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Why Managing Inflation Expectations Is Crucial: Reserve Bank Focus

by Chief Editor
written by Chief Editor

The Psychology of Inflation: Why Your Expectations Shape the Economy

We often think of inflation as a cold, clinical set of numbers tracked by central banks. In reality, inflation is driven by human psychology. This proves a self-fulfilling prophecy: if we believe prices will rise, we act in ways that force them to do exactly that.

The Psychology of Inflation: Why Your Expectations Shape the Economy
Managing Inflation Expectations Is Crucial

When workers demand higher wages to cover anticipated costs, and businesses hike prices in anticipation of supply chain disruptions, the economy enters a feedback loop. What we have is why central banks like the Reserve Bank of New Zealand (RBNZ) are not just managing interest rates; they are managing public confidence. They are fighting a PR war to keep inflation expectations “anchored.”

The Great Divide: Economists vs. The Average Household

There is a growing disconnect between how experts view the economy and how families experience it at the kitchen table. Recent surveys reveal a fascinating trend:

New Zealand Reserve Bank raises cash rate to 4.25 per cent to tackle inflation
  • The Expert View: Professional forecasters and business leaders remain relatively relaxed. They see current price spikes as temporary and expect long-term inflation to settle back toward the 2% target.
  • The Household View: The average consumer is far more skeptical. After years of persistent cost-of-living shocks, households expect inflation to remain elevated for years to come.
Did you know? Inflation expectations are considered “anchored” when the public believes the central bank will keep prices stable over the long term. If these anchors slip, inflation can become entrenched, making it significantly harder to lower prices without causing a recession.

Why Your Supermarket Receipt Matters More Than a Spreadsheet

Economists look at macroeconomic models, but households look at their bank accounts. For most people, inflation isn’t an abstract percentage; it is the cost of insurance, the price of fuel at the pump, and the rising total on a weekly grocery receipt.

For nearly three decades—from the 1990s until 2021—New Zealand and many other developed nations enjoyed a period of low, stable inflation. An entire generation grew up without knowing what “high inflation” felt like. Now that the trend has shifted, the psychological scar tissue is real. Once people have lived through a period of sustained price hikes, they tend to brace for the next one, which influences their spending and saving behaviors today.

How to Navigate a High-Expectation Environment

If you are worried about your purchasing power, it is important to separate the noise from the signal. While you cannot control global supply chains or central bank policy, you can control your personal financial strategy.

How to Navigate a High-Expectation Environment
Reserve Bank of New Zealand building
Pro Tip: Focus on “inflation-resistant” habits. Instead of trying to time the market based on inflation fears, prioritize high-yield savings for short-term goals and consider assets that historically hold value during periods of currency devaluation.

The Future of Price Stability

The central bank’s biggest challenge isn’t just the economy—it’s the narrative. If the bank can successfully convince the public that the current price spikes are isolated and temporary, they can break the cycle of “expectations-driven” inflation. However, if that trust erodes, the bank will be forced to take more drastic measures, such as aggressive interest rate hikes, which could further dampen economic growth.

Frequently Asked Questions

Q: Why does the Reserve Bank care what I think about inflation?
A: If you expect prices to rise, you might demand a higher salary or spend money more quickly to avoid future costs. When everyone does this, it creates the very inflation they were worried about. Your behavior is a key economic indicator.

Q: What does it mean to have inflation “anchored”?
A: It means the public has high confidence that the central bank will keep inflation low and stable over the long term, regardless of temporary price spikes in goods like oil or food.

Q: How can I protect my savings from inflation?
A: Diversification is key. While cash is necessary for emergencies, long-term wealth is often protected by assets that have historically outperformed inflation, such as equities or real estate, depending on your risk tolerance.

What is your take on the current cost-of-living climate? Do you feel that prices will stabilize soon, or are you planning your finances around a “new normal” of higher costs? Share your thoughts in the comments below or subscribe to our newsletter for deep dives into economic trends that affect your wallet.

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Entertainment

Inside a Brutalist Icon: A Millennial Couple’s Unique Home

by Chief Editor
written by Chief Editor

Beyond Concrete: Why Brutalism is the Future of Urban Living

For decades, Brutalist architecture was the punching bag of urban design—labeled as “harsh,” “cold,” or “monolithic.” Yet, walk through London’s iconic Barbican Estate today, and you’ll find a different reality: a thriving, sought-after community where concrete is no longer a symbol of decay, but a canvas for modern living. As we look toward the future of city planning, the “Brutalist Revival” offers more than just an aesthetic trend. it provides a blueprint for sustainable, pedestrian-first urbanism.

Beyond Concrete: Why Brutalism is the Future of Urban Living
Page and Turnbull Hannah Simonson

The “Magic Key” Effect: Prioritizing People Over Cars

Modern urbanites are increasingly rejecting the sprawl of the suburbs in favor of “utopian” density. The Barbican’s success—marked by its car-free layout and integrated cultural amenities—is becoming the gold standard for developers. By moving infrastructure underground, the estate creates a sprawling, elevated pedestrian sanctuary.

As Hannah Simonson, a senior cultural resources planner, notes, social media has played a pivotal role in this shift. Platforms like Instagram have reframed raw, geometric forms as “authentic” and “expressive,” moving the needle for younger generations who prioritize architectural integrity over cookie-cutter glass towers.

