Real Aussie house prices 1.8% below peak

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen RP Data’s Cameron Kusher has produced an interesting post this afternoon on Australian housing values in the wake of today’s March quarter CPI release from the ABS: Over the 12 months to March 2014, combined capital city home values have increased by 10.6% however, when you adjust for inflation the rise has been a lower 7.5%.  Across each city the rate of capital growth over the year is somewhat lower when you adjust for inflation and markets such as Hobart and Canberra which have recorded low levels of value growth have actually recorded value falls. Home...
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Roy Morgan consumer confidence bounces

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index has been released for the week ended 20 April, which registered its first rise in four weeks, jumping 3.4 points (+3.0%) to be above its long-term average (113.0) but well below the highs reached after last year’s Federal Election: The improvement in the week was driven by strength in consumers’ perceptions of ‘economic conditions next year’ and ‘financial situation compared to a year ago‘; with the latter sub-index most correlated with household consumption growth. Below tracks the ANZ-RM...
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REIWA: replace stamp duty with land tax

ScreenHunter_2162 Apr. 23 13.54 By David Collyer, cross-posted from Prosper Yesterday REIWA president David Airey issued a call in the West Australian newspaper for the WA government to abandon Stamp Duty and fund this by removing the many wheezes from the tattered State Land Tax. Hooray! Airey says: “It’s time to recognise that stamp duty on property as a means to raise revenue is clumsy, inefficient and out-dated. “REIWA calls on the Government to have a serious look at broadening the land tax base to all property owners with a view to abolishing stamp duty altogether. “The benefit to property owners is the...
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Rents continue to decouple from population

ScreenHunter_2154 Apr. 23 13.16 By Leith van Onselen The March quarter consumer price index (CPI) data, released today by the Australian Bureau of Statistics (ABS), revealed a continued moderation of rental growth at the national capital city level. According to the ABS, rents nationally grew by 0.7% over the March quarter of 2013 - up slightly on the 0.6% growth recorded in December - but moderated to 2.9% growth in the year to March - the lowest annual growth recorded since June 2006 (see below charts). The outlook for rental growth is unclear. On the one hand, population growth is running strong, which...
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Australian CPI in detail

ScreenHunter_01 Jun. 08 23.33 By Leith van Onselen As noted briefly by Houses & Holes, the Australian Bureau of Statistics (ABS) has released the Consumer Price Index (CPI) data for the March quarter 0f 2014, which registered a modest quarterly increase in prices, with the result also coming in well below economists’ expectations. According to the ABS, headline CPI rose by a modest 0.6% in the March quarter, which follows December’s strong 0.8% rise. The 0.6% increase in the March quarter was 25% below analyst’s expectations of an 0.8% increase over the quarter. On an annual basis, headline CPI growth...
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RBNZ slams the population ponzi

ScreenHunter_07 Mar. 19 12.02 By Leith van Onselen The Reserve Bank of New Zealand's (RBNZ) Michael Reddell has written an interesting paper questioning the merits of New Zealand's high immigration program, which appears to have crowded-out (through higher interest rates and a high average real exchange rate) other productive investment, lowering living standards in the process: Over the last 50 years (and more) New Zealand’s population has mostly grown materially faster than the populations of other advanced countries... All else equal - and in particular for an unchanged savings rate - faster population growth...
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John Hewson: End the superannuation rort

ScreenHunter_2139 Apr. 23 09.33 By Leith van Onselen Former federal Liberal Party Leader, John Hewson, has written a well-argued piece in The AFR today, joining the chorus to wind-back superannuation concessions granted to high income earners: It’s worth reconsidering concessions granted for super: they’re as costly as the age pension ($44.8 billion compared to $44.9 billion in age pension), but are growing more rapidly... Treasury estimates that from the combined support of superannuation tax concessions and the age pension, most people (about 80 per cent) receive around $270,000 support over their lifetime. In...
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It’s time to end pharmacy entitlements

ScreenHunter_2078 Apr. 16 12.28 By Leith van Onselen Following Janet Albrechtsen's cracking article last week attacking Australia's pharmacy racket, The AFR's Tony Boyd has written an detailed article today outlining the rorts taking place across pharmacies, as well as some of the pressures for change: There was a time when joining Australia’s $12 billion retail pharmacy industry was a passport to guaranteed wealth creation thanks to a stack of business-friendly factors. Territorial oligopolies were clearly marked, limits were placed on the number of pharmacies one entity could control and above all, there was a handsome...
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Standards of living begin their fall

ScreenHunter_04 Feb. 08 21.40 By Leith van Onselen The Australian has published new research by the Canberra University’s National Institute for Social and Economic Modelling (NISEM), which sows that Australian wages rose by only 0.1% over the December quarter versus a 0.7% rise in living costs, meaning that real wages and living standards are going backwards. And NISEM sees no immediate relief in sight: AVERAGE living standards fell in the December quarter and the outlook for households is now weaker than at any time since the Hawke government in the 1980s... NATSEM principal research fellow Ben Phillips said the net...
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Australia’s supply-side squeeze continues

