Dog days have arrived for the Australian economy

ScreenHunter_5596 Dec. 22 09.07 By Leith van Onselen Professor Ross Garnaut, whose book released last year entitled Dog Days: Australia after the Boom predicted a prolonged period of falling living standards unless Australia raises productivity and boosts competitiveness by lowering the real exchange rate, has returned proclaiming that "regrettably the dog days scenario [outlined in my book] is playing out very much". From The AFR: “We’ve got a longer period of grind: of falling real per-capita incomes; of underperformance of employment before we get the economy growing at a rate that will start to deal with the unemployment...
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Australia hits peak mortgage debt

ScreenHunter_5590 Dec. 19 15.43 By Leith van Onselen The Reserve Bank of Australia (RBA) has released its household debt ratio data for the September quarter, which reveals that outstanding mortgage debt has hit the highest ever level when compared against GDP and household incomes. As shown in the next chart, the ratio of housing debt to GDP was a record 87.7% as at September 2014, eclipsing the previous record high 86.9% as at March 2010 (see next chart). In a similar vein, the ratio of housing debt to household disposable income was a record 139.0% as at September 2014, easily eclipsing the June 2010 peak of 134.7%...
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Without revenue, we’ve only half a budget debate

ScreenHunter_64 Jul. 29 15.04 Cross-posted from The Conversation: The missing element in last week’s mid-year economic and fiscal outlook, and more broadly, in current government policy, stares Australians in the face. Revenue needs to be increased. Increasing taxes, reducing tax concessions and eliminating loopholes are all options, which I and other commentators have argued for. For example, journalist Peter Martin has shown that if compulsory superannuation contributions were taxed as income, i.e. like wages (rather than being taxed at a concessional rate) there would be a net gain to the budget of approximately A$12...
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Melbourne drives auction clearances lower

ScreenHunter_19 Mar. 13 13.12 The national auction clearance rate fell over the weekend, driven by a big decline in Melbourne. According to RP Data, the national weighted average preliminary auction clearance rate was 64.3% over the weekend, which was down 0.9% from the 65.2% clearance rate recorded last weekend. Sydney’s clearance rate rose by 5.0% to 76.2%, whereas Melbourne’s fell to 61.2% (last weekend 65.9%). Brisbane, which typically only has a small number of auctions, experienced a rise in its clearance rate (up 3.5% to 50.8%). Overall auction volumes (1,622) were down significantly on last weekend’s...
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RP Data weekend property market update

ScreenHunter_18 Mar. 18 17.58 Click to view RP Data’s latest weekly housing market update, which provides a useful snapshot of the housing market as at 21 December 2014. This week’s report includes: Latest weekly dwelling value results; Auction results & clearance rates; Latest median house & unit prices; Average time on market & vendor discounts; Mortgage market activity; and New listings...
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Links 22 December 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Do falling oil prices raise the threat of deflation? - Econbrowser The Conventional Wisdom On Oil Is Always Wrong - fivethirtyeight.com Of Kiwis and Currencies: How a 2% Inflation Target Became Global Economic Gospel - New York Times The Blacklist That Rules Wall Street’s Loan Market - Bloomberg Deflation Warning Sounds as 2-Year Break-Even Rates Go Negative - Bloomberg Oil’s Drop Hits Big Investors Hard - Wall Street Journal When to Throw in the Towel on a Stock - cleareyesinvesting.com What Is Intrinsic Value, And Who Decides It? -...
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How does China stack-up against Japan’s bubble?

ScreenHunter_5587 Dec. 19 12.38 From Westpac's Phat Dragon comes his final report for 2014: ...can a current account surplus economy have a financial crisis? Phat Dragon notes that history says yes (indeed, there is one underway in Russia right now), but beyond resource dependency, the best example is the Japanese experience in the 1990s. In Japan a combination of rapid credit growth, pervasive, other-worldly asset price inflation (equities, real estate, gold course memberships etc etc), with ever escalating expansions in balance sheets funded by revalued assets, in classic Kindlebergian fashion. Rapid currency appreciation kept...
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East West Link highlights need for FOI reform

ScreenHunter_5488 Dec. 16 10.03 Cross-posted from The Conversation: The disclosure of the full business case for the East West road link in Melbourne confirmed what many had suspected – the project is a dud. The release also unequivocally shows that the Victorian Freedom of Information (FOI) system failed on its most basic task – that is, to facilitate the disclosure of information that is in the utmost public interest. It is hard to conceive, apart from the reasons for bringing the country to war, of what could carry a higher public interest than how a government proposes to use A$5 billion in taxpayer money for a major...
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Bad, not high, taxes are holding Australia back