Pro Tip: When evaluating a potential home in a historic landmark, look beyond the facade. The true value of these estates often lies in the “invisible” infrastructure—the shared gardens, quiet pedestrian walkways, and community-centric floor plans that facilitate social connection.

Sustainability and the “Re-use” Revolution

The future of architecture is undeniably tied to sustainability. Demolishing massive concrete structures is carbon-intensive and wasteful. The trend toward preserving and retrofitting postwar design aligns perfectly with contemporary climate goals. Instead of building new, we are seeing a global movement to “re-value” the existing built environment.

Home Tour: Anton Rodriguez – Inside the Barbican Estate

By transforming these spaces into modern residences, architects are proving that Brutalist structures are surprisingly adaptable. Their thick walls offer superior thermal mass, and their expansive footprints allow for flexible interior layouts that can evolve with the needs of a modern workforce.

Finding Serenity in High-Density Environments

One of the most surprising trends in urban migration is the search for “connected isolation.” Residents like Luke Kaluzny, who moved to the Barbican in 2025, highlight the unique balance of living in a massive, bustling city while enjoying the quiet, pedestrian-only pockets of the estate. It’s this marriage of city-center convenience and architectural serenity that will define the next generation of luxury real estate.

Finding Serenity in High-Density Environments
Luke Kaluzny Barbican apartment
Did You Know? The Barbican is built on land heavily damaged during World War II. The integration of 1,000-year-old Roman walls alongside 20th-century concrete is a testament to the idea that architecture should reflect layers of history rather than constant replacement.

Frequently Asked Questions

  • Why is Brutalist architecture becoming popular again? Younger generations are drawn to its raw authenticity and bold forms. The focus on sustainable reuse of existing structures has made these buildings highly desirable for preservation.
  • What makes the Barbican unique for residents? Its car-free design, integrated cultural venues (theaters and galleries), and expansive private green spaces create a “city within a city” feel that is rare in modern developments.
  • Is Brutalism energy efficient? Many Brutalist buildings feature thick concrete walls that provide excellent thermal mass, helping to regulate indoor temperatures naturally.

Are you living in an architecturally significant building, or are you passionate about the future of urban design? We want to hear your story. Reach out to our editorial desk or join our newsletter for more deep dives into the spaces that shape our lives.

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News

Generational Economic Gap Set to Hit Record Highs

by Rachel Morgan News Editor
written by Rachel Morgan News Editor

For Mady, a mother of four living in Rockhampton, Central Queensland, the daily reality of managing a household has become a “pressure cooker.” To cope with rising interest rates and the increasing cost of living, her family has been forced to cut subscriptions, pause home renovations, and reduce spending on children’s school sports.

The financial strain is compounded by urgent maintenance needs at her home, including termite control and addressing “concrete cancer” in the house stumps. To help rebuild their savings, Mady and her neighbours are planning a community garage sale this June.

A Widening Intergenerational Divide

Mady’s struggle reflects a broader, systemic issue identified in recent research from the Actuaries Institute. The study suggests that inequality between younger and older Australians is widening and could reach record levels within the coming years.

While all generations have seen improvements in wealth since 2000, outcomes for younger people are worsening in three critical areas: the economy, housing, and the environment. Dr. Hugh Miller, a lead author of the report, noted that this trend creates a significant equity issue when compared to older generations.

Did You Know? Australia’s dwelling value-to-income ratio has climbed to 8.2, which is well above the 20-year average of 6.8.

The housing market has become a primary driver of this inequality. According to economist Saul Eslake, home ownership for those under 35 has regressed to levels seen in 1947, while those aged 35 to 44 are seeing ownership rates similar to 1954.

In contrast, home ownership among those aged 65 and over has remained near its 1966 peak. This disparity is reinforced by the fact that it now takes an average of 11 years to save for a 20 per cent deposit, with mortgage servicing consuming roughly 45 per cent of weekly income.

“The issue is whether young people will continue to have access to the same sort of ladder of wealth accumulation that others have had,” said Dr. Miller.

Stagnant wages have further hindered the ability of younger Australians to build wealth. Dr. Miller noted that wages have remained “very flat” for over a decade, failing to consistently rise above inflation as they have in previous historical periods.

Environmental Risks and Insurance Costs

The crisis is not limited to wages and housing. environmental factors are also playing a role. Adverse climate-related indicators, such as rising CO2 and temperatures, are creating a crossover effect that impacts housing affordability.

As extreme weather events increase, the costs of adaptation or insurance premiums may rise. Data from Finity shows that home insurance premiums have already increased by 51 per cent over the past five years.

Expert Insight: The intersection of stagnant wage growth, high housing costs, and rising climate-related insurance premiums creates a compounding financial burden. This suggests that the traditional mechanisms for wealth accumulation are becoming increasingly difficult for younger generations to access.

Dr. Miller warned that certain communities may become particularly vulnerable if they lack the economic resources to move or afford these escalating insurance costs.

Vulnerabilities in Older Generations

While the housing gap primarily affects the young, inequality also manifests in older age. Mr. Eslake highlighted a growing cohort of older women living near or in poverty, often due to a lack of home ownership following family breakdowns or career breaks taken for caregiving.

