COVID cases are rising in highly vaccinated Israel. But it doesn’t mean Australia should give up and ‘live with’ the virus

Maya Alleruzzo/AP/AAP

C Raina MacIntyre, UNSWIsrael has one of the highest COVID vaccination rates in the world, having fully vaccinated 78% of people 12 years and over.

Many people are surprised at the country’s resurgence of COVID cases since restrictions were lifted in June.

Israel’s vaccination rate is similar to Australia’s plan to start relaxing restrictions when 70% of over-16s are fully vaccinated.

So, why are cases surging in Israel? And what can Australia learn from it, particularly as Sydney charts its path out of the pandemic?

Let’s break it down.

Herd immunity is much harder with Delta

Around 25% of Israel’s population is younger than 12, so the whole population vaccination rate is only about 60% (including a small proportion of children under 12 with high-risk medical conditions who’ve also been vaccinated).

Even with last year’s virus and the use of the Pfizer vaccine, that wouldn’t be enough for herd immunity.

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COVID is surging in the world’s most vaccinated country. Why?

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The Delta variant, which has swept the world since April, is much more contagious. It has an R0 of 6.4, which means one infected person on average infects more than six others in the absence of restrictions and vaccinations. This is compared to the strain circulating in 2020, responsible for Melbourne’s second wave, which had an R0 of 2.5.

In Israel, 60% of hospitalised cases are vaccinated. This is something called the “paradox of vaccination” — in highly vaccinated populations, most cases will be in the vaccinated because no vaccine is 100% protective.

However, the rate of serious cases in Israel is double for unvaccinated under-60s and nine times higher for unvaccinated over-60s, so vaccines remain highly protective against severe outcomes.

Lifting restrictions too quickly

What’s clear in Israel (and the United Kingdom and United States) is lifting all movement restrictions and mask mandates after Delta arrived resulted in surging cases. Current vaccines at about 60% uptake weren’t enough.

In the US, Southern states with lower vaccination rates are seeing the worst surges, with the majority hospitalised being unvaccinated. Alabama, with 36% fully vaccinated (higher than Australia) is overwhelmed. Hospitals and ICUs are full and the health workforce is in crisis due to infected and quarantined health workers.

It provides a glimpse of what Sydney faces if we lift restrictions without the population being adequately vaccinated.

And that includes children. In Texas, paediatric ICUs are full and children cannot get beds. This is another warning that we must urgently vaccinate children, at least those 12 years and over, before lifting restrictions.

In Australia, the 70% vaccination rate at which the federal government proposes to begin easing restrictions corresponds to about 56% of the total population vaccinated.

It was modelled on 30 cases at the start of a new outbreak. With Sydney likely facing daily new cases in the 1000s (with no change in strategy), the outcomes could be much worse than anticipated.

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Read more:
Vaccination rate needs to hit 70% to trigger easing of restrictions

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Let’s recap

So, the situation in Israel is caused by several factors:

• the Delta variant has some ability to escape the protection offered by vaccines, and the protection seems to wane a bit over time after two doses
• premature lifting of restrictions
• the herd immunity threshold required for Delta is higher, likely over 80% of the whole population, not the 60% achieved in Israel
• over 70% of infections with Delta arise from asymptomatic transmission, which makes it harder to control
• cases of Delta breakthrough infection in vaccinated people can be as infectious as in unvaccinated people (though viral load declines faster in vaccinated people).

Reasons for optimism

There’s a good news story in one of the most highly vaccinated cities in the US, San Francisco, where over 70% of the whole population has been vaccinated and cases are starting to decline.

This is also likely due to the reintroduction of layered social measures such as mask mandates.

Israel has reintroduced a green-pass system of proof of vaccination or a negative test for anyone three years or over accessing public indoor spaces. It has also started vaccinating over-50s with a third dose booster.

It seems a third dose dramatically boosts immunity, even in people with weakened immune systems. The US will soon start offering a third dose for everyone.

Many vaccines require three doses for full protection, and it’s too early to know what the final primary immunisation schedule will be. We may end up needing three doses plus regular boosters, or more effective spacing of two doses.

There’s reason to be optimistic because the vaccine pipeline isn’t static. We’ll have vaccines updated to tackle Delta and other variants in time, which will raise their efficacy and lower the herd immunity threshold.

What about children?

In addition to crippling outbreaks of Delta in schools, new data shows kids 0-3 years old transmit to adults more than older children.

