Kohler laments Australia’s expensive land

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen Alan Kohler has published a good post today at Business Spectator warning that increasing credit availability, brought about partly from the resurgence in securitisation, is combining with Australia's constipated land use/planning system to raise house prices, to the detriment of younger Australians: We are seeing two quite different markets being mixed together: one for credit that is active and plentiful (call this one nitro) and one for land that is short (call it glycerin)... There simply isn’t enough land being released in Australia to match either the demand for...
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The pharmacy racket must end

ScreenHunter_2078 Apr. 16 12.28 By Leith van Onselen  The Australian's Janet Albrechtsen has written a cracking article today attacking the Abbott Government for refusing to free-up competition in the pharmacy industry, which she argues is one of the nation's biggest entitlement racket: So here we are again. A Coalition government is back in Canberra, with the same union-busting, free-market messages in addition to one heck of a new target — ending the age of entitlement. Yet, in a case of deja vu, one union behind one industry in Australia has done a clever job of removing itself from the dartboard of reform... [The]...
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Dwelling completions fell in Q4

ScreenHunter_01 Mar. 03 22.48 By Leith van Onselen The ABS has just released dwelling completions data for the December quarter, which registered a 2.0% seasonally-adjusted fall in the total number of dwellings completed over the quarter, with the 3.3% rise in detached house construction more than offset by a 9.9% slump in unit & apartment construction (see next chart). The decline in dwelling completions nationally was driven by a big 10.9% fall in Victoria, where unit & apartment construction slumped by 21.3% and house construction fell by a more moderate 1.3%. The fall in Victoria more than offset increases...
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Housing sentiment lifts on record foreign demand

ScreenHunter_05 Jul. 07 22.22 By Leith van Onselen NAB has released its Australian Residential Property Survey for the March quarter of 2014, which revealed a small rise in sentiment nationally amongst property professionals, with house price expectations also strengthening is all states except Victoria. Concerns about rising interest rates are starting to rise, whereas employment security continues to be viewed as the biggest impediment to buying property in most states. The Survey also found that foreign buyers were significantly more active in both the new and established property market, accounting for a record...
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Why incomes will bear the brunt of rising taxes

ScreenHunter_1797 Mar. 25 08.08 By Leith van Onselen The Australian has published a neat article today citing Parliamentary Budget Office (PBO) analysis warning of big rises in personal income taxes unless the Government embarks on widespread tax reform: PERSONAL income tax is the only prospective source of revenue growth for the federal government, with all other major taxes either falling or about to fall. ...company tax has come off its record high while other important sources of tax revenue including superannuation, fringe benefits and consumption taxes all look weak... “In the absence of explicit government...
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Coalition should tread carefully in Medicare rejig

ScreenHunter_2066 Apr. 16 08.37 By Leith van Onselen The AFR is reporting today that Health Minister, Peter Dutton, is planning major changes to Medicare in order to reign-in costs, including introducing a co-payment on GP and emergency hospital services, as well as introducing "private sector efficiencies" into the public hospital system and greater private health insurance involvement in chronically ill care: Mr Dutton says private sector efficiencies must be introduced in the public hospital system, the primary care system needs to be improved, and private health insurers should be involved in the care of chronically ill...
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Coalition embraces the grey gouge

ScreenHunter_90 Oct. 24 08.28 By Leith van Onselen The Coalition's vow to "end the age of entitlement" has taken a serious hit, with Prime Minister Abbott seemingly ruling-out making changes to Aged Pension arrangements until after the next federal election. From The Australian: “If there is one lesson to be learned from the political quagmire that the former government got itself into, it is: keep your commitments. So we will keep them,’’ Mr Abbott said. “But one of the most fun­damental commitments of all was to get the budget back under control, to put the budget back on to a path to a sustainable...
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Roy Morgan consumer confidence falls again

ScreenHunter_20 Apr. 10 19.28 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index has been released for the week ended 13 April, which fell for the third consecutive week (down 1.3 points) to be a touch below its long-term average (113.0) and well below the highs reached after last year’s Federal Election: The fall in the week was driven by weakness in consumers’ perceptions of ‘financial situation in the year ahead’ and ‘… a year ago’, with the latter closely correlated with consumer spending. While this sub-index can be volatile, it is now around 5% lower than its average...
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Links 16 April 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets: Trillion-Dollar Firms Dominating Bonds Prompting Probes - Bloomberg North America: Social Security stops trying to collect on old taxpayer debts - Washington Post Working Women Help the Economy - New York Times Canada’s Climate Warms to Corn as Grain Belt Shifts North - Bloomberg In Many Cities, Rent Is Rising Out of Reach of Middle Class - New York Times Europe: Eurobank gears up for crucial but contentious capital increase - Macropolis How China is stoking London’s housing bubble - Breaking Views Why aren’t Chinese students at UK...
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Australia must move up the manufacturing chain

