… help older generations on housing.

Better yet, Labor agreed to support it. Politicians, huh? Can’t live with ’em, can’t live with ’em.

Another first home buyers subsidy scheme, ostensibly to help young people get into a property market moved out of reach by tax subsidies for wealthy investors and decades of policy stupidity by state and local governments. Operating as a loan guarantee for up to 15% of the value of a property, it’s an indirect subsidy compared to the disastrous original first home owners’ scheme, which directly flowed through to higher house prices without any benefit to market entrants, until Labor switched it to new housing.

But it will have a similar result — to the extent that anyone ever uses the scheme. Sensible borrowers won’t risk a mortgage of 95% of a property value and banks might be justifiably reluctant to lend to anyone who does. That and the the small size of the scheme, $500 million, means it will hopefully be marginal to the property market. Still, given the housing price falls that have occurred under this government, every little bit helps for our beleaguered home owners.

Scott Morrison knows perfectly well that that will be the impact. Just last week during his third debate with Bill Shorten he noted “in my experience, Bill, every time you subsidise something, it always pushes the price up”. He was referring to wage subsidies for childcare workers, which don’t actually push the cost of services up at all, and indeed should in an orthodox competitive market push prices down. Indeed, the Liberals normally have no qualms about wage subsidies and eagerly advertise a range of their own such programs; for some reason, for childcare workers it’s “communism”.

But Morrison was entirely correct about the impact of subsidy schemes when it comes to house prices — a 2012 report to COAG forensically established that subsidy schemes pushed house prices up in the short term and the long term. Still, what’s a little thing like consistency when you don’t have anything left to announce at a campaign launch?

Labor’s rapid endorsement of the policy minimises the capacity of the government to devote the final week to scaring the daylights out of voters about house prices, which is about all the Coalition has left given the stubborn refusal of the published opinion polls to shift at all.

But it leaves taxpayers with a dog of a policy that we can only hope will be too complex to enjoy more than token usage. At least there was some consistency from a couple of the usual suspects in the commentariat: Judith Sloan slammed the policy. “Subprime mortgages here we come. Fannie Mae and Freddie Mac for Australia.” The IPA’s John Roskam described it as “just awful.”

Correct.

Such an interventionist and economically irrational policy does illustrate how impending electoral disaster and the death of neoliberalism have left the Liberal Party ideologically unmoored. It can’t even effectively run a scare campaign on climate action or energy policy — remember the good old days when the government was going to use electricity prices as its election superweapon against Labor? — because of its internal divisions and the growing electoral demand for action on climate change.

The centrepiece of its campaign launch after six years of government ends up being a half-arsed intervention to put taxpayers on the hook for mortgages. Does the Liberal Party even stand for anything anymore?