Chris Anstey on the US's biggest interest rate rise in nearly 30 years | ABC News

This gender gap is reflected in superannuation balances. Data from AFSA shows that in June 2022, the median superannuation balance for men aged 60 to 64 was $205,385, while for women in the same age bracket, it was $153,685—a difference of 25.2 per cent.

economists point to emerging concerns regarding the affordability and suitability of access to aged care for older Australians.

Looking Ahead

As economic and environmental pressures continue, the gap between generations may continue to expand. Increased frequency of extreme weather events could lead to further increases in adaptation costs and insurance premiums.

The federal government has introduced legislation to change the capital gains tax discount and negative gearing, which may impact how housing inequality is addressed in the future. Whether younger Australians can regain access to the wealth-accumulation tools available to previous generations remains a critical question for the nation’s economic stability.

Frequently Asked Questions

Why is intergenerational inequality increasing in Australia?
Inequality is growing due to worsening outcomes for younger people in the economic, housing, and environmental domains, contrasted with the relative stability of older generations.

How has the housing market affected younger Australians?
High dwelling value-to-income ratios and stagnant wages have made home ownership difficult, with ownership rates for those under 35 falling back to 1947 levels.

How does climate change impact housing affordability?
Climate change and extreme weather events can lead to increased costs through higher insurance premiums and the need for home adaptation.

How might these shifting economic patterns change the way your own family plans for the future?

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Labor’s Tax Fight: Why Not All Critics Are Vested Interests

by Rachel Morgan News Editor
written by Rachel Morgan News Editor

The Australian government is facing a growing wave of public backlash following the federal budget, prompting a defensive campaign from the Labor Party. In an email sent to members this week, the party’s national secretariat requested $10 contributions to help build campaign infrastructure, characterizing the current climate as a fight against “vested interests” and “wealthy backers” who are pouring money into attacks on the proposed tax changes.

Prime Minister Anthony Albanese has maintained his stance on the budget measures, which include adjustments to capital gains tax (CGT) and negative gearing. While the government has signaled potential carve-outs for start-ups and minimum tax exemptions for certain testamentary discretionary trusts, officials have largely dismissed the mounting public criticism as invalid or the result of politically motivated scare campaigns.

Did You Know? The Labor Party’s recent email to members, which warned that the party is up against the Liberals, One Nation, and their “hard right allies,” was explicitly authorized by the party’s national secretariat on Wednesday.

The Challenge of Communication

Treasurer Jim Chalmers and other ministers have frequently attributed the public outcry to their political opponents, accusing them of spreading misinformation. However, this strategy has drawn comparisons to the government’s approach during the referendum on an Indigenous Voice to Parliament, where an inability to distinguish between the source of a critique and the substance of the concern proved costly.

From Instagram — related to Treasurer Jim Chalmers, Indigenous Voice

Cabinet ministers have been criticized for their tone. For instance, Housing Minister Clare O’Neil used a video explainer to accuse “internet finance bros” of manufacturing outrage, while Social Services Minister Tanya Plibersek suggested that Australians are being misled by the opposition. Critics argue that such antagonistic framing risks alienating younger voters who are concerned about how new tax policies will affect their personal wealth accumulation.

Expert Insight: The government’s current predicament highlights the high-stakes trade-off of political messaging: by choosing to aggressively label dissenters as partisan or self-serving, they risk delegitimizing valid questions from compact business owners and younger investors who are genuinely seeking clarity on how these reforms will impact their financial security.

Looking Ahead

As the government continues to navigate the fallout, analysts suggest that the “if you’re explaining, you’re losing” adage—often associated with former U.S. President Ronald Reagan—may continue to define their political standing. While some senior government figures maintain they anticipated a period of messy fallout, the administration may struggle to regain control of the narrative if they cannot pivot from defensive, antagonistic rhetoric toward addressing the specific, practical concerns of those affected by the tax changes.

Anthony Albanese defends tax policy in studio with Neil Mitchell

If the government remains unable to decouple the political noise from the legitimate economic anxieties of young people and small business owners, the current “dull roar” of dissatisfaction could potentially intensify, further complicating the implementation of their proposed reforms.

Frequently Asked Questions

What is the purpose of the recent email sent by the Labor Party?
The email, authorized by the party’s national secretariat, asks members for a $10 contribution to help build campaign infrastructure for the “fight ahead” regarding tax changes.

How has the government characterized the backlash against the budget?
Labor officials have largely described the opposition as “scare campaigns built on lies,” arguing that the complaints are coming from political opponents and “vested interests” aiming to protect the status quo.

What specific tax changes are currently under discussion?
The government is moving forward with changes to negative gearing and capital gains tax (CGT), with potential carve-outs for start-ups and minimum tax exemptions for prospective testamentary discretionary trusts.

Are you concerned that the government’s current communication strategy is failing to address the underlying economic anxieties of young Australians?

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News

The hidden reason houses cost too much – Roger Partridge

by Rachel Morgan News Editor
written by Rachel Morgan News Editor

Local councils in New Zealand are facing a significant fiscal mismatch where the immediate costs of population growth fall on ratepayers, whereas the financial benefits flow to central government in Wellington.

Upgrading trunk infrastructure—including arterial pipes, roads, and sewage capacity—requires immediate funding. However, the rates payments from new housing arrive slowly, leaving a gap in funding for essential services like schools and stormwater management.

