Since Labor has been in power …

Since Labor has been in power …

For almost a decade now, rents in Melbourne have increased by around 58 per cent. You might think it’s just bad luck, but it’s really because Labor hasn’t managed the economy well.

Projects are blowing out to extraordinary levels under Labor. There’s a $21 billion blowout on the North East Link, a $4.7 billion blowout on the West Gate Tunnel and a $3 billion blowout on the Metro Tunnel. Last week, a Parliamentary Budget Office analysis revealed that the first two stages of the Suburban Rail Loop would cost more than $216 billion – a jaw-dropping price tag for a project that is not supported by transport experts and is designed to shore up support in their marginal seats.

How does this relate to rents, you may ask? It’s a fair question and there’s a good answer.

Victoria’s mismanaged projects and finances result in ever-growing debt. We now have more debt than New South Wales, Queensland and Tasmania combined. To pay for it, Labor has increased virtually every tax and charge on the books. Land tax is no exception.

The land tax-free threshold has been reduced, there are additional flat fees and the rate on most properties has increased. Even the Treasurer admits that the hike will cost Victorian households an additional $1300 every year. But we don’t have to take the Treasurer’s word for it.

One of the most established approaches to thinking about the real estate market is the DiPasquale-Wheaton model. It tells us that when taxes on rental providers increase, so too do rents. It’s almost as certain as night following day.

When land tax goes up, some of that extra cost gets passed on to renters. Increases also reduce the viability of rentals, resulting in them been withdrawn from the market. In turn supply is reduced, resulting in higher rents as renters compete for less rentals.

It’s become so bad that analyst firms like Propertyology are now advising rental providers to boycott Victoria because of high taxes and regulation. Many have told me they’re going to exit the market after receiving big bills from the State Revenue Office.

Labor’s mismanaged “Big Build” is compounding the problem in other ways. It’s pushing up the cost of materials and labour, making it harder to build new homes, sending building companies broke and creating a nightmare for their customers losing deposits. Only months after promising to build 80,000 new homes a year, it’s falling apart faster than the Commonwealth Games.

All this shows. When Labor was elected, Melbourne had more than 12,000 homes available to rent. Despite a flood of press releases about homebuilding, there are less than half that now.

Worse still, when supply drops, so does quality. There’s less competition. As we all know, when there’s less competition, you get worse service. I’m sure anyone who’s had to stand in a long line to see an expensive, mouldy apartment or an old, run-down house can relate.

So, there you have it. Labor has mismanaged projects and the economy, and renters are paying the price. Victoria needs strong economic management. We need to ensure projects are properly managed and confidence is returned to the rental market. We don’t need more of this tired, old Labor government.


Evan Mulholland is the Liberal MP for the Victorian Upper House seat of Northern Metropolitan. Photo by Simona Sergi. •

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