Ultimately, vaccination of children will be required to fully control SARS-CoV-2, or it will become a pandemic of the young, with unknown long-term, generational health effects for our children.

COVID has mutated to become more contagious, more vaccine resistant and more deadly. As a result, there’s no safe “living with COVID” until at least 80% of the whole population is vaccinated, including boosters or vaccines updated to tackle the Delta variant.

We can live with COVID as we do with measles — occasional travel-imported outbreaks that never become sustained — with an ambitious vaccination strategy.

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Should we give up on COVID-zero? Until most of us are vaccinated, we can’t live with the virus

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Lifting restrictions with only 60% of the population vaccinated in Australia will result in a resurgence of COVID like Israel, the UK or the US. The health system will be endangered and its workforce will be stricken.

To lift restrictions safely, we should also continue some social interventions such as wearing masks, vaccinating children, ventilating public venues including classrooms, and prioritising front-line health workers for a third dose booster to protect them and the health system.

There’s light at the end of the tunnel. But we need to keep using masks and other restrictions for now, learn from Israel and other countries, protect health workers and hospitals, vaccinate kids, use boosters, await vaccines updated for variants, implement smarter dosing schedules and aim for the most optimal vaccination strategy with equitable vaccine access, everywhere.

C Raina MacIntyre, Professor of Global Biosecurity, NHMRC Principal Research Fellow, Head, Biosecurity Program, Kirby Institute, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Huawei or the highway? The rising costs of New Zealand’s relationship with China

New Zealand’s Prime Minister Jacinda Ardern meeting with the Premier of the State Council of the People’s Republic of China Li Keqiang during last year’s ASEAN summit.
AAP Image/Mick Tsikas, CC BY-ND

David Belgrave, Massey University

Until recently, New Zealand’s relationship with China has been easy and at little cost to Wellington. But those days are probably over. New Zealand’s decision to block Huawei from its 5G cellular networks due to security concerns is the first in what could be many hard choices New Zealand will need to make that challenge Wellington’s relationship with Beijing.

For over a decade New Zealand has reaped the benefits of a free-trade agreement with China and seen a boom of Chinese tourists. China is New Zealand’s largest export destination and, apart from concerns about the influence of Chinese capital on the housing market, there have been few negatives for New Zealand.

Long-held fears that New Zealand would eventually have to “choose” between Chinese economic opportunities and American military security had not eventuated.

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But now New Zealand business people in China have warned of souring relations and the tourism industry is worried about a downturn due to backlash following the Huawei controversy.

China’s growing might

During Labour’s government under Helen Clark (1999-2008) and under the National government with John Key as prime minister (2008-2016), New Zealand could be all things to all people, building closer relationships with China while finally calming the last of the lingering American resentment over New Zealand’s anti-nuclear policies. But now, there are difficult decisions to be made.

As China becomes more assertive on the world stage, it is becoming increasingly difficult for New Zealand to keep up this balancing act. Two forces are pushing a more demanding line from Beijing. One is China’s move to assert more control over waters well off its coast.

For decades, Beijing was happy to let the US Navy maintain order over the Western Pacific to facilitate global trade with China. As China’s own economic and military abilities have grown, it has begun to show that it is willing to protect what it sees as its own patch. Its mammoth island building in the South China Sea is a testament to its new-found desire to push its territorial claims after decades of patience.

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Despite strong words, the US has few options left to reverse China’s gains in the South China Sea

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China’s stronger foreign policy is testing what is known as the “rules-based order”, essentially a set of agreed rules that facilitate diplomacy, global trade, and resolve disputes between nations. This is very concerning for New Zealand as it needs stable rules to allow it to trade with the world. New Zealand doesn’t have the size to bully other countries into getting what we want.

Trump-style posturing would get New Zealand nowhere. A more powerful China doesn’t need to threaten the rules-based system, but the transition could create uncertainty for business and higher risks of trade disruption. It is vital for New Zealand that an Asia-Pacific dominated by China is as orderly as one dominated by the US.

Tech made in China

The other force challenging the relationship is China’s emergence as a source of technology rather than simply a manufacturer of other countries’ goods. Many Chinese firms like Huawei are now direct competitors of Western tech companies. Huawei’s success makes it strategically important for Beijing and a point of pride for ordinary Chinese citizens.