Meanwhile, the real-time revenues generated by growth, such as company tax, PAYE, and GST on new spending, go directly to the central government. This creates a system where Wellington captures the short-term gains while councils and ratepayers bear the short-term costs.

The Case for GST-Sharing

To address this, the New Zealand Initiative’s 2013 report, Free to Build, proposed a Housing Encouragement Grant. This would provide councils with a direct fiscal reward benchmarked to the estimated GST on each new home.

From Instagram — related to Zealand, Bill

As an example, under 2013 rates, a $400,000 house-and-land package would have resulted in a $60,000 payment to the consenting council. Proponents argue that a simple, formula-based system is harder to game and provides a clear incentive for councils to approve development.

Did You Know? In Switzerland, the canton of Zurich alone has more than 100 municipalities that each set their own income tax rates, creating a competitive environment where residents can move to lower-tax neighbors.

This approach is inspired by the Swiss model, where local growth leads to local revenue because cantons and communes levy their own income taxes. While New Zealand cannot replicate this exactly—as a local income tax in a monopoly like Auckland would lack competitive pressure—GST-sharing serves as a proxy.

Political Momentum and Potential Impact

The concept of GST-sharing has moved from a fringe idea to a central political discussion. The ACT party introduced it as a member’s bill, and the 2023 National-ACT coalition agreement committed both parties to investigate the proposal.

Housing Minister Chris Bishop has similarly floated the idea as part of his housing agenda. Although the coalition government’s first two Budgets did not deliver the policy, there are indications it may appear in the third.

Expert Insight: The core of this issue is not just about planning laws, but about aligning financial incentives. If councils are financially penalized for growth, they will rationally resist it; providing a direct fiscal reward changes the “arithmetic” of development.

The potential financial impact is substantial. Local Government New Zealand estimates that sharing 50% of GST from 2024 building consents could have generated $1.3 billion for councils, which may have been enough to cover their entire rates increases for that year.

Integrating Incentives and Frameworks

Similar logic has been applied to other industries, such as New Zealand First leader Winston Peters’ proposal to share mining royalties with the regions that bear the costs of extraction.

The Hidden Reason Your Construction Costs Keep Increasing

However, GST-sharing is not a complete solution on its own. For three decades, the Resource Management Act (RMA) has made development costly and uncertain. The government’s Planning Bill is intended to replace the RMA.

For housing supply to improve, both levers must work together: the Planning Bill must provide the legal room for development, while GST-sharing provides the financial reason for councils to say yes.

A final decision on whether these changes will be implemented may be revealed on May 28.

Frequently Asked Questions

Why do councils often resist new housing developments?

Councils face immediate costs to upgrade trunk infrastructure, such as roads and sewage capacity, while the resulting rates payments from new housing arrive slowly. This creates a financial burden on current ratepayers.

Frequently Asked Questions
Planning Bill Planning Bill

How would the proposed GST-sharing system work?

It would involve a Housing Encouragement Grant where councils receive a payment benchmarked to the estimated GST of each new home, providing a direct fiscal reward for approving consents.

What is the difference between the GST-sharing proposal and the Planning Bill?

GST-sharing provides the financial incentive for councils to approve growth, while the Planning Bill aims to replace the Resource Management Act (RMA) to remove the planning barriers that create development slow and uncertain.

Do you believe financial incentives are the most effective way to encourage local councils to increase housing supply?

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Business

First home buyer scheme found to be fuelling price increases at lower end of market, Cotality suggests

by Chief Editor
written by Chief Editor

The Paradox of Low-Deposit Schemes: Helping Buyers or Hiking Prices?

For many aspiring homeowners, the dream of owning a home often hits a wall: the deposit. Government initiatives, such as the Australian Government 5% Deposit Scheme (formerly known as the Home Guarantee Scheme), aim to dismantle this barrier by allowing eligible buyers to enter the market with significantly lower upfront costs and without the burden of lenders’ mortgage insurance (LMI).

From Instagram — related to Australian, Scheme

Although, recent data suggests a complex side effect. Research from property analytics firm Cotality indicates that these schemes may be fueling a price surge at the lower finish of the housing market. When demand is artificially boosted through lower entry requirements without a corresponding increase in housing supply, the result is often a price hike that erodes the highly affordability the scheme intended to create.

Did you recognize? Recent data shows that homes eligible for the guarantee rose 6.7 per cent in the first six months following scheme expansions, nearly double the 3.6 per cent increase seen in higher-priced properties.

This trend is most visible in Sydney, where a stark divergence has emerged: homes below the price cap rose 4.1 per cent, although higher-priced properties actually fell by 1.1 per cent. This creates a “growth gap” that makes it increasingly difficult for the next wave of first-home buyers to get their foot in the door.

The Danger Zone: Negative Equity and the Low-Equity Trap

While a 5 per cent deposit lowers the initial savings hurdle, it fundamentally changes the risk profile of the loan. Borrowing 95 per cent of a property’s value leaves a homeowner with a very thin equity buffer. In a stable or rising market, this is manageable; however, in a volatile environment, it opens the door to negative equity.

The Danger Zone: Negative Equity and the Low-Equity Trap
Deposit Government Negative

Negative equity occurs when a borrower owes more to the lender than the current market value of the home. For those who entered the market with a minimal deposit, even a slight dip in property prices can wipe out their equity entirely, leaving them trapped in a loan that exceeds the asset’s value.

