Is the Coalition prepared to die defending the housing bubble?

I don’t always agree with David Llewellyn-Smith but love his pithy style. Here he takes the Turnbull government to task over their housing and immigration policies.

Cross-posted with kind permission from Macrobusiness:

….Because that’s what it looks like.

We all know that the Coalition hearts the housing bubble. Everything it does spells undying infatuation:

• protecting property tax rorts;
• focusing only on supply-side reform and even then doing pretty much nothing;
• shelving any and all policy reform that might disrupt its smooth and burgeoning progeny, plus
• running a staggeringly huge immigration program despite widespread economic damage.

It’s the last point that I want to focus on today because that’s the one where Coalition bubble-love rubber hits the road for its electoral prospects.

Since the WA election, Coalition polling has been devastated. A little bounce in Newspoll has been wiped out by landslides against the government in Ipsos and Essential polls. Moreover, the carnage has been just as apparent in the Coalition’s primary vote which has hemorrhaged voters to One Nation. The latter has been unaffected by the WA election despite doing less well than expected.

The major change in politics since the state result has been a commitment by One Nation to never ally with the Coalition again. The fringe party has realised that such pragmatism is lethal to its prospects.

This simple truth seems yet to have filtered through to the federal Coalition. As One Nation takes a material portion of its vote, and that vote refuses point blank to ally with it, there is ZERO chance of the Coalition winning a federal election ever again, and probably not at the state level either. While One Nation exists in this form, the Coalition has effectively ceased to exist as a political force.

One might have thought that the prospect of NEVER WINNING ANOTHER ELECTION might be enough to trigger some soul-searching in the party. And it has done a little. Do-nothing Malcolm has switched from toying with random ideas to deploying random ideas but it’s still all at the margins and is meaningless:

• 18c reform won’t move the needle;
• contradictory coal and hydro investment won’t move the needle;
• a retrograde company tax cut won’t move the needle;
• a supply-side housing affordability Budget won’t move the needle.

All together they might nudge it a little but it won’t be enough. Nothing like it.

Indeed, I’ll go so far as to say that the Coalition could do the following immensely popular policies and it would still get clubbed from office:

• abolish negative gearing;
• install gas reservation;
• offer tax cuts.

The problem is that these are all cyclical fixes for what is a structural shift to One Nation driven by one very simple truth: Australians are done with high immigration.

That’s Pauline Hanson’s primary appeal. She makes little sense on other issues and is bat shit crazy on many. But her one great power, the one that vibrates deep in the bowels of every Australian that is marginalised by house prices, falling wages, can’t get a job, is fearful of Islam or just a bigot, or is just plain pissed off at the direction of the country, is the deep and legitimate truth that running a mass immigration program during a period of high unemployment is treasonous economics.

Thus there is only one policy shift that can change the Coalition’s fate and it is as plain as the nose on Pauline Hanson’s face: cut immigration and cut it hard.

Cutting immigration back to 70k per year or less would completely shift every electoral parameter as the Coalition:

• finally had a housing affordability policy to put up against Labor’s negative gearing reforms;
• finally had an environmental policy to put up against the immigration-hypocritical Greens;
• could gut One Nation overnight and go to work on wiping it out by exposing the loons as weakening polls divide them.

This one policy shift would put the Coalition instantly in the running for the next election even if it were Do-nothing Malcolm that did it.

So, why does the Coalition suffer from such suicidal bubble-love that it can’t or won’t grab this lifeline?

• many Coalition MPs are personally leveraged to the bubble so they’ve their own financial interests in mind;
• as yesterday’s revelations about the MPs that prevented negative gearing reform showed, they are political hacks with terrible policy judgement;
• they are bereft of the intellectual depth and corporate memory to contemplate alternative economic models. Cutting immigration to 70k would take pressure off eastern capital house prices enabling further rate cuts and a lower currency;
• the Howard and Costello myths make this even worse,
• and, the Coalition is closely wedded to the business interests in banking, retail and construction that benefit from high immigration even as the net result is negative for the wider economy.

I’ll add one more factor which appears increasingly important. Career politicians don’t care for their own political party or its nominal values as they used to. The dominant ideology of unglued self-interest comes with the wonderful fringe benefit of not having to take responsibility for anything. Contemporary Coalition MPs see party membership as a gravy train to private sector riches in board positions, lobbying roles and other forms of ‘control fraud’ in the very sectors that thrive on the bubble. So, for them, arbitraging the fate of the party for personal gain is all just a part of being a good liberal.

Backing self-interest used to work in political forecasting but does this rabble even have that in them?