ScreenHunter_20 Feb. 20 10.06 Cross-posted from The Conversation: Australia faces a fall in living standards unless policy action is taken. This is due to de-industrialisation and loss of economic complexity. The higher the economic complexity, the stronger the economy’s value-creation prospects. Australia languishes at 79 in global rankings of economic complexity. Modern industry policy could help correct this but is poorly understood. Hence it is frequently maligned in Australia. Any intervention should aim to improve business environments or influence a shift in the economy. The goal should be a structure that...
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Second Sydney airport to be built out west

ScreenHunter_2062 Apr. 15 14.18 By Leith van Onselen Prime Minister Tony Abbott has today announced that Badgerys Creek in Sydney's west will be home to the city's second airport, with work on the $2.5 billion project expected to commence in 2016 and reaching full operating capacity within a decade. From The AFR: The federal government will bear some costs with planning but is expected to announce later this week a large investment of its own in roads and other transport infrastructure to service the new airport... Mr Abbott assured the roads would be built before the airport... Mr Abbott said “for more than 50 years...
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How to ensure housing fills the mining void

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen Following its dubious effort on first home buyers last week, the Housing Industry Association (HIA) has today released a decent research report assessing the role of housing as a leading indicator of the broader non-mining economy, as well as reforms that could be undertaken in order to help the economy transition away from mining-led growth and cope with the ageing population: New engineering construction (which captures and reflects the most visible element of mining investment) accounted for around half of aggregate GDP growth in 2011 and was the majority share in...
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Bring back the 9-5 work day

ScreenHunter_2057 Apr. 15 11.51 By Leith van Onselen The AFR's Lucy Kellaway has written an interesting article today calling for the re-introduction of the nine-to-five workday: We start the daily email orgy before we get out of bed in the morning and then pass the hours till dusk in tiresome meetings and video conferences, only to continue to commune with our smartphones late into the night. Every day feels like a marathon, only by the end of it we have hardly covered any distance... Nine-to-five has a long, splendid pedigree and used to work very well. Only in the past 15 years has it fallen out of...
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NZ Government sets housing affordability target

ScreenHunter_2055 Apr. 15 10.08 By Leith van Onselen New Zealand's Housing Minister, Nick Smith, has set an ambitious target to improve the affordability of New Zealand housing back to its long-run average of four times household incomes. From Interest.co.nz: "The target that I've given to my ministry goes back to those long term affordability measures - which is the ratio of incomes to house prices. That’s what really matters. Historically that number's been about four for New Zealand," Smith said. "Currently in Auckland it's seven. I've set that long term objective of getting it back to four. That means incomes are...
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Only in the public service

ScreenHunter_2054 Apr. 15 09.31 By Leith van Onselen The Canberra Times has published an article today on the growing number of federal public servants that have been classified as "excess" to requirement and are being paid to effectively turn up to work and do nothing: More than 400 federal public servants are languishing in employment limbo after they lost their jobs but were kept on the government payroll... The public service's ''redeployment register'', which has grown three-fold since late last year, now holds the names of 427 departmental staffers cast into bureaucratic purgatory by the wave of cuts sweeping the...
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Why builders should split from the HIA

ScreenHunter_01 Mar. 03 22.48 By Gavin R Putland, Research Officer at Prosper Australia Eight days after SBS reported that Treasury and the Parliamentary Budget Office are working on limiting negative gearing to new homes (while grandfathering past acquisitions), and two days after Louis Christopher of SQM Research backed the story, the Housing [sic] Industry Association has released a “research note” under the title First Home Buyers: The Big Picture. The front page says in part: Low FHB shares have also been attributed to changes in FHB grant regimes in many states, which have seen the grant for the purchase of...
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Plummeting mining vacancies signals capex cliff

ScreenHunter_12 May. 01 18.48 By Leith van Onselen The number of job vacancies in the mining industry have plummeted nearly 23% in the past nine months, according to the latest DFP Mining and Resources Job Index, which provides month-end data for March. The Index dropped 1.9% from February to 77.34 for the month of March 2014 and the number of job vacancies has now fallen 22.66% in the last 9 months. Moreover, permanent employment opportunities have declined the sharpest, down 30% in 9 months (see below chart). Queensland job vacancies have declined the sharpest, down roughly half from June last year (see next...
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Spare the poor, hit rich retirees

ScreenHunter_08 Feb. 03 14.45 By Leith van Onselen It seems most groups have resigned themselves to the fact that there will be cutbacks to the Aged Pension in this year's Budget. Instead of opposing reform outright, focus appears to have shifted to ensuring that cuts are targeted at wealthier retirees. From The Australian: WELFARE groups have called on Tony Abbott to target asset-rich retirees and raise the age for access to superannuation rather than cut pension entitlements for low-income earners... The expenditure review committee is also examining income and assets tests for the pension as its members seek to make...
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GST is better than bracket creep