Pro Tip: Focus on serviceability, not just the deposit. While government guarantees help you get the keys, your ability to handle repayments amid inflation and interest rate fluctuations is the real determinant of long-term financial stability.

As inflation concerns persist and global uncertainty weighs on the economy, the risk for low-deposit borrowers increases. Without a substantial equity cushion, these buyers are far more exposed to the pressures of higher repayments and potential market downturns.

A Fragmented Market: Residential vs. Commercial Trends

The property landscape is currently performing in silos. While residential property continues to be supported by a chronic shortage of housing, other sectors are reacting differently to economic pressures.

New scheme allows first home buyers to purchase with a 5% deposit | 9 news Australia

Industrial property, particularly warehouses, remains a powerhouse driven by the relentless growth of e-commerce and infrastructure demand. Conversely, the office and retail sectors are struggling. Higher interest rates, shifting work-from-home habits, and changing shopping behaviors have pushed these sectors below neutral confidence levels.

Even within the residential sector, confidence is cooling. The Australian Property Institute (API) reported a dip in its key index from 7.1 to 6.1, signaling a broad slowdown across various states. This suggests that while the “bottom end” of the market is being pushed up by first-home buyer activity, the broader market is becoming more cautious.

The Interest Rate Weight: The New Market Driver

For several years, constrained supply was the dominant force driving Australian property prices. However, the narrative has shifted. Recent cash rate increases by the Reserve Bank of Australia (RBA) have become the primary drag on market confidence.

The RBA has acknowledged that expanded guarantee schemes can increase the borrowing capacity of first-home buyers and bring forward purchases, which puts upward pressure on prices in the short term. While Treasury suggests that supply will eventually respond to this demand to dampen the price effect, that relief is a medium-term prospect, not an immediate fix.

For the modern buyer, the challenge is no longer just saving for a deposit—it is navigating a high-interest-rate environment where borrowing capacity is squeezed and cost-of-living pressures are mounting.

Frequently Asked Questions

What is the Australian Government 5% Deposit Scheme?
It is a program (formerly the Home Guarantee Scheme) that allows eligible first-home buyers to purchase a property with a deposit as low as 5% without paying lenders’ mortgage insurance (LMI).

How does the scheme affect house prices?
By increasing demand for entry-level homes without increasing supply, the scheme can drive up prices at the lower end of the market, potentially making housing less affordable for future buyers.

What is negative equity?
Negative equity is a financial situation where the current market value of a home is lower than the remaining balance of the mortgage used to purchase it.

Which property sectors are currently the strongest?
Industrial properties, such as warehouses, are currently among the strongest sectors due to e-commerce and infrastructure demands.

Join the Conversation

Do you reckon low-deposit schemes are a genuine help or a “bandaid” solution for the housing crisis? Share your thoughts in the comments below or subscribe to our newsletter for the latest property insights.

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Business

‘Too big to ignore’ housing problem top priority for productivity commissioner

by Chief Editor
written by Chief Editor

Breaking the Housing Deadlock: Why Supply is Only Half the Battle

Australia’s housing affordability crisis has reached a tipping point where it can no longer be ignored. While the federal government has set an ambitious target of 1.2 million fresh homes, evidence suggests this goal is unlikely to be met.

The challenge isn’t just about the number of roofs over heads. it’s about structural barriers that make building slower and more expensive. Planning rules and zoning laws remain significant hurdles, dictating what can be built and where, often at the expense of density and affordability.

From Instagram — related to Productivity, Current

Beyond regulation, there is a worrying trend in how we actually build. Residential construction productivity has fallen by 12 per cent over the last three decades, even when accounting for the fact that modern homes are larger and of higher quality.

Did you know? Construction productivity has declined significantly, meaning it takes longer to build a house today than it did a decade ago.

The social cost of this stagnation is already visible. In major hubs like Sydney, young people are leaving in mass numbers because they can no longer afford to live close to the jobs and opportunities that drive their careers. We are moving toward a reality where parental home ownership is a stronger predictor of future ownership than an individual’s own income or effort.

Reviving the Economic Engine: The Productivity Slump

Productivity—the value of output relative to the labour required to produce it—is currently languishing. Between 2015 and 2025, labour productivity growth sat at approximately 0.4 per cent per year.

Ralphie May: Too Big To Ignore – Stoned Like a Gravel Road

To place that in perspective, Here’s only about a quarter of the 60-year average. This slump is partly attributed to reduced private sector investment since the global financial crisis and a general lack of ambition in the government’s reform agenda compared to the aggressive changes seen in the 1980s and 90s.

To shift the dial, experts suggest that Australia needs to move beyond “quick fixes” and embrace bolder structural reforms. This includes addressing the “drag” on investment and finding new ways to incentivize productivity gains across the board.

Pro Tip: For businesses looking to improve productivity, focusing on “general-purpose technologies”—tools that fundamentally change how operate is performed—is historically the most effective way to trigger long-term growth.

Tax Reform: A Lever for Investment and Work

Taxation is often viewed solely as a revenue tool, but it can as well be a powerful lever for economic growth. Current company income taxes can create a strong disincentive for businesses to invest in new equipment or technology.

One proposed solution is the cashflow tax. Unlike traditional systems, a cashflow tax allows businesses to write off investments in full as they occur, reducing the financial drag on productive investment and encouraging companies to modernize.