Yet, unlike Western countries, China actively monitors its population through a wide variety of mass surveillance technology. Therefore, there is a trust problem when Chinese firms claim that their devices are secure from Beijing’s spies. New Zealand’s decision to effectively ban Huawei components from 5G cellular networks could be the first in many decisions needed to ensure national security.

Chinese designed goods are becoming more common and issues around privacy and national security will get stronger as everyday household goods become connected to the internet. Restrictions on Chinese-made goods will further frustrate Beijing and will invite greater retaliation to New Zealand exporters and tourist operators.

In more extreme cases, foreign nationals have been detained in China in response to overseas arrests of prominent Chinese individuals. As many as 13 Canadians were detained recently in China following the arrest of Huawei’s CFO Meng Wanzhou in Vancouver at the request of US prosecutors.

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Australian-Chinese author’s detention raises important questions about China’s motivations

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Declaring the limits of the relationship

If New Zealand is to maintain a healthy relationship with China, it needs to be clear on what it is not willing to accept. It is easy to say individual privacy, national security and freedom of speech are vital interests of New Zealand, but Wellington needs to be clear to its citizens and to China what exactly those concepts mean in detail. All relationships require compromise, so Wellington needs to be direct about what it won’t compromise.

New Zealand spent decades during the Cold War debating how much public criticism of the US the government could allow itself before it risked its alliance with the Americans. New Zealanders wondered if they really had an independent foreign policy if they couldn’t stand up to their friends. Eventually nationalist sentiment spilled over in the form of the anti-nuclear policy.

New Zealand is now heading for the same debate as Kiwis worry about how much they can push back against Beijing’s interests before it starts to hurt the economy. Now that the relationship with China is beginning to have significant costs as well as benefits, it’s probably time New Zealanders figured out how much they are prepared to pay for an easy trading relationship with China.

David Belgrave, Lecturer in Politics and Citizenship, Massey University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Russia is a rising military power in the Asia-Pacific, and Australia needs to take it seriously

Alexey D Muraviev, Curtin University

Many analysts have seen China’s rapidly growing naval power as a sign that Australia needs to rethink its defence strategy in the Asia-Pacific region. Indeed, China has made remarkable strides in building up its defence capability. But it is worth noting that another military power is increasingly making its presence felt in our region – Russia.

The Coalition government does not give Russia much consideration at all in its current strategic planning. None of the recent Australian defence white papers, including the 2016 paper, considered Russia a significant military power. This perception stems from post-Cold War assumptions that Moscow has little political influence due to its reduced military power and limited economic engagement with our region.

Perhaps these assumptions were true in the 1990s or even ten years ago. However, current strategic realities are very different.

Putin’s game plan for military prowess

In the 2000s, Russia’s military began to gradually rebuild its combat potential. Under President Vladimir Putin’s leadership, the once cash-strapped military force received a massive financial boost and, more importantly, full political support.

After years of decline and neglect, Russian military power in the Asia-Pacific region is making a major leap forward. According to my research, Russian air force units deployed to East Asia received some 300 new upgraded aircraft from 2013-18. This is about equal to the total strength of the current Royal Australian Air Force.

By 2019, the Russian Eastern Military District (the military arm responsible for operations across the Pacific) is expected to receive more than 6,240 pieces of new and upgraded military equipment. This will include battle tanks, missiles and heavy artillery, aircraft, electronic warfare systems and more.

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Read more:
Australia’s naval upgrade may not be enough to keep pace in a fast-changing region

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The Russian Pacific Fleet, the main means for Russia to exert power in the region, is expected to receive some 70 new warships by 2026. This will include 11 nuclear-powered and diesel-electric submarines, and 19 new surface warships – nearly the same number Australia is planning to add over the coming decade.

Russia is also increasingly showcasing this new-found military power in the region.

From late August to mid-September, the Russian military carried out the largest single show of its military power in 37 years, the Vostok 2018 war games. According to the Russian Ministry of Defence, the war games involved 297,000 personnel, more than 1,000 aircraft and 80 warships. A sequence of large-scale exercises was held across eastern Siberia, the Russian Far East and parts of the Arctic. The maritime component was staged in the Okhotsk and Bering seas on Russia’s Pacific coast.

The Vostok 2018 strategic manoeuvres in Siberia and along the Pacific coast.

