Housing affordability is not just about supply. Credit:Louise Kennerley Well that's that then. Mission accomplished. Sir Humphrey could not have put it better. Up to a point, Minister, the states are to blame for supply issues, but it's not only about supply and there is plenty of blame to go around on housing. The federal government certainly does play a role in the policy mix that has made Australian housing very expensive, social housing harder to come by and the housing market distorted by tax policy that favours increased inequality in wealth acquisition. While Morrison is "thinking" about it – and hoping the cycle solves the problem before the next election as it might – this is what the Productivity Commission, a relative bastion of economic clarity, had to say about dodgy federal governments trying to wash their hands of responsibility: "To the extent that currently low housing affordability reflects cyclical price pressures, this will eventually be reversed. (Evidence of market cooling is already emerging.) However, there is a role for policy to address forces that can cause prices to be excessive over the entire housing cycle.

Treasurer Scott Morrison revealed the government has the support for the four One Nation Senators, plus Bob Day and David Leyonhjelm for the "social services" cuts which are worth $6 billion. Credit:Ben Rushton "Interactions between negative gearing, 'capital works' deductions, post-1999 capital gains provisions and marginal income tax rates have lent impetus to investment demand during the housing boom. "These influences are not confined to housing and selective 'fixes' could have ramifications across the economy. Potential reforms need to be assessed through a broader review, with a focus on capital gains provisions. The forces that drive your cost of mortgage borrowing are many and varied. Here are the ones to watch in 2017. Credit:Virginia Star "Reducing reliance on stamp duties would help first home buyers and improve the efficiency of housing markets over time.

"There is also scope to moderate price and affordability pressures over time by: improving land release and planning approval processes; and ensuring that developer charges for infrastructure relate appropriately to the benefits provided to home buyers in new housing developments. "The First Home Owner Scheme, though conceived to compensate for the GST, would have more impact on home ownership if better targeted at lower income households. But the funds may generate larger social benefits if used to address the broader housing needs of the lowest income Australians, which should be the subject of a separate public review." They were the key findings of a Productivity Commission report on first home ownership way back in 2004. Nothing has changed. The findings are as sound today as they were a dozen years ago. Five prime ministers and the same number of federal treasurers have ignored them. That report was commissioned by another I-love-rising-housing-prices treasurer, Peter Costello. With his achievement of distorting the superannuation system to greatly advantage the one per cent, it's no surprise he did nothing about housing beyond commissioning the PC study. So there is absolutely nothing new about what Morrison seems to have miraculously discovered about housing, his speech a cut-and-paste of cliches down the years.

But don't just take the Productivity Commission's word for it. Last year a Senate committee reported on housing affordability and also rounded up all the usual suspects. It's solid stuff. And of no apparent interest to the government. More embarrassing, as reported by Peter Martin and James Massola, the coalition's own House of Representatives housing affordability inquiry has been quietly scrapped after taking numerous submissions. Labor suspects the government didn't like the direction the evidence was pointing. Or there was the National Housing Supply Council, which Crikey's Bernard Keane reminds us was a body bursting with studies and reports on housing supply and infrastructure development – and that the coalition abolished upon gaining government. And now Morrison seems to be taking his housing instructions from a report by the industry lobby, the Property Council of Australia, which calls for a new federal housing body with more power than the disbanded NHSC to get those rezonings rolling. That's the relatively easy answer to Morrison's essentially political problem: at the federal level, with Labor now prepared to take the PC's advice about the interaction of negative gearing and the capital gains tax discount, the coalition made an election policy out of opposing it. There goes part of what the government could do to help – if it wanted to.

At the state level, freeing up zoning and planning restrictions is a perennial political problem that leads to rapid conflict with local government. Federal ministers like to talk about it because it has nothing to do with them. There is that bigger issue that could involve the feds, and thus the feds run a mile: facilitating the move from state treasuries relying on stamp duty to no-exceptions land tax, as recommended by the PC and just about every economist who has addressed the issue. Especially in Sydney, a market with limited land, comprehensive land tax would help facilitate more efficient use of land and the planning changes required to get ahead of the housing problem. But there are hordes of voters who wouldn't like the idea of paying substantial land tax on the family home, even if it merely replaced the stamp duty that people pay anyway. The ACT election showed a relatively educated electorate can be brought along for the ride, but it would be a gift for any unprincipled state opposition. Corner state treasurers and they'll squeal about needing federal help for any genuine transition. There is no sign of that happening, so there is no sign of tax reform.

And there is another problem for ScoMo, if he was prepared to be honest about housing: the supply angle is, at best, a medium-term solution. As previously reported, Deutsche Bank chief economist, Adam Boyton, has highlighted the PC's observation that housing is different to other markets in that housing supply is relatively fixed in the short run. By the short run, he means a quite a few years. "After all, there are around 9 million dwellings in Australia, with a strong year for housing construction only increasing supply by around 2 per cent, once we take into account not just completions but also demolitions," Boyton wrote. "Add to that the lags involved from planning, to approval and then to construction. "That combines to suggest that, yes, while in the very long run supply matters, over even a five to 10-year horizon it is likely to be the demand side that has a greater impact on house prices. Specifically, it is likely to be factors that shift the demand curve that drive trends in house prices." The chief of such factors is borrowing power. Borrowing power in turn comes from the combination of movements in income, interest rates and credit availability. In other words, in a time of low income growth, low interest rates are pushing up Sydney house prices.

In turn, low interest rates are partly the result of the federal government refusing to take the Reserve Bank's advice to provide more beneficial infrastructure investment to stimulate the economy. ScoMo's selective hearing leaves that advice undisturbed. Loading Morrison says it's simplistic to blame investors and low interest rates for housing prices taking off. It's also simplistic to only blame zoning and planning restrictions. Thus we're left with a treasurer making empty politician's speeches, advising other levels of government to "do something" about housing affordability while studiously doing nothing to really help.