ScreenHunter_5581 Dec. 19 10.14 By Leith van Onselen John Roskam, executive director of the Institute of Public Affairs, has penned a piece in The AFR today debunking the "myth" that Australia is a low taxing country, and arguing that the only true tax reform is one that cuts taxes: It is a myth that Australia is a low-tax country, because we’re not... The claim that Australia is a “low-tax” country is based on data collected and presented by the Paris-based Organisation for Economic Co-operation and Development (OECD)... When the OECD calculates taxes in Australia, it includes taxes collected by local, state and...
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Phat Dragon’s China real estate chart pack

ScreenHunter_18 Nov. 22 14.25 Below are some charts and commentary from Phat Dragon's latest China Real Estate Chart Pack: Prices remain under downward pressure, but some diversity first returned in October, and increased in November, after the oneway race to the bottom seen in Q3. The new market across every tier remains visibly weak. Developers continue to discount aggressively to clear their stock on hand and sellers are maintaining abundant supply in the secondary market in the vast majority of cities. As in October, Beijing saw gains month-on-month in secondary markets, while Shanghai edged slightly lower after a...
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RBA drinks kool aid on mining job losses

ScreenHunter_5566 Dec. 19 07.24 By Leith van Onselen The Reserve Bank of Australia (RBA) released its quarterly bulletin yesterday, which contained an article examining the impact of the mining investment boom on the Australian labour market. According to the RBA, on-site resource construction employment is estimated to have increased six-fold between the mid-2000s and 2013, from around 15,000 to 90,000 jobs. And the RBA's liaison-based estimates suggest that the labour required to operation these newly-built mines and LNG plants will be only around one-third of that required during the construction phase. As such, there is...
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Mining leads nation’s job losses

ScreenHunter_01 Feb. 17 18.55 By Leith van Onselen The ABS yesterday released quarterly labour force data, which provides a breakdown of employment at the industry level. According to this data, which is presented below in trend terms, the mining extraction industry shed 14,600 jobs in the November quarter and 43,000 jobs over the year. At the other end of the spectrum, construction (which funnily enough includes resources projects) rose by 15,900 over the quarter and by 47,400 over the year. Science jobs (up 8,400 QoQ; 56,300 YoY) have also picked up strongly, whereas public sector (-31,000 YoY) and manufacturing (-21,100)...
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RBA audits our gold reserves

ScreenHunter_5570 Dec. 19 09.02 Cross-Posted from Bullion Baron Two years ago the news was publicly broken on this site that 99.9% of Australia's Gold reserves are stored by the Bank of England in the United Kingdom. Attempts by another blogger, interested in the whereabouts of Australia's Gold, had been rejected by the RBA only several months earlier, "The Bank does not publish the location of its gold reserves." Decisions like this don't happen in a black hole. Something changed the RBA's mind, between August 2012 and December 2012, on making the location of Australia's Gold reserves public.From my observation, the RBA tends to...
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Regional unemployment jumps

ScreenHunter_5544 Dec. 18 17.04 By Leith van Onselen The Australian Bureau of Statistics (ABS) yesterday released its detailed monthly labour force statistics, which includes breakdowns of employment and unemployment across Australia's capital cities and regions. According to this release, the unemployment rate in Australia's capital cities was 5.5% in November in raw terms, down 0.4% from October. By comparison, unemployment in Australia's rural and regional areas was 6.8% in November, which was up 0.2% from October. The below chart, which is presented on a rolling 12 month average basis to smooth volatility, illustrates...
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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 18 December 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.27% (see next chart). Home prices rose in all major capitals (see next chart). So far in December, home values nationally have risen by 0.40%, with all capitals except Sydney rising (see next chart). Over the past 12 months, home values have risen by 8.51% at the 5-city level, again with all capitals rising in value (see next chart). The next chart plots the daily movements on a 14-day moving average,...
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Links 19 December 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Oil jumps three percent to $63 as energy firms slash investments – Reuters Bankers See $1 Trillion of Investments Stranded in the Oil Fields - Bloomberg The Conventional Wisdom On Oil Is Always Wrong - Five Thirty Eight Iron Ore Shipping Rates, Prices Slump to 5-Year Low on China – Bloomberg Economic Outlook - A Rising Tide Lifts Most Boats - PIMCO North America: The Blacklist That Rules Wall Street’s Loan Market - Bloomberg U.S. Must Defend U.S. Culture From North Korea - New York Mag Europe: Swiss franc hits two-year low as SNB...
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Some alternatives to Pyne’s uni reforms