Condemned by NATO as a rehearsal for “large scale conflict”, the war games signalled that Russia’s military is prepared for possible confrontation in the Asia-Pacific region. This reinforces what many analysts believe is Putin’s intention – to reassert Russia’s status as a global power.

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Russia not so much a (re)rising superpower as a skilled strategic spoiler

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Russia’s ‘soft’ military power on the rise

Russia also continues to be a key provider of advanced military technology in the Asia-Pacific region. Last year, Russia supplied 52 countries globally with US$45 billion worth of arms – making it the world’s second-biggest arms supplier, behind the US. Over 60% of Russian arms exports go to Asian countries, with Southeast Asia accounting for most of that total.

Putin meeting Indian Prime Minster Narendra Modi this month.
Harish Tyagi/EPA

The Russian military is making its presence felt. This month alone, the Russian army staged joint exercises with Pakistan, while Russian warships were operating in the Indian and Pacific oceans.

Through these arms sales and joint activities, Russia is increasingly bringing Asian countries into its orbit and altering the balance of power in the region by increasing their military capabilities.

In addition to existing security and defence relationships with China, India and more recently Pakistan, Russia has been actively seeking to build ties with other countries on Australia’s doorstep – Indonesia, Malaysia, Myanmar, the Philippines, Thailand and Fiji.

Australia should closely follow Moscow’s growing strategic intimacy with Beijing. In contrast with Western countries, Russia has been willing to share its military expertise with China. And China has taken up the offer. The PLA, for instance, took part in the Vostok 2018 war games under Russia’s command.

Russian activities in and around Australia

Finally, we should not be ignorant of Russia’s activities in Australia and near our shores, which have intensified in recent years.

In 2009, Australian intelligence reported a sharp increase in Russian intelligence-gathering activities in Australia. Russia continues to have an interest in Australia’s national intelligence, especially highly sensitive information shared by the US and its NATO allies.

In November 2014, a Russian naval task group staged operations near Australia’s north at the same time Putin attended the G-20 summmit in Brisbane. This triggered a brief media storm, and was seen by some as a projection of Russia’s naval power.

Last December, Russian strategic bombers conducted exercises out of an Indonesian airfield close to Australia, forcing Australian Defence personnel in Darwin into a state of “increased readiness”. There were concerns the exercises may have been aimed at information gathering.

Then in March, two “undeclared intelligence officers” were expelled from the Russian embassy in Canberra, raising more questions about Russian covert activities in Australia. Two months later, a Russian training warship visited Papua New Guinea – the first visit of its kind for the Russian navy.

Australia-Russia relations at a low point

Russia is making its presence felt in the region for the benefit of its regional allies and clients, and as a form of deterrent to its geopolitical rivals.

Australia’s strategic alliance with the US is clearly on Moscow’s radar. Russia has a keen interest in our joint defence facilities and intelligence sharing, as well as our latest defence technology and operations.

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Russia’s grand strategy: how Putin is using Syria conflict to turn Turkey into Moscow’s proxy

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Australia’s hard stance on issues related to Russia, such as Moscow’s annexation of Crimea, the downing of Malaysia Airlines flight MH17, Russia’s involvement in the Syrian conflict and the attempted assassination of former double agent Sergei Skripal in the UK, further complicates our relations with Moscow.

In October, Canberra also joined London in condemning the Russian military for its ongoing cyber-operations against the West, including Australia.

Australia’s relations with Moscow are at their lowest point in decades. And while Australia is by no means a priority for Russia, the country is still being viewed as a geopolitical and security rival. The time has come for us to appreciate a power north of the Great Wall, as well.

Alexey D Muraviev, Associate Professor of National Security and Strategic Studies, Curtin University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Rising reliance on personal income tax signals need for bolder reforms

Phil Lewis, University of Canberra

The Parliamentary Budget Office (PBO) has just released a report on trends in Commonwealth taxation receipts. While supporting the expectations of a budget in balance by 2019-20, it exposes worrying trends in the balance of the burden of taxes in Australia. In particular, its analysis of trends in the composition of tax revenue identifies an increasing reliance on personal income tax.

The PBO shows that tax revenue from labour (mostly income tax) was 8.6% of GDP in 1971-72. By 2015/16, this had risen to 12.6% of GDP. Over the same period, tax collections from capital (mostly company tax) as a percentage of GDP was virtually unchanged, from 3.3% to 3.2% – although this increased noticeably during the “economic boom”, which ended when the Global Financial Crisis (GFC) hit in 2007.

