Interview with Alan Jones, 2GB

Friday, 18 August 2006

7.15 am

SUBJECTS: Housing affordability, land shortages, Telstra, fuel prices

JONES:

The Treasurer is on the line, Treasurer good morning.

TREASURER:

Good morning Alan.

JONES:

Thank you for your time.

JONES:

Now this is a big issue. You are saying that the New South Wales Government is pushing up housing prices because it won’t release land?

TREASURER:

Yes. We don’t have a housing affordability problem in Australia, we have a land affordability problem in Australia and particularly in Sydney. Now I released a report on Monday of this week which showed that although building costs have not risen very much in the last 30 years

JONES:

In other words your bricks and mortar and so on

TREASURER:

your bricks and mortar, the cost of the labour to put it together, the tiles that go on the roof and everything else, it hasn’t risen much at all over the last 30 years. But the price of land has multiplied seven times in Sydney and the reason for that is that State Governments predominantly, but also local councils, are not releasing enough land for urban blocks.

JONES:

I mean the last big land release in Sydney was in 1990 in Rouse Hill.

TREASURER:

Well that is right and because you have got people moving in all the time, people wanting to start families, but you aren’t releasing enough land to meet the market, the price is just escalating and it is escalating particularly to hit first home buyers. Actually this is an area where the State and local governments could really make a big difference in improving the ability to get an affordable home.

JONES:

Okay now let me ask you another question. Do you think there is an ideological and philosophical issue here, that there are some governments and some politicians who believe in this medium density stuff, where you keep going up and put people into high rise. In other words, it is a deliberate policy to take people away from the orthodox housing of 20 years ago into high rise, called urban consolidation, and this is the way to achieve it.

TREASURER:

I do think there is a big ideological component. You some times hear people throw off at what they call McMansions in outer suburbs, and what they are doing is they are throwing off at people who want to live in suburbs, in free standing homes, where they have got room to raise their children and a backyard. There is nothing wrong with that. That is the Australian way, that is what people want. The reason why these houses are being built is they give people room, particularly room to have children and to have a bit of a backyard. So I think there is an ideological view against them in some of these planning departments. There is also a financial view that some of these State and local councils have decided that if they can pack more and more people into the existing areas then they can save money because they won’t have to put additional sewage

JONES:

But as you know that is the crisis isn’t it. You are putting more and more people in, and every one has a couple of bathrooms and a dishwasher. We have done nothing about increasing the supply of water, done nothing about increasing the supply of electricity and nothing about the services or having new parks or football fields or whatever, we are just increasing the density of the precinct.

TREASURER:

Absolutely, just packing people into the existing services, the existing services have been there in some cases for hundreds of years and of course they haven’t been renewed at all. The governments think this is cheaper because they don’t have to build new sewers or new residential roads or whatever, and as a consequence of that people are being packed into smaller areas and prices are going up.

JONES:

Where do the public fit into this, I mean while urban planners as you say talk about medium density development and the joys of inner city living, many families prefer a garden to call their own don’t they?

TREASURER:

Absolutely. Families want some room for their kids to play in the backyard. They are often worried about the safety of the kids, they want to know that the kids can play somewhere where Mum and Dad can keep an eye on them, they can have a swing or whatever in the backyard, and they are prepared to move quite some distance out from the city. But not everybody works in the city of course. This is the other myth, that everybody commutes from outer suburbs right into the CBD.

JONES:

Okay well you are the pay master, you’re the boss, you’re the Treasurer here and you see all these figures, I mean years and years we used to think when we were trying to determine how we could afford a home, that a home was about three time average weekly earnings. It is now, here in Sydney, at least six times and for first home buyers nine times the median family income. What future do these people have?

TREASURER:

Well this is the whole point. This is not because the price of their house has gone up, this is the point I keep emphasising. It is the price of the land that has gone up and that is because as the population grows, instead of doing what we did in the forties and the fifties and the sixties, which was to release land so that people could get a block of land at an affordable price, you have got land being locked up, so you have got a growing population, land locked up so more and more people are competing for the very few blocks of land that are coming on to the market and that is what is driving up the prices.

JONES:

I agree with you entirely. Can I ask you about Telstra, in early 2000 you said if Telstra is going to be caught in a position where it is half privately owned and half government owned I don’t think it is going to be a good outcome. You said Telstra should all be either privately owned, or if people really think if nationalisation and government ownership is necessary, they ought to have the courage of their convictions and nationalise it, that’s in 2000. Now six years on Telstra is still half private and half public and if the sale goes ahead I guess a substantial share will still remain in public ownership through the Future Fund. Do we need, in light in the awful mess that it seems to be in, re-nationalisation of Telstra?

