I recently bought a printer, and it made me think about structural problems with the Australian housing market. As if this wasn’t weird enough of a premise for a column, I will also use Argentina as a positive economic case study.
When you buy a printer these days there are two extreme options.
You can splurge on a fancy super-efficient eco-printer. Such machines are expensive to purchase but the cost per page is super low. On the other end of the spectrum, you can buy a dirt-cheap printer but the printing costs for each page are outrageously expensive.
Let’s put some made up but realistic numbers out there so we have a nice visual. Our fancy printer costs $1300 (yikes!) but each page in full colour costs only $0.02. The cheap printer costs as little as $59 but each page sets you back $0.20.
The up-front cost of our cheap printer is 22 times lower compared to the fancy model. Assuming the quality of the printed pages is even remotely comparable why would you opt for the expensive model? Simply because after 6895 pages the expensive printer becomes the cheap printer.
If you need to print a lot but aren’t rich enough to afford the $1300 up-front, you are forced to print expensive pages forever. Being poor makes for some awfully expensive printing. The longer you are poor, the bigger the gap between you and the rich gets.
Who cares about printing? In the age of apps, iPads, and paper-free offices we hardly ever print anything anyways. That’s right, I don’t care about printing; rather, I care about the quality of life of low-income earners and the inadequate housing stock they are occupying.
The vicious circle
A cheaply built house is much like a cheap printer. For a (comparatively) low cost you can assemble relatively low-quality building materials into a box to live in. This box has thin walls, is poorly insulated, and is a consequence very expensive to cool or heat.
The upfront cost for the house obviously includes a piece of land. Usually, the block of land is what really drives the overall purchasing price of a house up.
We aren’t creating more land, but more people look for housing – voila, land prices go up. As land became forbiddingly expensive, one way to keep the overall cost of a house down was to build a cheaper box. We forced low- and middle-income families to buy a cheap printer. Instead of printing pages, we spend money to cool or heat our homes.
In a cost-of-living crisis, low-income earners in such homes have two options. They can pay an arm and a leg to heat the leaky box they live in or they can stop heating. Further financial stress or physical discomfort (and potential negative health outcomes) – what choice!
Research shows that 81 per cent of sampled homes in Australia were classified as cold, meaning the World Health Organisation’s recommendation of 18 °C minimum indoor temperature in winter wasn’t reached. Australian homes are two degrees colder than homes in the UK. This fact can easily be verified by talking to any European that moved to Australia. I am always joking that the first thing two Europeans bond over when they meet in Australia are the terrible insulation standards.
Government eventually took the obvious step to tighten building standards. That can only be done at scale for new dwellings. New buildings must now register a six-star energy efficiency rating. Most of the existing building stock in Australia is comically far away from receiving a six-star rating. A massive 41 per cent of buildings record one star or less – an outrageously bad result!
Energy rating (Stars) of the Australian building stock in 2023
The rising costs of living, in our example electricity and gas, hit the poorest Australians the hardest. It’s therefore quite understandable that the recent federal budget focused heavily on relieving such pains through temporary measures.
Over the coming decades the quality of our national building stock will improve as the low-star buildings get bulldozed and replaced by buildings with at least six stars. Tightening of standards will help in the long run but it might not be enough to really help low-income earners. Energy costs will likely go up at a higher rate than low-income wages rise.
Argentina, not chilly
This is where Argentina enters the stage. Argentina while being a gorgeous country, is a common case study of a totally mismanaged basket case of an economy. Nobody points to Argentina as a positive case study these days. Well, I do.
About a century ago, before the Great Depression, Argentina consistently was ranked as one of the world’s ten largest economies due to massive beef exports. Argentina used this wealth to build cities, to build massive, high-quality medium density buildings. Buenos Aires was called the Paris of South America. The quality of the housing stock was cutting edge.
In the century since, many of these massive houses weren’t maintained well, if at all. Nonetheless, they are occupied and provide decent living conditions for low-income workers. The lesson for Australia is that you need to build long-lasting housing stock and infrastructure while you have the money. We failed to do so at scale during the 2008 mining boom.
I am however pretty sure that we will see another long-lasting mining boom this decade. As the global transport system electrifies, mining products will be in higher demand and higher prices can be charged. As a nation we must ensure we capture enough of the wealth this new mining boom creates and invest it into projects that benefit the nation in the long-run. I want us to buy expensive printers.
Demographer Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. Follow Simon on Twitter, Facebook, LinkedIn for daily data insights in short format.