Taxes on consumption (such a GST and excise duties) were 5.3% of GDP in 1971-72 and 5.7% of GDP in 2015-16. While the introduction of the GST in July 2001 raised consumption taxes temporarily, revenue from both GST and particularly excise taxes has been in decline as a percent of GDP since.

Figure 2 from the report shows these trends over the decades.

Trends in revenue from categories of Commonwealth taxes.
Source: ATO data and PBO analysis

The main emphasis of the PBO report is on the period since 2001-02. The chart below shows the increased reliance on income tax and declining importance of taxes on consumption and capital.

What is driving these shifts?

The main reason for the rise in income tax revenue is “bracket creep” as incomes increase and taxpayers move into higher marginal tax brackets. This is due to successive governments not fully indexing tax brackets to increases in CPI or average earnings.

Meanwhile, consumers have been changing their tastes and responding to prices by altering their consumption patterns. The so-called “sin taxes”, or rates of excise duties on alcohol and tobacco, have increased significantly over time.

This has been particularly true for tobacco where the volume of consumption has fallen as fewer people smoke and those who do smoke less. However, the percentage fall in consumption has been less than the percentage rise in tax, so tobacco tax revenue has risen.

For alcohol, consumers have been switching from more highly taxed beer to wine, which is more lightly taxed. For instance, a full-strength beer from your bottle shop carries a tax of $37.10 per litre of alcohol. A moderately priced bottle of wine bears a tax less than half that ($17.60 per litre).

What might be considered a distortion in the taxing of alcohol means that changes in tastes towards drinking wine reduce tax revenue. The system of taxing alcohol is distorting in that encourages changing consumption habits away from beer drinking to wine.

Fuel excise is levied on a number of fuels but revenue comes mainly from petrol sales. The indexing of fuel excise rates was abolished in 2001 before being reintroduced in 2014. This reduction in the real excise rates was accompanied by significant reduction in the volume of fuel per household, from 11.4 L/km in 2001 to 10.6 L/km in 2016, as vehicles became more fuel-efficient.

The combination of reduced real excise rates and reduced consumption have reduced fuel excise revenue as a percentage of GDP.

The GST, one of the principal aims of which was to provide a broadly based growth tax, is declining in relative importance. This is mainly due to the exemptions from the GST base. For instance, spending on education and health, which are exempt from GST, is growing faster than spending on other goods and services. There is also some loss in revenue due to online purchases from overseas, which the government is trying to address.

As the share of consumers’ spending continues to switch from GST-liable to GST-exempt items the share of GST revenue will continue to fall.

Company taxes have diminished in importance in Australia and elsewhere because of the way multinational companies can arrange their tax liabilities across national borders to minimise tax. However, there is also worldwide recognition of the need to reduce company tax rates because of the detrimental effects these have on investment and growth.

The need to cut ‘deadweight loss’

When discussing taxes economist often refer to “deadweight loss”, which is the loss to the economy over and above the amount recouped in tax revenue. When revenue is taken from individuals or companies this results in less of a service or good being produced.

It is argued that governments should put more reliance on taxes that cause less distortion – less deadweight loss. That is, they should have as little effect on individuals’ and firms’ behaviour as possible.

A broad-based GST is efficient because all goods and services bear the same tax rate and therefore will not change relative consumption. It is exemptions that bring about inefficiency by encouraging consumption of untaxed items and discouraging consumption of taxed items. Taxing wine more lightly than beer encourages wine consumption at the expense of beer.

The Australian Treasury has named company tax and income tax as having the “biggest deadweight loss” of all the Commonwealth taxes. International research backs this up. The deadweight loss falls on consumers and shareholders but mostly on workers and wages through lower investment.

The Treasury estimates the deadweight loss of company tax could be more than half the revenue raised from taxation. For income taxes, the deadweight loss is estimated to be 21 cents for every dollar of revenue. This comes about from reduced incentives to work, save or invest.

The PBO report suggests that with continuing trends in taxation revenue the budget’s reliance on personal income tax will increase if current levels of Commonwealth taxation are maintained as a percentage of GDP. While proposals to reduce company tax rates will reduce inefficiency of taxes somewhat, a heavy and increasing reliance on personal income tax points to the need for substantial tax reform. But that’s something neither major party seems prepared to do.

Phil Lewis, Professor of Economics, University of Canberra

This article was originally published on The Conversation. Read the original article.