ScreenHunter_26 Oct. 16 10.41 Cross-Posted from The Conversation: The government will introduce amended legislation for higher education reform into the Senate next year for further debate. But how do we keep higher education sustainable if the package is torpedoed again? Here are three practical measures that would fix past mistakes and make Australian higher education funding sustainable. Cap funded university places The Rudd-Gillard government’s removal of the cap on funded university places has made Australian higher education funding unsustainable. It resulted in a 20% increase in student numbers between 2008 and...
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Hockey shuns tax reform

ScreenHunter_4209 Sep. 15 14.37 By Leith van Onselen Treasurer Joe Hockey has this afternoon shunned raising the GST, arguing that there is not enough money in the Budget to provide the necessary compensation to middle and lower income earners. From The AFR: [Hockey] said the recommendation earlier this week by the OECD that the 10 per cent GST should be raised to between 15 per cent and 18 per cent could not be made in isolation. “They are not looking at the full picture. If you increase the GST, you need to compensate middle and low-income Australians with significant tax cuts,’’ he told Channel Seven. “We...
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Resources jobs resume their descent

ScreenHunter_03 Jul. 23 09.31 By Leith van Onselen DFP Recruitment has released its mining and resources jobs index for November, which registered a fall of 4.2% to 60.90, marking eight falls out of the past nine months. Year on year, the number of mining and resources job advertisements has fallen by 31.3% nationally, but by only 2.6% in the last quarter. Moreover, since January 2014, advertised permanent opportunities have declined by 33% and Contract and Temporary roles have fallen by 25%. (see next chart). According to DFP, "the principle hiring factor driving the reduction in advertised vacancies is the price of...
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Population ponzi slows as mining unwinds

ScreenHunter_5522 Dec. 18 11.48 By Leith van Onselen The ABS has released its Australian demographic statistics for the June quarter of 2014, which revealed that Australia's population growth rate continues to fall, driven by declining growth in the two key mining states of Western Australia and Queensland. According to the ABS, Australia’s population grew by 1.58% in the year to June 2014 - the sixth consecutive quarterly decline in growth - albeit population growth remained well above the 30-year average of 1.4%. The growth in the number of persons in the year to June 2014 was 364,800, which was still 106,178 above...
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Stamp duty delivers $555m Budget windfall to NSW

ScreenHunter_5521 Dec. 18 10.18 By Leith van Onselen The NSW Government has today released its Half-Yearly Review for 2014-15, which recorded a massive $555 million Budget turnaround on the back of the booming Sydney housing market (see next chart). As shown in the table below, the 2014-15 Budget had forecast a deficit of $283 million, which now has been revised to a surplus of $272 million, with larger surpluses forecast over the forward estimates: The reason for the massive upward revision was booming transfer (stamp) duties, which "are forecast to be markedly higher, driven by continuing strength in the property...
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Why Abbott is failing on infrastructure

ScreenHunter_5488 Dec. 16 10.03 By Leith van Onselen Back in July, Prime Minister Tony Abbott gave an address to the 2014 Economic and Social Outlook Conference Dinner, arguing that Australia needs to invest heavily in infrastructure and outlining why he wants to be known as the "infrastructure Prime Minister" [my emphasis]: An essential part of our Economic Action Strategy is record investment in infrastructure. We need it to address the end of the investment phase of the resources boom. We need it to improve our country’s long-term competitiveness and productivity. And we need it if there is, indeed, to be an...
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PS redundancy costs pass $1 billion

ScreenHunter_07 Oct. 11 11.09 By Leith van Onselen The Canberra Times is running an article today claiming that the taxpayer bill for federal public sector redundancies has passed $1 billion: The redundancy bill for departing public servants and other government workers will be more than $1.1 billion in just three years, the latest government data shows. But the real cost of Commonwealth golden handshakes under Labor and Liberal governments since 2012 might be much higher, with the Treasury unable to shake its habit of vastly underestimating the cost of taxpayer-funded redundancy payouts... Monday's Mid-Year Economic...
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Why not offset oil price fall by raising fuel excise?

ScreenHunter_04 Sep. 23 15.14 By Leith van Onselen The Pascometer, Michael Pascoe, was on point yesterday afternoon, recommending that the Abbott Government should offset falls in oil/petrol prices by raising fuel, and in the process undo the Budget damage caused by the Howard Government's decision to freeze the fuel excise in 2001. From The SMH: [The Government should] seize the opportunity of crashing oil prices now to recoup all the indexation that has been forgone. Yep, I'm saying increase the price of petrol by about 12 cents a litre... Hey presto, around $5 billion a year would disappear from Joe's troublesome...
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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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