ScreenHunter_1797 Mar. 25 08.08 By Leith van Onselen Business Day yesterday has an article citing PwC research, which claimed that average income earners will soon face a big jump in income taxes as bracket creep, brought about through inflation, pushes them into higher tax brackets: People earning up to $80,000 will soon face tax rates of up to 40 per cent unless the government addresses bracket creep... "With bracket creep you are going to have a large number of working Australians worse off," PwC managing partner tax Tom Seymour said. "They will have less real income to spend on food, education, health and housing as...
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Links 15 April 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets: Slowdown puts 1bn middle class at risk - Financial Times North America: Recovery for Whom? - New York Times Who Spends Extra Cash? - House of Debt Europe: Doom-mongers risk a self-fulfilling prophecy - Financial Times High-Frequency Traders Get Curbs as EU Reins In Flash Boys - Bloomberg This could be the moment for Greece to default - Financial Times Ukraine Forces Storm a Town, Defying Russia - New York Times ECB signals further monetary stimulus - BBC ECB preparing to unleash unconventional monetary policy - Financial Times ECB policy...
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Links 14 April 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets: Only the ignorant live in fear of hyperinflation - Financial Times Bitcoin Price Drops 10% as Chinese Exchanges Stop Bank Deposits - Coin Desk Bitcoin Mining Boom Sputters as Prospectors See Real Cash Losses - Bloomberg Are Speculative Bubbles Good? - New Yorker North America: U.S. budget deficit narrows sharply in March Economic Report - Market Watch The Next America - pewresearch.org American subprime lending is back on the road - Financial Times Europe: ECB preparing to unleash unconventional monetary policy - Financial Times Ukraine...
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Seniors, Labor lobby against pension changes

ScreenHunter_90 Oct. 24 08.28 By Leith van Onselen The AFR has this afternoon reported that Chief executive of National Seniors, Michael O’Neill, has slammed rumoured changes to the Aged Pension, claiming that raising the pension age would backfire as a Budget savings measure, since older Australians would simply shift to Newstart or the disability pension. While this might be true for some oldies, O'Neill has failed to mention that the Aged Pension is currently around $6,600 higher than Newstart - i.e. $19,916 per annum for a single pension versus $13,273 for the single Newstart unemployment allowance. Moreover,...
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Meet “lowflation”, deflation’s scary pal

ScreenHunter_12 Apr. 30 13.06 By Peter Schiff, cross-posted from Euro Pacific Capital In recent years a good part of the monetary debate has become a simple war of words, with much of the conflict focused on the definition for the word "inflation." Whereas economists up until the 1960's or 1970's mostly defined inflation as an expansion of the money supply, the vast majority now see it as simply rising prices. Since then the "experts" have gone further and devised variations on the word "inflation" (such as "deflation," "disinflation," and "stagflation"). And while past central banking policy usually focused on "inflation...
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HIA pimps FHBs in new negative gearing defence

ScreenHunter_28 Jun. 12 16.40 By Leith van Onselen The Housing Industry Association (HIA) has today released a research report, entitled First Home Buyers: The Big Picture, which appears to be yet another thinly veiled attempt to thwart reforms to negative gearing: Concerns about First Home Buyer (FHB) participation in the home purchase market have surfaced repeatedly in the media over the past year... Commentary around the low FHB share has typically invoked the narrative that younger buyers are being ‘squeezed out’ of the market by investors with deeper pockets... Low FHB shares have also been attributed to...
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Is Australia’s financial sector a zero sum game?

ScreenHunter_06 Jun. 26 22.42 Cross-posted from The Conversation Governments seem to be enamoured with financial markets, judging by the support they give them around the world to encourage their growth. The assumption seems to be that there’s always a positive relationship between the size of the financial system and its contribution to the economy. This assumption that bigger is always better is one that Australia’s financial system inquiry would do well to test as it considers “how the financial system could be positioned to best meet Australia’s evolving needs and support Australian economic...
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Sydney housing speculation goes bananas

ScreenHunter_24 Apr. 18 12.02 By Leith van Onselen RP Data's daily home values index shows the absurdity of the Sydney housing market, where values have almost gone exponential: Today's Lending Finance data, released by the ABS, provides a solid clue as to what is driving the Sydney housing market, as well as the blow-off in home prices nationally: property investors. As shown below, the value of investor loans in New South Wales (read Sydney) has skyrocketed, with Melbourne - the second hottest market - also experiencing strong growth: According to the ABS, investor finance commitments in New South Wales in...
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Total lending approaches former highs

