Lucky, or another whiteboard?

One thing that stands out about Kevin Rudd is that he has a tidy mind.  He likes to have his policy expenditure in nice round figures.

Thus we have $500 million in taxpayers' money to fix up the housing problem;  another $500 million to subsidise the building of the Australian Prius;  $20 million for improving skills and marketing in Tasmanian forestry;  $450 million for pre-schools;  and $250 million for backyard water tanks.

Most of these are selective expenditure programs that involve beauty contests to choose the worthiest recipients.

Such contests are susceptible to political corruption -- funding the areas that offer the best political pay-off.  Hawke minister Ros Kelly famously used a whiteboard to identify and determine the allocation of sports money in this way.  Since then, no modern government would leave itself open to ridicule by allowing such obvious ministerial discretion.

Instead it would set up advisory committees that would doubtless have gender balance, represent a cross-section of the community, have union and management participation, be sensitive to indigenous needs and so on.

In other words, a modern government would put in place an elaborate bureaucratic apparatus to pick the winners.

In the case of the Australian Prius, the outcome would clearly be closer to the infamous East German Trabant than the child of the white-hot technological revolution foreshadowed by the subsidy.  Contributing to this would be an inevitable insistence on a high degree of local sourcing and union co-management of the favoured facility.

Housing is a different matter.  The ALP target is remedying the "supply side" barriers.  These are stated to be twofold:  first, the infrastructure costs of sewerage, transport and parklands;  and second, holding costs associated with planning approval delays.  As the ALP recognises, all these costs are eventually paid by the new home owner.

One problem with the policy is that it fails to recognise the major dividend available.  This is the current excessive cost of land, which is induced by regulation.

A block of land on every Australian city's outskirts is intrinsically valued, in its predominantly farming use, at $500.  But governments create artificial shortages by severely restricting the areas where houses can be built.  Once the Government approves land to be used for housing, its value, and therefore its cost to the new home buyer, leaps to $50,000 in Melbourne and Brisbane, and more than $115,000 in Sydney.

Allowing people the choice of where they live by releasing more land for housing has to be the prime policy aim.

The ALP goes some way towards this by seeking to bribe local authorities to expedite planning processes.  Important though reducing red tape is, its significance is overshadowed by land-use constraints throughout Australia.

In terms of the funding involved, Treasurer Costello has already pilloried the sum allocated as meaning an average of a mere $645 per home.  To make the budget a meaningful driver, this sum must be allocated to particular areas where it may do most good in reducing costs.

The ALP has targeted reductions in infrastructure charges as the best avenue to get the biggest bang per buck of subsidy.  The trouble is that the infrastructure for new houses is already paid for by the developers.  Sure, government agencies pay for trunk roads and major sewerage facilities, but these are needed whether people live in Prahran or Melton.

Government agencies' infrastructure charges are, therefore, largely fictitious.  Evidence of this is that the charges in Sydney are $84,000;  in most of Queensland $17,000;  in Melbourne $6000;  and in Perth a very modest $644.  Hence the charges are just another way of raising revenue.  The more spendthrift the governments the more they raise in these hidden taxes.

The areas that stand to benefit most from the ALP proposal are those where the local authority and other government charges are highest.

This means Sydney and to a lesser degree Queensland.  These are the very areas where the ALP needs to pick up and retain seats if it is to win a durable period of office.

Perhaps the outcome of the policy target is fortuitous or perhaps it brings us back to Kelly's whiteboard.

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