TREASURER:

Well I wouldn’t advocate that. My answer is to put it all in private hands, but I said to those who believe it should be in government hands, there is no point in just having half of it in government hands you really ought to have the courage of your convictions and go for full government ownership. I want to go the other way. I think it is best in full private ownership which most of the telecommunications companies around the world are so…

JONES:

The trouble with private ownership is of course shareholders are looking for short term profits and short term profits can sometimes stand in the way of long term telecommunication benefits.

TREASURER:

Well you have got to bear in mind that Telstra is competing with a whole lot of other companies, Vodafone, it is competing with Optus, these are all privately owned.

JONES:

But we seem to be falling further behind don’t we, as other companies move to high speed internet technology based on optical fibre all the way to the home, and we had the race years ago didn’t we, between Telstra and Optus to roll out duplicate hybrid fibre, coaxial cable networks covering half the country. That left everyone to wait for a decade for decent broadband access and now we are not even going to get that.

TREASURER:

Well I would say I think that people expect Telstra to look at the long term interest of their shareholders. They expect the management to focus on the business and I think it is important that management does focus on the business in the interests of all of the shareholders.

JONES:

Are you happy where things are?

TREASURER:

I would just say to the management that you are responsible to your shareholders, you better have a very careful look at how the business is going and make sure you are acting in their interests.

JONES:

Well just let me put this to you, some people would say that perhaps the only way out, and I appreciate what you are saying about the international trend in this, but the Government has got a majority ownership, it should then appoint a board and chief executive committed to acting in the national interest, and get on with the business of bringing it up to speed with Japan and other countries who are delivering fibre into the home to allow high speed internet traffic uploads and downloads – we are miles behind all that.

TREASURER:

Well I think that you must bear in mind that the Government does have programmes, particularly to extend in rural and regional areas access to broadband. We pay for that directly. We just make the money available and that is paid out of many of our of own programmes. As for the operation of the company itself, we have to bear in mind that the company has private shareholders, it has got to act in their interests, it also should be acting in the interest of all the shareholders including

JONES:

Can that be in conflict with the national interests?

TREASURER:

It shouldn’t be. If you have got the right regulatory system it shouldn’t be. And sometimes in the national interest the Government has come to along and it has set through a private company various other objectives, which we have done in terms of universal service obligations, sometimes the Government has to fund extensions which we have also done, particularly in relation to extending rural and regional areas.

JONES:

Let me ask you this. With the focus on LPG this week, a lot of focus on it and all sorts of incentives for people to convert and to sell and so on. All my correspondence tells me now that the price has gone from 36 cents a litre to 57 cents a litre. How can this be, how can we be charging 57, 59 cents a litre today when two months ago we were paying 20 cents less. Now Graeme Samuel told the Senate petrol inquiry, and I quote his words price gouging and profiteering are not defined in the law, nor are they illegal conduct under the Trades Practices Act. So for the poor motorists is it just open slather?

TREASURER:

Well if there is any evidence of price fixing, if it looks as if anybody has basically got together with one of his competitors and said we will raise the price

JONES:

I don’t think that is the argument. The profiteering is the argument.

TREASURER:

well price fixing, any fixing in a market is illegal.

JONES:

And hard to prove.

TREASURER:

Well we did have a case relating to some service stations in Ballarat, where they were given $20 million in fines.

JONES:

If Graeme Samuel says price gouging and profiteering are not defined in the law nor are they illegal conduct, they should be illegal conduct. Shouldn’t the law be strengthened? Shouldn’t Graeme Samuel be coming to you as the Government and saying, well listen you better tidy up this

Trades Practices Act because as things stand now profiteering isn’t defined, it is not illegal, so the LPG price has gone from 37 cents a litre to 57.

TREASURER:

Well can I tell you Graeme Samuel has a well funded organisation and you are quite right if he believes there is an area where there is a defect in the law he should come to us and recommend to it to us.

JONES:

I mean you would think that profiteering would be illegal conduct wouldn’t you?

TREASURER:

Well it really depends what you mean.

JONES:

Price gouging ?

TREASURER:

It depends what you mean. Let’s suppose there’s a shortage of bananas.

JONES:

Well the price will go up.

TREASURER:

Well, okay

JONES:

We have got a stack of LPG though Peter.

TREASURER:

Well come back to bananas, I am just saying if, there are various degrees

JONES:

Prices are always a barometer of scarcity so if there is a shortage of bananas we know why the price has gone up, but there is LPG everywhere.

TREASURER:

Well with bananas, suppose they take their price up from a dollar to 13 dollars for a kilogram, is that profiteering because there is a shortage?

JONES:

Well you are the Treasurer. Aren’t you lucky that the news is coming up. Have a good weekend.

TREASURER:

We will finish this when I am next back on the programme.

JONES:

Okay, have a good weekend. Thank you for your time.