The Rising Oil Price

Egalitarian or Edwardian? The rising wealth inequality in Australia

Perceptions of the levels of both income and wealth inequality are derived from our day-to-day experiences.
AAP/Dean Lewins

Jennifer Chesters, University of Melbourne

Recent commentary on levels of inequality exposes the myth that Australia is an egalitarian society in which the privileges of birth have little currency.

Focusing on inequality in the distribution of incomes ignores an equally important dimension of inequality: wealth. Wealth is much more unequally distributed than income. Therefore, ignoring wealth inequality skews perceptions of social inequality.

Perceptions of the levels of income and wealth inequality are derived from our day-to-day experiences. This means that not mixing with people from the other end of the wealth distribution can colour our perceptions of inequality.

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Further reading: Here’s why it’s so hard to say whether inequality is going up or down

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The lack of official data on the wealth holdings of Australians hampers research into trends in wealth inequality. Between 1915 and 2003-04, there is almost no official wealth data to examine.

In 2003-04, the wealthiest 20% of Australian households held 58.6% of total household wealth, and the poorest 20% of households held just 1.4% of total household wealth. In 2013-14, the wealthiest 20% of households held 61% of total household wealth, and the poorest 20% of households held just 1% of total household wealth.

These figures indicate that wealth inequality increased over the decade to 2013-14.

The table below details trends over time in various measures of wealth inequality. The P90 to P10 ratio compares the wealth of households at the 90th percentile with that of households at the tenth percentile. A larger ratio indicates greater levels of inequality.

In 2003-04, households at the 90th percentile held 45 times as much wealth as households at the tenth percentile. In 2013-14, households at the 90th percentile of the distribution held 52 times as much wealth as households at the tenth percentile. This indicates that wealth inequality increased in that decade.

Using the mean and median household wealth figures, it is possible to calculate the ratio of median to mean wealth.

The closer this ratio is to one, the lower the level of inequality. In 2003-04, the ratio was 0.63. In 2013-14, it was 0.57. This also indicates that wealth inequality increased.

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The distribution of household wealth also varies between Australia’s state and territories, and by location within states and territories.

Households in the ACT recorded the highest mean household wealth (A$890,100). Households in Tasmania recorded the lowest mean household wealth ($595,600).

When these figures are disaggregated by location into capital city households and households located in the rest of the state, the largest wealth gap occurs in New South Wales. The mean wealth of households in Sydney was $971,700, whereas the mean wealth of households in the rest of NSW was $534,700.

The median-to-mean-wealth ratios show wealth was most unequally distributed in Brisbane and Perth.

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Given a relatively large proportion of household wealth is held in the form of property assets, the recently released Household, Income and Labour Dynamics in Australia Survey report identifies property as the key driver of increasing wealth inequality.

The percentage of 18-to-39-year-olds with property declined by 10.5 percentage points between 2002 and 2014. And the level of debt of those with a mortgage doubled in real terms.

So, fewer young adults have mortgages now compared to a decade ago, and those who do have mortgages have higher levels of debt.

Two other sources of publicly available data on wealth are the lists of the super-wealthy published annually by the Business Review Weekly in Australia and Forbes in the US.

Figures published in the Business Review Weekly show that, after adjusting for inflation, in 1984 the wealthiest 20 Australians held $8.25 billion in assets. In 2017, the wealthiest 20 Australians held $104 billion.

Forbes’ lists of billionaires (in $US) show that the number of billionaires living in Australia increased from two to 26 between 1987 and 2014.

Having an increasing number of billionaires would not be an issue if all Australians’ wealth was increasing at a similar rate. However, if the gap between the wealth of the billionaires and that of the average residents increases dramatically, there is likely to be discontent.

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Further reading: Don’t listen to the rich: inequality is bad for everyone

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Drawing on figures published in the Credit Suisse Wealth Report, it is possible to compare the wealth of the billionaires with that of average Australians.

In 2014, the wealth of the 26 Australian billionaires was equivalent to 214,914 adults with average wealth.

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Recent turmoil in the UK and the US may be an indicator that the “peasants are revolting” and are not willing to return to the 19th century, when the very rich lorded over the masses.

Australia has yet to experience mass demonstrations and voter backlashes. But events overseas should be ringing alarm bells among our politicians in Canberra.

