Warwick McKibbin gets his wish

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By Leith van Onselen

Let’s recall once more Professor Warwick McKibbin’s sermon last week, whereby he urged Australia to sell everything to China in a bid to maintain its living standards:

“If you have got something like a fixed asset in a country and you are globalising the entire world then location becomes a valuable asset”…

“Real estate on Sydney harbour for example is also from a national point of view attractive. But for foreign investors it’s also very attractive because there’s billions of dollars of wealth being generated in China.

“The middle class is expanding, and they’re going to want to buy things, environmental goods – they’re going to want to buy stuff which we actually have in abundance. But much of it is fixed assets so you can’t change the supply of it, and so therefore it’s value is likely to go up a lot.”

There are catches. High housing valuations could be less manageable if interest rates rise…

But it will also drive up the real exchange rate, hurting the competitiveness of trade-exposed industries such as tourism – currently enjoying good growth with a lower Aussie dollar – and manufacturing. A stronger dollar means Australian goods and services are more expensive for foreigners while competing foreign goods and services are cheaper for Australians.

Already, McKibbin seems to be getting his wish, with Domainfax reporting over the weekend the planned widespread sale of Australian homes to the Chinese:

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Agents are rolling out the red carpet for an influx of overseas buyers flying to Melbourne over the Chinese New Year holiday.

Some agencies are providing a concierge service; picking up buyers from the airport, booking their hotels and helping with school enrolments.

Others are reporting a jump in inquiries and translating property material into Chinese…

Esther Yong​, director at Chinese portal ACProperty, said phone inquiries before Chinese New Year jumped 35 per cent last year…

Biggin and Scott Glen Waverley’s Ming Xu said his agency was striving to be a one-stop shop…

Abercromby’s director Jock Langley said his agency was dealing with several high net-worth Asian buyers, who will be shown houses in Toorak, Hawthorn and Kew and properties in Flinders and Red Hill…

Cashed- up Chinese buyers are no longer just looking at the inner east.

Jellis Craig chief executive Nick Dowling said recently there had been more interest in top-end properties in the inner north, such as Fitzroy and Carlton, and inner south-east such as Malvern and Armadale.

Not to be outdone, The AFR chimed-in too:

Mansions have been spruced up and glossy dossiers have been printed as prestige property agents await the influx of high net worth Chinese buyers arriving in Australia on Tuesday, the second day of the Chinese new year.

While it is traditional to spend time with family on the first day of the new year, which falls on Monday, many Chinese take advantage of their longest holidays to go overseas and spend big.

With properties, Chinese buyers will be shopping at certain lucky suburbs, prestige agents said.

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And therein lies McKibbin’s future for young Australians: stuck in insecure rental accommodation, working in cafes, and selling cappuccinos to landed baby boomers and rich Chinese.

As pointedly noted by Houses & Holes on Friday:

Selling everything that isn’t tied down to the Chinese will marginalise generations from basic rights such as owning a roof over one’s head, it will gut the tax take as the best assets are profit-shifted to oblivion, it will dilute our natural endowments for the existing population and it will bog us further down in rent-seeking and falling productivity as governments fail to upgrade infrastructure to meet the new population. We don’t need to imagine anything to see that this is true, we can see it right now before our very eyes.

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Have some pride Australia, if not for yourself for your Children’s sake. We are better than this.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.