Bad economics and contemptible politics

By Donal Curtin 15/04/2014

It’s election year, so maybe it shouldn’t be a surprise that, according to (for example) the Herald’s account, there’s a “Rethink on foreign home-buying” underway, with various parties suggesting monitoring, controlling, restricting or banning it.
With the possible exception of gathering some data, this is a truly awful policy line to take.
We have an asset that’s come into strong international demand (and which we’re capable of building more of), and we want to stop the people willing to pay us high prices from getting out the cheque book? What sort of madness is that? It’s as if the Aussies decided that their own manufacturers weren’t getting coal or iron ore cheaply enough, so they won’t sell any of it to the Chinese.
Let’s face it: this is protectionism, pure and simple, and one of the things we know about protectionism is that it is a self-defeating, negative sum game. Both the ‘protecting’ country and the countries being ‘protected’ against end up worse off than they would have been if they had been allowed to trade freely with each other.
Some other countries control access to their housing markets? Among the many possible correct responses are: (a) more fool them, (b) most of us learn as adults not to put our hand in the fire just because Little Johnny did, and (c) I’m not inclined to take much economic or political guidance from overseas countries with political and economic systems often a lot worse than ours.
And why is the politics contemptible? Try rewriting any of the news coverage of the proposed policies with ‘Catholic’, ‘gay’ or ‘black’ substituted for ‘foreign’.