Subscribe to BrookesNews’ Bulletin
Bracks’ energy policies are pricing families out of the housing market
Gerard Jackson
While the Victorian Liberal Party is slowly eviscerating itself a mere nine months before the state election the bird-brained Bracks’ has, with impunity, been raising the cost of owning one’s own home. However, even worse was to come. Bracks is about to slug prospective new homeowners with a massive increase in costs. Why? To save energy. And while he is doing this he himself is wasting masses of energy and resources on grossly inefficient windmills
(Have you ever noticed how lefty politicians and bureaucrats always want us to consume less while those greedy, selfish capitalists strive to produce more for us to consume?)
He proposes to save energy by implementing very costly energy efficient regulation, thereby demonstrating to all those with some grasp of market economics (naturally, leaves out the Victorian Liberal Party’s hierarchy) that he has absolutely no understanding of economic theory. Fortunately the Productivity Commission has undermined Bracks’ stupidity by pointing out that it could find no significant evidence that such regulations reduce energy consumption.
I would go further and state that genuine improvements in energy efficiency actually increases the demand for energy. This is because such improvements amount to a drop in the price of a unit energy. In plain English, market induced reductions in energy are the same as reducing the prices of energy.* This is one of the reasons that Watt’s separate condenser helped bring about a significant increase in the demand for steam engines.
However, let us return to housing. One should note that those, like Bracks, who advocate these drastic and unnecessary regulations already own their houses, making themselves immune from the consequences of their legislation. Alas, the same cannot be said of those striving to find a better life for themselves in a new housing market, particularly the suburbs that our compassionate left hate with an undisguised passion
(I believe that Bracks is being encouraged to raise the costs of new homes by the Latte Left who are using these costly regulations to attack working class aspirations for better housing, the kind of housing these lefties sneeringly disparage as “Disney estates” and “McMansions”. Think of it as the revenge of the inner-city trendies).
This means that young couples will be forced to lower their expectations, meaning their living standards. Nevertheless, they can console themselves with the thought that Premier Bracks and his merry band of social engineers will be feeling smug and self-satisfied.
Apparently our Mr Bracks has been somewhat coy about the costs of his greenie plan to make housing a lot more expensive. However, I have been told that costs could range from $10,000 to $20,000 plus. Look on the bright side — for this you could save several hundred dollars a year.
If the additional cost is $20,000 and savings are a magnificent $600 a year then, in the absence of discounting, our proud house owner will break even in about 33 years and 4 months. Of course, if he saves only $300 a year he can look forward to breaking even nearly 67 years. Wow! Isn’t that something to look forward to?
If, however, we were to use a discount rate of 5 per cent the house owner will have made about $11,000 in 50 years. In other words, the government-mandated expenditure would never pay for itself. Nevertheless, this is what clever Labor politicians like Bracks, bureaucrats and greenies call a terrific deal. On the other hand, $20,000 invested at a modest 5 per cent per annum for 10 years would grow to $32,559.
Most people have to borrow to buy a house. Now what sane person would borrow an extra $20,000 over a 25-year period to save $300 to $600 a year on domestic bills? Not even Mr Bracks is that stupid.
Our meddling bureaucrats and politicians would argue that energy prices will rise. This flies in the face of history. Real prices for energy have been falling for generations. If there was any danger at all that the long-term trend for energy sources was signalling increasing scarcity markets would have already factored in this fact. (Commentators are forever confusing the short term with the long term).
Moreover, if energy sources did become increasingly scarce higher prices would signal this to consumers who would then make their own decisions as to how they would respond.
Basic economic analysis tells us that these so-called regulations do not save resources. In a free market prices signal relative scarcities. This is why we don’t try to use platinum or gold to wire our homes instead of copper.
What this amounts to is that the additional $20,000, or whatever, in costs that Premier Bracks is nobly going to stick on house buyers signals that more, not fewer, resources are being used, which means fewer resources for other lines of production. This is called opportunity cost
What is more, these resources are being used to reduce output rather than increase it. In case anyone doesn’t realise it, this is called socialist economics — the economics of creating more scarcity rather than reducing it.
If it were otherwise, house prices would fall rather than rise. This doesn’t mean that these regulations push up prices: they don’t, as the expression is normally understood. They raise prices by reducing the supply. And this is what economic illiterates like Bracks call a progressive policy.
Let’s understand something, these policies do not save energy. They simply reduce the direct demand for energy while increasing demand elsewhere, unless you think all the extra building materials these regulations demand do not need any energy to manufacture.
Even if these regulations did reduce the total demand for energy they still would not save any. There is never a shortage of energy, only the means to turn it into useful work, and that means capital goods.
George Orwell once said of the likes of Bracks: “One has to belong to the intelligentsia to believe things like that: no ordinary man could be such a fool”.
If we were living in a genuinely humane and sophisticated civilisation these meddling twits would be taken out and shot. Nevertheless, I live in hope. Meanwhile the Victorian Liberal Party helplessly thrashes around like a drowning man while its ME-TO leader jumps on every ephemeral bandwagon that passes by.
I think the Victorian Liberal Party is sitting on the Australian equivalent of “Reagan Democrats”. Unfortunately, it’s just too blind to see it
*Herbert Inhaber and Harry Saunders, Roads to Nowhere; The Sciences, published by The New York Academy of Sciences, November/December 1994
Gerard Jackson is Brookes’ economics editor
BrookesNews.Com
Monday 13 March 2006