Jennifer Chesters, Research Fellow, Youth Research Centre, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Affordable housing shortfall leaves 1.3m households in need and rising – study

Around one in seven Australia households either cannot get into housing at market rates or are struggling to pay the rent.
shutterstock

Steven Rowley, Curtin University and Chris Leishman, University of Adelaide

A new report by the Australian Housing and Urban Research Institute (AHURI) reveals, for the first time, the extent of housing need in Australia. An estimated 1.3 million households are in a state of housing need, whether unable to access market housing or in a position of rental stress. This figure is predicted to rise to 1.7 million by 2025.

To put it in perspective, 1.3 million is around 14% of Australian households. This national total includes 373,000 households in New South Wales, where the number is expected to increase by 80% to more than 670,000 by 2025 under the baseline economic assumptions of the modelling.

The first graph below shows the average annual level of housing need to 2025. The second, showing the percentages of households, permits a direct comparison by state. NSW and Queensland are in the worst position. The ACT is calculated to have the lowest proportional level of need.

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What does this mean for households in need?

Housing need is defined as:

… the aggregate of households unable to access market-provided housing or requiring some form of housing assistance in the private rental market to avoid a position of rental stress.

This includes potential households that are unable to form because their income is too low to afford to rent in the private rental market. These households would traditionally rely on public housing and community housing to meet their needs. However, more and more are being forced into the private rental market, paying housing costs they are unable to afford without making significant sacrifices.

To 2025, on average 190,000 potential households in NSW will be unable to access market housing in a given year. The graph below is the most revealing as it illustrates the gap between affordable housing demand and supply.

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The lack of social housing and subsidised rental housing prevents such households forming under affordable conditions. Many will manage to form but will have to spend well over 30% of their income on housing costs to do so, putting them in a position of financial stress.

The results also reveal the increasing pressure the affordable housing shortfall places on the housing assistance budget, notably Commonwealth Rent Assistance.

The absence of a significant new supply of affordable housing – there has been no large-scale program since the National Rental Affordability Scheme (NRAS) began in 2008 – has left state governments trying to find ways to plug the affordability gap.

Responses have been largely on the demand side, such as first home buyer concessions recently announced in NSW. But such incentives are no use for low-income households. To help them, intervention needs to be on the supply side.

How does Australia compare?

The AHURI research built on ideas emerging from research into housing need in the UK. It revealed interesting differences between the two countries.

UK government policy prior to 2010 emphasised the role of the planning system in helping to substantially increase affordable housing supply. This reflected evidence from England and Scotland that found a link between low levels of new housing supply and higher and rising house prices.

In this project, we found plenty of evidence of deteriorating housing affordability in Australia. But we did not find a particularly strong relationship between housing supply and price growth. This might reflect how other drivers of deteriorating housing affordability are more important in Australia – such as tax incentives for investors.

These findings suggest we need to look more closely at how new supply and investment demand interact, and in what circumstances boosting new supply is likely to improve affordability.

From our analysis of individuals’ labour market circumstances and incomes, it was also clear that the Australian workforce has not escaped the erosion of secure, full-time employment opportunities seen in other countries.

The combination of widespread insecure, part-time employment opportunities, high housing costs and low supply of rented social housing means the housing of many working Australians is extremely precarious.

How was the research done?

The research modelled housing need at the state and territory level to 2025 using an underlying set of economic assumptions and interrelated models on household formation, housing markets, labour markets and tenure choice.

The models were underpinned by data from the Housing, Income and Labour Dynamics in Australia (HILDA) Survey, the Australian Bureau of Statistics (ABS) and house price and rent data.

This research delivers, for the first time in Australia, a consistent and replicable methodology for assessing housing need. It can be used to inform resource allocation and simulate the impact of policy decisions on housing outcomes.

The intention is to further develop the model to assess housing need at the level of local government areas.

So, what are the policy implications?

The scale of the affordable housing shortfall requires major action from federal and state governments.

NRAS had its problems but at least delivered a supply of below-market housing. Australia cannot rely on the private sector to deliver housing for low-income households without some form of government subsidy as it is simply not profitable to do so.

The question is what government is going to be prepared, or even able, to spend big to close the affordable housing supply gap?

Steven Rowley, Director, Australian Housing and Urban Research Institute, Curtin Research Centre, Curtin University and Chris Leishman, Professor of Housing Economics, University of Adelaide

This article was originally published on The Conversation. Read the original article.

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