White Paper to urge GST, superannuation tax rises

ScreenHunter_4198 Sep. 15 07.19 By Leith van Onselen The AFR has leaked some details of the upcoming White Paper on tax reform, which is scheduled to be released by the Abbott Government early next year. According to the article, the White Paper will recommend shifting the tax base away from personal income and company taxes by, among other things, raising the GST and increasing taxes on superannuation: The economy’s reliance on income and company taxes has barely shifted since the tax system was conceived after World War II, highlighting an urgent need for reform, the federal ­government’s tax white paper says... The...
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US heading down path of deflation

downwardspiral by Chris Becker Last night saw the release of the US consumer price index prints for November just before the FOMC meeting and painting a picture of a potential push into deflation for the worlds biggest (2nd?) economy. The headline inflation rate came in at 1.3% annualised, and 1.7% excluding food and energy, with dropping oil prices obviously helping: The monthly change was actually negative at -0.3%, and up 0.1% on the food/energy exclusion. The lack of inflation in an economy that has been juiced by successive rounds of monetary expansion with QE3 finishing last month is telling,...
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US Fed stays the course

keep calm stay on target by Chris Becker Last night saw the end of the two day FOMC Meeting by the US Federal Reserve, which released its statement and had Chairman Janet Yellen give a press conference early this morning, Australian time. The key takeaways included: removal of "considerable time" language for keeping zero bound interest rates at current level, but with a hedge, so no real change no change in 2015 and 2016 GDP forecasts (strange given impact of oil prices both globally and China's slowdown) uptick in 2014 GDP growth forecast small reduction in unemployment forecasts to below 6%for this year,...
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The history of Australian property values (redux)

ScreenHunter_5518 Dec. 17 15.43 By Philip Soos and Paul D. Egan This chart pack presents the latest statistics for 2014, updating the dataset provided earlier last year. When adjusted for inflation and quality, housing prices have boomed nationwide since 1996, hitting a peak in 2010, before undergoing a slight fall and rise. On current trends, a new, higher peak is likely to be set in 2015. Melbourne has been the epicentre of a number of historical real estate bubbles, with the latest iteration being no different. Compared to the other capital cities, Melbourne has experienced the largest escalation in housing prices,...
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Links 18 December 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Oil Trades Near 5-Year Low as Russia Echoes OPEC Output Policy – Bloomberg Oil Near 5-Year Low as Russia follows OPEC – Reuters Oil Plunge Sets Stage for Energy Defaults: Credit Markets – Bloomberg Buy American? Not so for retail stock fund investors – Reuters Oil plunge sparks US credit market fears – FT.com The First Casualty of a Bear Market - The Reformed Broker Russian Crisis Hits Pimco Fund Wipes Out Options as Ruble Sinks - Bloomberg Bond Investors Are Skittish Over Emerging Markets - New York Times A Pessimist’s Guide to...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Asia mixed ahead of the Fed Asia is experiencing some mixed moves ahead of the results from the FOMC meeting. There is a lot for investors to digest at the moment but the dominant theme is nervous trading in emerging markets as the Federal Reserve (Fed) is tipped to switch to a hawkish bias. It’s a wonder why governments in emerging economies continue to sweat over Fed tightening when the market has had ample time to plan around this. The biggest surprise all week was perhaps the weakness in the US dollar heading into the...
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Federal budget is not like a household budget

ScreenHunter_5512 Dec. 17 11.08 Cross-posted from The Conversation: Treasurer Joe Hockey is experiencing difficult times. Deteriorating terms of trade and an uncooperative senate mean that he cannot deliver the surplus when he said he would and he cannot continue to cut government expenditure without risking a recession. I have some comforting news for Joe Hockey: the importance of the whole deficit/surplus thing has been greatly exaggerated – with a lot of help from Joe himself of course. The focus on deficits and surpluses distracts us from what’s really important in the macro economy. Hockey and Abbott are very fond...
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Happy Xmas Capt’n Glenn: AUD below 82 cents

grumpy cat by Chris Becker Thar she blows! I go away for lunch in the quiet period of the day (all day has been quiet, let's be honest) and the Aussie dollar crumps below 82 cents on the USD, currently at 81.70:     Past 1.53 against euro (EURAUD): Rolling over against Kiwi (AUDNZD), with NZDUSD also selling off but not as dramatically: And a new monthly low in Yen (AUDJPY): Aussie 10 year bond yields are near 3 year lows (chart courtesy of Forexlive) - for mind a place to sell: This seems like market squaring before the FOMC meeting and Yellen press conference...
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Why forecasts of a bigger construction boom are wrong