On the individual side, reforms to the personal income tax system could provide greater incentives for people to work. This would involve reducing “leakages” and concessions to lower overall tax rates, making employment more rewarding for the average worker.

For more on how these policies impact the economy, see our guide on national economic reform or visit the Productivity Commission for detailed research.

AI: The Productivity Wildcard

While structural reforms are leisurely, artificial intelligence (AI) offers the potential for a rapid productivity boom. AI is being categorized as a “general-purpose technology,” similar to the impact of electricity or railways.

Conservative estimates suggest AI could boost labour productivity by 4 per cent over the next decade. While that number seems compact, it would effectively double the rate of productivity growth seen over the last ten years.

Augmentation vs. Automation

The fear of a “jobs bust” is common, but the data suggests a more nuanced future:

  • Automation: Only about 4 per cent of jobs are estimated to be fully or mostly automated, putting a small share of the workforce at high risk.
  • Augmentation: Over 30 per cent of jobs are subject to augmentation. In these roles, AI handles specific tasks, but a human remains essential to the equation.

However, Notice “tail risks.” If AI evolves to replace labour rather than augment it, policymakers may need to consider radical responses, such as a universal basic income, to provide structure and meaning to people’s lives in a post-work economy.

Frequently Asked Questions

Why is the 1.2 million home target unlikely to be met?
A combination of restrictive planning rules, zoning barriers, and a 12 per cent decline in residential construction productivity over 30 years makes this target tough to achieve.

What is a cashflow tax?
It is a tax system where businesses can write off investments in full as they happen, which reduces the disincentive to invest compared to traditional company income taxes.

Will AI replace most jobs?
Current estimates suggest only about 4 per cent of jobs can be fully automated, while more than 30 per cent will be augmented by AI, meaning humans will still be needed to operate the technology.

How bad is Australia’s current productivity growth?
Between 2015 and 2025, growth was roughly 0.4 per cent per year, which is only a quarter of the 60-year average.

Join the Conversation

Do you think AI will be the key to fixing Australia’s productivity slump, or are structural tax and planning reforms more important? Let us know your thoughts in the comments below or subscribe to our newsletter for more deep dives into the future of the economy.

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Health

Why the ROAD Act could shrink America’s housing supply, not expand it

by Chief Editor
written by Chief Editor

The Senate’s Housing Gamble: Will the ROAD Act Pave the Way to More Homes or Fewer?

Earlier this month, the U.S. Senate passed the 21st Century ROAD to Housing Act with a striking 89 to 10 vote. The bill, spearheaded by Senator Elizabeth Warren (D-Mass.), takes aim at the single-family rental industry, arguing it exacerbates the nation’s housing shortage. But experts are raising concerns that the Act, intended to boost housing availability, could inadvertently stifle investment and worsen the problem it seeks to solve.

The Core Argument: Institutional Investors and the Housing Supply

The central premise of the ROAD Act is that large institutional investors are reducing the supply of homes available for purchase by acquiring properties and converting them into rentals. This practice, proponents argue, drives up prices and limits choices for potential homebuyers. President Trump has publicly expressed support for curbing investor activity in the single-family home market, even issuing an executive order in January to that effect.

A Potential Backfire: Curbing Investment in Modern Construction

However, critics suggest the Act’s provisions could have unintended consequences. Ed Pinto, director of the American Enterprise Institute’s Housing Center and former chief credit officer at Fannie Mae, argues the bill could severely curtail investment in new single-family housing. He describes the legislation as a “textbook example of the law of unintended consequences.”

Why Single-Family Rentals Exist in the First Place

Pinto highlights that the demand for single-family rentals has grown because many potential buyers are unable to qualify for a mortgage due to insufficient savings, income, or credit scores. Others may prefer renting due to short-term relocation plans or a desire to avoid the responsibilities of homeownership. These renters often seek the space and amenities – bedrooms and backyards – that apartments typically don’t offer.

The Role of Rehab Investors and Build-to-Rent

Currently, companies like Amherst acquire properties, often in disrepair, and invest in renovations. Amherst alone has reportedly fixed up 58,000 homes, spending around $40,000 per property, totaling over $2 billion in investment. Another segment of the industry focuses on “build-to-rent” developments, constructing entire neighborhoods of homes specifically for rental purposes.

Challenging the Narrative: Renovations and Market Dynamics

Proponents of the ROAD Act believe purpose-built rentals don’t add to the housing supply and that buying and rehabbing homes reduces the number available for sale. Pinto disputes both claims. He points out that many rehabbed homes are initially in such poor condition they aren’t viable for sale or rent. Renovations bring them back onto the market, and investors often sell these properties when market conditions are favorable, effectively increasing the supply.

Key Provisions and Their Potential Impact

The ROAD Act includes two key provisions that are raising concerns. First, it prohibits “large institutional investors” – defined as entities owning 350 or more homes – from purchasing additional properties, with penalties reaching around $1 million for violations. Second, it mandates that any newly constructed rental homes must be sold after seven years of being leased.

This seven-year sell-off requirement is already “totally chilling financing for purpose-built rentals,” according to Pinto. Private capital investors, such as insurance companies and pension funds, prefer long-term investments and are hesitant to commit to projects with a forced sale date. The Act also grants broad discretionary power to the Secretary of the Treasury, potentially allowing for further restrictions on ownership.