ScreenHunter_05 Jul. 26 10.23 By Leith van Onselen The Australian Bureau of Statistics has released Lending Finance data for the month of February, which registered a seasonally-adjusted 0.7% fall in total finance commitments, with the 2.5% fall in commercial finance loans more than offsetting rises in the other broad components. In trend terms, total finance commitments rose by 1.3% in February to be up 25.5% over the year, with increases recorded across all of the four broad components (see next table). The below chart plots total lending in trend terms. As you can see, the volume of lending is fast approaching...
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NZ house prices hit record as buyers strike

ScreenHunter_08 Jul. 01 09.14 By Leith van Onselen The Real Estate Institute of New Zealand (REINZ) has released its March house price results, which registered a significant bounce in values nationally, with prices also hitting a new record. In the month of March, the national stratified median price rose by 3.4% to nearly $427,000. Prices rose by 0.4% in Auckland over the month, by 1.9% in Christchurch, but fell by 2.3% in Wellington (see next chart). The price changes are shown more clearly in the below chart, which shows the values in index form since 2005: Annual house price growth rose to 9.2%...
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Taxi fares to rocket as industry structure fails

ScreenHunter_24 Jun. 25 08.09 By Leith van Onselen The Age is reporting today that Victorian taxi fares are set to jump by up to 30%, in a bid to improve service and improve driver's incomes: The cost of catching a taxi is set to rise by up to 30 per cent next month after the Napthine government decided to raise fares for the first time since 2008. Exactly how much more passengers have to pay will depend on a range of factors including the time and day of travel and the distance... The size of the increase varies, but will be greatest for short trips and at times of high demand such as Friday and Saturday...
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Ageing tsunami goes global

ScreenHunter_08 Feb. 03 14.45 By Leith van Onselen Joe Hockey warning about ageing's deleterious impact on the economy and Budget are set to get a warm welcome from fellow G20 finance ministers this week, whose economies are facing similar, if not more extreme, pressures from ageing than Australia, according to The AFR: Joe Hockey has once again headed offshore to send his global message local. The Treasurer’s unmistakable warning in Washington that the ageing of the population is a ticking budget time bomb for governments around the world will certainly get nods at the table from fellow G20 finance ministers this...
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HIA repeats negative gearing lies

ScreenHunter_01 Jun. 28 09.52 By Leith van Onselen The AFR has published a detailed report today summarising the arguments for quarantining negative gearing. The article cites a number of commentators, including Saul Eslake and the Grattan Institute's John Daley, who essentially argue that winding back negative gearing would: Save the Budget money: around $4 billion per annum initially and $2 billion over the longer-term; and Improve housing affordability, by removing speculative demand from the housing market, increasing home ownership in the process. It's all fairly stock standard stuff, and nothing that hasn't...
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RP Data weekly Australian house price update

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen In the week ended 10 April 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.19%. It was the sixth consecutive weekly rise in values (see next chart). Values rose in two major capitals and fell in three (see next chart). Values are up 0.17% so far in April, driven by big gains in Sydney and solid gains in Brisbane, which have outweighed falls in the other major capitals: Values are up 3.73% so far in 2014, driven by big gains in Sydney and Melbourne, with Perth values...
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Links 11 April 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets: Here’s how the U.S., U.K., Japan and Germany are faring on the Misery Index - Wall Street Journal There Goes the Market: Dow Industrials Off 200 Points, Nasdaq Plunges 3% - Barons North America: Americans are having dogs instead of babies - Quartz "Reasons for the Decline in Prime-Age Labor Force Participation" - Calculated Risk Trailer Parks Lure Wall Street Investors Looking for Double-Wide Returns - Bloomberg Report Finds a Los Angeles in Decline - New York Times Jim Flaherty, former finance minister, dead at 64 - cba.ca Report: 85% of pensions...
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Expect RBA dollar jawboning

ScreenHunter_06 May. 13 11.32 By Leith van Onselen Today's better than expected employment data has put a rocket under the Australian dollar, which earlier today broke through $US0.94 for the first time in 2014. According to UBS bond strategist, Matt Johnson, the Aussie dollar is now around 6% overvalued according to the RBA's own model, and will eventually have to fall. From the Fairfax Markets Blog: Johnson says the RBA tends to kick up a fuss when it breaks those grey bands so they might resume voicing their displeasure. That might mean the RBA will restart “jawboning” – and with the balance sheet...
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Rental growth slows, yields deteriorate

ScreenHunter_07 Jul. 17 21.09 By Leith van Onselen RP Data has released its quarterly rental review, which revealed a sharp slowing of rental growth across Australia, with national house rents experiencing 0% growth over the March quarter, whereas unit rents grew by 1.3%. In the year to March, house rents rose by only 1.3% nationally, whereas unit rents rose by 2.6% (see below table). According to RP Data's Cameron Kusher: “With home value growth comparatively strong we are seeing a deterioration of rental yields in most capital cities. We expect that rental growth is like to continue at moderate levels over the...
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