ScreenHunter_01 Mar. 03 22.48 By Leith van Onselen Master Builders Australia (MBA) has forecast bullish growth in Australian new home construction, tipping that dwelling commencements will rise to over 200,000 for the first time in Australia's history in the year to June 2016. From The AFR: Low borrowing costs will fuel accelerate demand in the long-neglected NSW market, pushing the market figure of 194,310 housing starts in the year to June 2015 up to 201,557 in the year to June 2016, the MBA says. “Interest rates will remain low, working to release pent-up demand built up during a decade-long period of underbuilding...
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How NSW is driving the domestic economy

ScreenHunter_01 Oct. 04 00.04 By Leith van Onselen Westpac has released its Coast-to-Coast report, which provides an update on Australia's state economies. The report provides some interesting analysis showing that New South Wales is driving demand and consumption nationally on the back of its booming housing market: Economic conditions softened in the September quarter and growth remains uneven. These two points are clear from an analysis of the state economies. Nationally, domestic demand contracted by 0.3% in the quarter and annual growth slowed to 0.9%. NSW was the only state to record an increase in final demand in...
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Black gold loses its glitter

ScreenHunter_5444 Dec. 12 10.59 By Peter Schiff, cross-posted from Euro Pacific Capital The stunning 40% drop in the price of oil over the past few months has scrambled global economic forecasts, changed the geo-political landscape, and has severely pressured many energy sector investments. Economists are scratching their heads to determine if the drop is good or bad for the economy or whether cheap oil will add to or decrease unemployment, or complicate the global effort to "defeat" deflation. While all of these issues merit detailed discussions, the first question to address is if the steep drop is here to stay and whether...
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Youth unemployment crisis set to deepen

ScreenHunter_3946 Sep. 01 12.43 By Leith van Onselen I wrote last week how Australia's youth labour market has hit crisis levels, with unemployment for those aged 15 to 24 years old at 14.1% in November in trend terms - the highest level in over 16-years - versus only 4.7% for the rest of the labour force (see next chart). To add insult to injury, this deterioration in the unemployment rate comes despite the collapse in the labour force participation rate since the GFC, suggesting considerable hidden youth unemployment: Youth underemployment, which captures those employed part-time that would like more work, also hit...
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Daily iron ore price update (no restock)

How-to-Cut-Hair4 by Chris Becker The iron ore complex continues to fall, with Dalian futures off more than 2% with 12 month swaps following: The investment houses are catching up on their price forecasts with Morgan Stanley out with a new lower price, contending an average $79 per ton in 2015 and $75 a ton in 2016. Its all about supply of course with increasing idle capacity in China, text from Bloomberg: “Led by Australia in 2014, the relatively low-cost supply surge continues to dramatically alter the character of the industry’s supply side,” the Morgan Stanley analysts wrote. “Many of the...
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Leading index falls. Growth to stay below trend

ScreenHunter_13 Jul. 15 15.13 From Bill Evans at Westpac. The six month annualised deviation from trend growth rate of the Westpac Melbourne Institute Leading Index which indicates the likely pace of economic growth three to nine months into the future fell from –0.15% in October to –0.47% in November. This is the tenth consecutive month where the growth rate in the Index has been below trend. That follows thirteen consecutive months to February this year when the growth rate was above trend. The index continues to indicate that we can expect growth in the Australian economy to stay below trend in the final quarter of...
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Survey says….cut!

survey by Chris Becker David Scutt has the results from Livewires latest survey from financial industry types, including managers traders and SMSF investors. Charts below, but here's the interesting takeaways: Of the 80% who think RBA will "move" only 8% thought they would hike next year, everyone else says down Financial advisors are least likely to agree, but all fund managers think so International equities are the favourite go to asset Majority see the AUD at 70-79c next year with only 3% say below that figure Hmm, the contrarian in me says short the majority view, especially the...
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Workers to get crunched by rising health costs

ScreenHunter_5507 Dec. 17 09.41 By Leith van Onselen A new report by the Actuaries Institute finds that the tax burden and private health insurance costs facing younger generations will rise dramatically in order to pay for the health needs of an escalating number of older Australians: Health care costs rise dramatically with age – health expenditure for an 85 year old Australian is more than four times that for a 50 year old. By 2049-50 the number of Australians over 85 will more than triple... Ageing is the most predictable factor which will influence future health expenditure. It is a key factor that affects our ability...
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Macro Morning (FOMC jitters)

marketmorning by Chris Becker As I said in my "Crazy Bill Gross" post earlier this morning, the FOMC two day meeting has begun and combined with the Russian ruble crisis has seen higher volatility on risk markets across the North Atlantic. The VIX has spiked once more:     US markets at first followed the European bourses (all up 2% or more on the cash markets, but following US in futures trading) but have sold off quickly later in the session, with tech stocks the most sold off, the NASDAQ off 1.2% while the S&P500 is off nearly 1%: This is a decent correction with daylight below...
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OECD issues Australia tax reform challenge

