Fix the Cause, Not the Symptons

The Federal Treasurer put down the budget on 14th May, 2024 giving some relief to the high costs of electricity and housing expenses. It seems to me that the decisions of government across all persuasions as well as both states and federal governments have created the problem in the first place. Due to the budget reports, I wrote a letter to the Newcastle Morning Herald and it was published on the 17th May, 2024.


To understand the real problem, we must go back into history. Electricity was originally supplied via the state ministers for Energy Department. This department created a number of electricity supply “councils”. In the Newcastle area we had the Shortland County Council that supplies electricity to the lower Hunter Valley. Over time the ministers responsible began to distance themselves from the operations of these electricity supply county councils. These county councils created the energy supply power stations and were responsible for the poles and wires as well as substations in the whole supply of the electricity to their communities. As the various governments actually lost sight of their basic responsibilities and wanted to find a way to ‘crate funds’ for various projects that began a program of privatization of state-owned assets, without consulting the “shareholders” (the citizens of that state). Firstly, they sold the generators then they sold the poles and wires – the legal documents for these deals have not been seen by the shareholders and the details seem very murky as the government still has some influence over the electricity production and distribution. In all of this they have created a lot of ‘re-sellers’ of electricity (essentially a business pays for an amount of electricity and re-sells it at a price). It seems to me that as it was formally the responsibility of the county councils to sell their electricity they should be selling it at a reasonable price to the consumers. If there was sufficient financial room in the bills charged and the actual costs to alow a re-seller to bulk purchase electricity and to sell it at a profit, sufficient to create the company and to manage the bill payments and to make a return to the owners of the re-selling business then the governments were permitting the county councils to over charge for electricity, or the government has interest in having profitable re-sellers and have overseen price increases that they have approved.

Today with the government having its fingers arms and legs all over the electricity market in an attempt to manipulate the electricity market in the direction of a political agenda – whether it is helpful or not is not in question and certainly never a part of the government equation because if it was, we would have open discussions into all aspects of various types of energy production. The government is betting on so called green energy that it claims will be cheaper and yet is unable or unwilling to fully disclose the finance details of electricity production and distribution. The use of rebates and taxes or charges and well as investments incentives distort the whole of the market that it would be very difficult to unravel the whole thing. The excessive charges in the whole process means the drop in the bucket “relief” in this budget of 2024 is totally meaningless as I am certain there will be charges that will dwarf this so-called relief by the end of the financial year 2024/2025.


Before leaving office Bob Menzies, Prime Minister 1949 -1966, said that housing is affordable if it does not exceed 20% of the disposal income of the family. At that time a family had a single income and would work on about 44 hours a week. in recent times some are claiming that housing is affordable if it does not exceed 30% of disposal income as well some claim that the negative gearing and the capital gains taxes impact negatively on housing affordbility; yet I hold a vastly different view. Let us deal with the logic of Negative Gearing. -If I have a place to rent and the costs of insurance repairs and repayments are $500 a week and I charge a tenant $400 a week I may, if I have other income apply that “loss” to my taxable income of another source; assuming that my taxable rate is 30 cents in the dollar, I would effectively get a tax break of $30 per week which would make $70 “loss” per week. If I was to sell the property which I purchased at $50,000-and 40-years latter I sold it for $500,000 it would give me a “profit” of $450.000, yet the purchasing power of those dollars are significantly different due to inflation. I would be required to pay tax on the $450,000, the calculation is to pay tax on 50% of the profit so tax is payable on $225.000 at my marginal rate of tax yet a lot of the profit numbers are taken up via inflation and sometimes the real profit when inflation is taken into consideration would be reduced from $450.000 to even less than $1,000 in profit after being adjusted for inflation.

Considering all of the above we must find out what when wrong we must have a look at a graph between wages and house prices, this one covers only a short period of time.

Government policies that were sold to the electorate as vote grabbers have been responsible for this problem. In the 1960’s the process of buying a home required a deposit of at least 25% of the asking price and a history of savings for over 5 years. The easing of these conditions did gain votes and in the short term some were able to purchase a home without a huge increase in the prices, but the increases soon followed. It was simply the supply and demand equation living out in the real world. The more people being capable of buy a home will cause the sellers seeking higher prices, simply because most of us will seek to obtain the most we can for something we want to sell. Then the governments introduced first home owner grants that were able to be used as a part of the deposit and so this further put more people into the market causing an upward pressure on house prices. In the more recent years there has been assistance in areas that have made buying a home as a really unwise position as the capacity to continue to own the home may become more difficult as the months went by.

The rental assistance to low-income earners has been clear evidence to government for years that there was coming a bigger than Ben Hur housing crisis. The government housing of the past should have continued especially the pathway to long term good tenants being able to purchase old housing stock. Governments must understand that a subsidy demonstrates that the market is not functioning very well at all to deliver a good outcome. Governments must be very careful when they interfere in a market as the distortion that they create, posibly for good reasons, may and often do produce very poor outcomes. There was an historic program for returned soldiers where Service First Home Owners Grants were rolled out but the funds were put in an account to be able to be used for “compliant reasons” for the first 5 years and any residual funds at the end of that time the funds would then be free to be used as desired.

My actual letter:

Dear Editor,
In the budget the government is giving a rebate on electricity but will not deal with the problem of soring electricity prices, fixing the problem is better than a rebate. When it comes to rent assistance; solving the housing problem is always the best plan. Rebates and rent assistance do little as the “market” will increase the charges to consume the financial injections. The high costs of both housing and electricity are the result of extremely poor historical government decisions.
Unravelling the actual costs of producing and distributing electricity due to the many subsidies and charges at the hand of government is almost impossible.
Rents/housing prices are distorted by excessively high housing prices caused by very low deposits, first home grants, excessive stamp duties, huge influx of immigrants, and the huge volume of foreign owned housing that is left vacant.
Huge increases in housing insurance and their massive delays repairing damaged so it can be occupied again. I removed an insurance company that did absolutely nothing to repair a fire damaged house for over 8 months, so I can fix it.
Government must put its efforts to fix and not band-aid the economy – it is not that difficult to do!

Yours in Good Faith

Milton Caine