A Small Slice of a Large Pie

Despite the focus on institutional investors, their total portfolio represents a relatively small percentage of the overall housing market – around 800,000 properties, or approximately 1% of all existing homes in the U.S. However, Pinto emphasizes that these investors play a crucial role in bringing new supply to the market, particularly in rapidly growing states like Texas, Florida, and North Carolina, adding roughly 40,000 purpose-built rental homes annually.

Market Forces and the Natural Ebb and Flow

The argument against the ROAD Act centers on the idea that market forces naturally regulate the balance between renting and buying. When home prices are high, more people rent, easing pressure on the for-sale market. Conversely, when homeownership becomes more affordable, demand shifts, and rental properties may be sold, further balancing the market. The single-family rental industry, according to this view, helps facilitate this natural ebb and flow.

FAQ: The 21st Century ROAD to Housing Act

Q: What is the main goal of the ROAD Act?
A: To increase housing affordability and availability by addressing perceived issues with institutional investors in the single-family rental market.

Q: What defines a “large institutional investor” under the ROAD Act?
A: Any for-profit entity that owns 350 or more single-family homes.

Q: What is the seven-year rule?
A: Newly constructed rental homes must be sold after seven years of being leased.

Q: Could the ROAD Act actually reduce housing supply?
A: Experts like Ed Pinto argue that the Act’s provisions could discourage investment in new construction and renovations, ultimately limiting the availability of homes.

Did you realize? The single-family rental industry has grown significantly in the last 15 years, driven by increasing demand from those unable to qualify for a mortgage or preferring the flexibility of renting.

Pro Tip: Stay informed about legislative changes impacting the housing market. Understanding these policies can help you make informed decisions whether you’re buying, selling, or renting.

What are your thoughts on the ROAD Act? Share your opinions in the comments below! Explore our other articles on housing market trends and real estate investment for more insights.

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News

The 31-Year-Old Lobbyist Fighting the Rent Freeze

by Rachel Morgan News Editor
written by Rachel Morgan News Editor

Over a half-melted peanut-butter açai bowl in the Bronx’s Pelham Bay neighborhood, Kenny Burgos, CEO of the Modern York Apartment Association, argues that rents for nearly a million New York apartments need to increase. Burgos states that “The Bronx, to this day, has buildings that are almost 100 percent — if not 100 percent — regulated,” and that these are often the buildings “that are struggling the most, that have the highest violation counts.” He believes increasing rents is necessary to maintain habitable conditions in these buildings. Burgos, a former assemblyman, acknowledges this position is unpopular, particularly given the current mayor’s campaign promise to freeze rents on stabilized apartments. “I do this work because I know I’m right,” Burgos says, “And I know that we are on a path to destroy the housing people live in.”

A Familiar Face in Albany

Burgos maintains a friendly relationship with Mayor Mamdani, despite now opposing his housing policies. The two met while serving in the State Assembly, having both been elected in 2020; Burgos represented the 85th District in the Bronx, while Mamdani represented Astoria and parts of Queens, an area referred to as “Commie Corridor.” They bonded over shared interests in music and internet culture, appreciating each other’s presence as young officials seeking to redefine the role. They even played basketball on Tuesdays in Albany and shared a hookah on Steinway Street.

Ideological Clash at the Rent Guidelines Board

The differing ideologies of Burgos and Mamdani will come to a head at the annual Rent Guidelines Board meetings in March. These meetings determine allowable rent increases for stabilized apartments, and the mayor’s proposed four-year rent freeze is now at stake. Burgos and his team have been preparing arguments to present to the board, anticipating being positioned as the opposition. He believes that, based on data and current trends, the current path is “not sustainable.”

Did You Know? The New York Apartment Association, led by Kenny Burgos, represents property owners and managers of approximately 500,000 rent-stabilized apartments.

The affordable-housing crisis is attributed to a combination of factors, including rising rents, low vacancy rates, and a slow pace of new development. However, the question of who bears the brunt of the cost – tenants or landlords – remains a central point of contention. According to a report by NYU’s Furman Center, nearly half of the city’s rent-stabilized units are in “legacy properties” built before 1974, concentrated in northern Manhattan and the Bronx, with a median rent of $1,400 a month in 2023. Both Mamdani and Burgos agree that addressing the city’s complicated property-tax system and rising insurance fees could facilitate improve conditions in these buildings.

Differing Views on Building Disrepair

Mamdani and his team attribute the disrepair of rent-stabilized buildings to speculation and “slumlordism,” arguing that only a compact percentage of buildings with stabilized units are financially distressed. Burgos disagrees, stating that this measurement doesn’t account for landlords’ debt service. He also criticizes the state’s “hardship” program for landlords as ineffective, calling it “a program in name only.”

Burgos believes a 2019 law exacerbated the problems facing rent-stabilized housing. Prior to the Housing Stability and Tenant Protection Act, landlords had more flexibility to increase rents and convert regulated apartments to market rate. This incentivized investment in stabilized properties, but the 2019 law limited rent increases and conversions, reducing profit margins and, according to Burgos, leading to deferred maintenance and empty units. He argues What we have is “a math problem, not an emotional one,” and that a rent freeze will worsen the situation.

Expert Insight: The core of the disagreement between Burgos and Mamdani centers on the financial viability of rent-stabilized housing. Burgos’s argument highlights the potential for economic disincentives to maintain properties under strict rent control, while Mamdani’s approach focuses on addressing perceived exploitative practices by landlords.

