Is Demand Inflation Really The Problem?

We keep hearing that demand needs to be supressed, but price rises are the result of supply constraints, in particular housing, which has given rise to the largest rent increases in the nation's history.

Housing supply has been constrained in all Australian capital cities including the Gold Coast by State Government planning policies which encourage urban consolidation or infill development as opposed to decentralised development.

Consequently none of the States have produced sufficient housing to meet underlying demand over the past five years. This has caused serviced land and house prices to sky-rocket faster than ever before in Australian history.

The impacts are obvious, that is, higher mortgages and a much higher proportion of spending directed towards housing than ever before, hence supply-side constraint inflation.

The answer is to revisit our planning policies to open up more affordable land, and this means creating satellite suburbs, not neccessarily continuous urban sprawl. There are a number of Australia's largest public companies, for example Delfin Lend Lease and Stockland, who are equipped to do this but are being hampered by restrictive planning policies.