ScreenHunter_5502 Dec. 17 08.15 By Leith van Onselen The OECD has released its biennial report on Australia, which recommends a program of comprehensive tax reform at the federal and state level, along with better targeting Australia's gigantic superannuation concessions. Regarding the federal taxation system, the OECD notes that Australia is too heavily reliant on inefficient personal income and corporate taxes, and recommends a shift in the tax mix towards more efficient consumption taxes: The government has initiated a review of taxation, which provides an opportunity to improve the efficiency of the existing system,...
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“Crazy” Bill Gross says no Fed rate hike next year

cary by Chris Becker With the last US Federal Reserve FOMC meeting for the year starting overnight, Bill Gross had an interesting interview on CNBC recently whose core message has been overshadowed by his "no rate hike in 2015" call. His actual message, that structurally the US economy can only grow GDP at 2% instead of its post-GFC rate at ca. 3-4% comes at the same time as Chinese authorities are managing a decline in the rate of growth for the world's biggest economy: tradingeconomics.com tradingeconomics.com From CNBC: "Yes, we're starting from a 3 percent growth economy that will...
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NSW Government rides the property wave

ScreenHunter_01 Feb. 17 18.55 By Leith van Onselen The epic investor-driven Sydney property boom has been well documented, with home prices there rising by around 26% over the past 18-months, according to RP Data (see next chart). One stakeholder that has been a big beneficiary of the Sydney property boom is the State Government, which has enjoyed a massive escalation in stamp duty receipts, rising by more than 85% over the past 18-months to $6.1 billion in the year to November, on the back of a 41% rise in transaction volumes and the above price rises (see next chart). The problem for the State Government in the...
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Russian currency crisis deepens

red-dead-rubber-duck-hi by Chris Becker The massive intervention by the Russian Central bank, where it raised rates from 10.5% to 17% yesterday, has failed to arrest the collapse in the ruble, Russian stocks and bonds. These moves have also set off shockwaves in other emerging markets, with Dubai and Saudi Arabia stock markets falling over 7%, although oil prices have slowed their descent (although Brent crude fell 2% and below $60USD a barrel). Overnight the ruble collapsed nearly 20% accelerating its falls for this year as confidence disappeared - chart from Bloomie: The ruble hit 80 to the USD but also has...
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Perth and Darwin in mining-related rental bust

ScreenHunter_03 Jul. 23 09.31 By Leith van Onselen SQM Research has released its rental vacancy data for November, which revealed a slight 0.1% monthly increase in the national vacancy rate to 2.2%, but no change from November 2013: However, the unwinding of the mining boom continues to have a drastic impact on Perth and Darwin: Perth and Darwin have continued to record alarming increases in vacancies, whilst many of the other capital cities have remained stable year-on-year. However, Hobart and Melbourne have recorded yearly declines. SQM Research believes the falls in Hobart most likely relate to the recovery in its...
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Links 17 December 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Iron Ore Cut by Morgan Stanley as Supply Surge Counters Closures – Bloomberg Oil Slides Below $55 as U.S. Output Seen Steady Amid OPEC Fight – Bloomberg Brent falls below $60 for first time since 2009 – Reuters Saudi Arabia is playing chicken with its oil – Reuters Why Are Commodity Prices Falling? – Project-Syndicate Rouble leads plunge as oil rout contagion spreads – Fairfax This Hedge Fund Manager Who Remembers 1998 Says Prepare for Pain - Bloomberg Oil Is Dragging Down Prices Faster Than Official Price Index Can Capture - Wall...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Emerging markets panic ahead of the Fed Global equities remain subdued with bad news continuing to mount for emerging markets. In a week where the Federal Reserve is expected to take a hawkish shift in tone, the last thing emerging markets need is some unsettling economic data. China’s latest HSBC manufacturing PMI print dropped into contractionary territory for the first time since May, coming in at a worse than expected 49.5. While some would have hoped to see disappointing China data result in growing calls for stimulus,...
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A new use for Murdoch “news” paper

dailytelegraph By Chris Becker The response to the Sydney siege yesterday from the nation's media was telling, confirming the strata of quality. The usual "we dont know what's going on, but we'll speculate anyway", combined with the usual left/right bias of commentators and experts quickly dragged on screen was the standard for the mainstream, although I tip my hat to the ABC with former Army captain James Brown providing the most steady analysis. In the gutter is the Murdoch press, headlined by the Daily Telegraph with its tasteless and unethical coverage, inciting fear and showing hostages faces and coming...
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