Burgos took his current position in the summer of 2024 following a merger of two landlord lobbying groups. He and his wife were anticipating their first child, and the role offered a reprieve from his Albany commute. Like Mamdani, Burgos utilizes social media platforms like Instagram and TikTok to communicate housing policy. Despite spending $2.5 million to oppose Mamdani’s election, Burgos sometimes finds himself compared to the mayor, even being jokingly referred to as “Temu Zohran” or “Wario.”

In a final anecdote, Burgos is described as health-conscious, meticulously tracking his caloric intake, even while enjoying a 1,200-calorie açai bowl. He emphasizes that “healthy” and “low calorie” are not necessarily synonymous.

Frequently Asked Questions

What is Kenny Burgos’s position on rent control?

Kenny Burgos believes that rents for nearly a million apartments in New York need to increase to ensure the habitability of buildings, particularly those in the Bronx that are almost entirely rent-regulated.

What is the relationship between Kenny Burgos and Mayor Mamdani?

Burgos and Mamdani were classmates at Bronx Science and served together in the State Assembly, developing a friendly relationship based on shared interests. However, they now find themselves on opposing sides of the debate over rent control.

What law does Burgos believe negatively impacted rent-stabilized housing?

Burgos believes the 2019 Housing Stability and Tenant Protection Act limited landlords’ ability to raise rents and convert units, leading to decreased investment and deferred maintenance.

How will differing approaches to housing affordability impact New York City residents in the coming months and years?

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Entertainment

Absent family support, they went from children’s home to rented flat. This is how they managed

by Chief Editor
written by Chief Editor

The Growing Pains of Independent Living: Supporting Young Adults Transitioning from Care

For young adults who age out of institutional care, the simple act of managing finances and housing can be profoundly empowering. Having limited control over life choices earlier on makes these decisions feel particularly significant. However, this newfound independence often comes with a steep learning curve, and a series of unexpected financial and logistical challenges.

The Reality of Rental Agreements and Unexpected Costs

One common hurdle is navigating the complexities of rental agreements. A recent case highlighted the importance of carefully reviewing contracts, even when a property appears move-in ready. Participants in a program found themselves responsible for repainting a flat at the end of their lease, despite some defects not being their fault. While the contract stipulated tenant responsibility for repairs, the situation underscored differing interpretations between landlords and tenants.

This isn’t an isolated incident. Many young people entering the rental market for the first time are unaware of the nuances within lease agreements. Clauses regarding wear and tear, repairs, and deposit returns can be particularly problematic. Understanding these details is crucial to avoiding unexpected expenses.

The Affordability Crisis and the Need for Support Systems

The expectation that 19- to 21-year-olds without family backing can fully cover open market rents is often unrealistic. Rising housing costs exacerbate this issue, placing a significant strain on already limited resources. Support programs, like Thrive21+, play a vital role in providing a safety net and a space for young adults to practice independent living skills.

These programs aren’t simply about providing financial assistance; they’re about fostering financial literacy and responsible decision-making. Learning from mistakes – like underestimating repair costs – is a valuable part of the process, but it’s a process that benefits from guidance and support.

Beyond Housing: Broader Financial Literacy Needs

The challenges extend beyond housing. Young adults transitioning to independence often lack experience with budgeting, credit management, and long-term financial planning. This can lead to poor financial decisions and increased vulnerability to debt.

Pro Tip: Before signing a lease, create a detailed budget that includes not only rent but also utilities, transportation, food, and potential repair costs. Factor in a buffer for unexpected expenses.

The Role of Community Organizations and Government Initiatives

Organizations dedicated to supporting vulnerable youth are increasingly focusing on comprehensive life skills training. This includes workshops on financial literacy, tenant rights, and conflict resolution. Government initiatives aimed at providing affordable housing and financial assistance are also crucial.

Did you know? Many cities and counties offer free or low-cost financial counseling services. These services can provide personalized guidance and support.

Looking Ahead: Trends in Support for Transitioning Youth

The need for robust support systems for young adults aging out of care is only going to increase. Several trends are shaping the future of this landscape:

  • Increased Focus on Preventative Measures: Programs are shifting towards earlier intervention, providing support and guidance while young people are still in care to prepare them for independent living.
  • Technology-Enabled Solutions: Mobile apps and online platforms are being developed to provide financial literacy training, connect young adults with resources, and facilitate access to affordable housing.
  • Collaboration Between Sectors: Greater collaboration between government agencies, non-profit organizations, and the private sector is essential to create a comprehensive and coordinated system of support.

FAQ

Q: What should I look for in a rental agreement?
A: Pay close attention to clauses regarding repairs, maintenance, deposit returns, and termination of the lease.

Q: What if I disagree with my landlord about a repair?
A: Document everything in writing and seek legal advice if necessary.

Q: Where can I find financial literacy resources?
A: Many community organizations and government agencies offer free financial counseling services.

Q: Is it common for tenants to be responsible for repainting?
A: It depends on the lease agreement and local laws. Some jurisdictions limit a landlord’s ability to charge tenants for normal wear and tear.

Aim for to learn more about supporting young adults transitioning to independence? Explore our other articles on youth services or subscribe to our newsletter for the latest updates.

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