ScreenHunter_15 Mar. 05 15.42 By Leith van Onselen RP Data's Cameron Kusher has written an interesting analysis of recent supply-side trends in the Australian housing market, which points to ongoing constipation: Across individual capital cities, the 2011 Census reported that on average; Sydney, Brisbane and Darwin had 2.7 persons per household, Melbourne, Perth and the Australian Capital Territory had 2.6 persons per household and Adelaide and Hobart had 2.4 persons per household.  Returning to the original findings, over the year to June 2013, the capital city population increased by 313,387 persons and 114,825 dwellings...
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Links 23 April 2014

ScreenHunter_01 Apr. 02 06.19 North America: House Prices Are Important: A Simple Explanation for Why the U.S. Middle Class Has Fared Poorly - National Review Online U.S. Emission Rules Would Far Outweigh Impact of Keystone Pipeline - New York Times How the Internet Is Taking Away America’s Religion - Technology Review 50 Years Into the War on Poverty, Hardship Hits Back - New York Times Europe: Italian banks look to private equity firm for bad loans vehicle - Financial Times Under Russia, Life in Crimea Grows Chaotic - New York Times Ukraine peace deal falters as rebels show no sign of surrender -...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 By Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets It has been a good return to trade for Asia with markets riding positive sentiment from US earnings and economic data. In Australia it has been all about stocks hitting fresh highs with the likes of Woolworths, Westpac and ANZ trading at record highs. We’ve also seen cycle highs for other stocks like Woodside Petroleum trade at cycle highs. This is encouraging traders to add to longs as they take advantage of the price momentum on a technical breakout. While equities are enjoying some modest gains, major FX pairs have been...
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Why are we still working so hard?

ScreenHunter_2130 Apr. 22 14.57 Cross-posted from The Conversation In a world of iPhones and drones, people are right to wonder why they are still working so hard. The past century saw huge technological advances and yet there hasn’t been a corresponding increase in leisure time: people are working as hard as ever. The Easter break lasts for four days; couldn’t every weekend be like this? Proponents of shorter work time have received two pieces of goods news recently. One is the announcement of a new law in France to prevent employees being required to read work emails out of office hours. The other is the decision...
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Aussie sub-prime mortgages are back

ScreenHunter_2128 Apr. 22 13.52 By Leith van Onselen In a worrying development, an issuer of Australian sub-prime mortgages, Pepper Home Loans, has reportedly completed the largest issue of non-conforming (sub-prime) residential mortgage-backed securities (RMBS) since the Global Financial Crisis (GFC). From The AFR: Global yield-seeking investors showed their faith in Australian mortgages as non-bank lender Pepper raised $500 million through the sale of non-conforming residential mortgage backed bonds, the largest of its kind since the financial crisis. Non-conforming loans are the Australian equivalent of sub-prime loans...
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Mortgage war intensifies

ScreenHunter_2126 Apr. 22 13.02 By Leith van Onselen The Australian Finance Group (AFG) has released its Competition Index for March 2013, which revealed that major lenders continue to dominate mortgage lending, despite some recent market share gains by non-major lenders (see below tables). According to AFG:  "Competition has been partly restored in the past two years, with non-major lenders being quite agile in targeting specific products and markets.  But they are finding it a struggle to challenge the overall dominance of the major lenders.  Collectively they still only account for around a quarter of all new...
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Coalition to proceed with GP co-payments

ScreenHunter_2066 Apr. 16 08.37 By Leith van Onselen The AFR is reporting that the Coalition Government will proceed with its planned $6 co-payment for GP services, with the measure to be introduced in the upcoming Federal Budget: The Abbott government will introduce a mandatory $6 co-payment for all GP visits in the May budget, saving a collective $750 million over the next four years... The co-payment will be capped at 12 visits a year, limiting any extra costs to patients to $72 annually... Health economists have warned the introduction of a co-payment would shift patients who cannot afford it to hospital emergency...
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Bracket creep to crunch middle income earners

ScreenHunter_1989 Apr. 09 08.22 By Leith van Onselen More analysis has emerged today of the growing tax burden likely to fall on middle-income Australians as bracket creep, brought about through inflation, pushes them into higher tax brackets. From The AFR: Single-income households on $70,000 to $75,000 will be worst hit by bracket creep, facing a 60 per cent increase in income tax within a decade, according to a KPMG analysis. The KPMG report, Tax reform for our future success, suggests this would not only see government receiving a “windfall” gain from middle-income Australians, but workforce participation rates...
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High immigration is creating an illusion of growth

ScreenHunter_16 Jun. 06 16.17 By Leith van Onselen Business Spectator's Callam Pickering has written another good piece today, this time questioning the merits of Australia's world-beating immigration program, which risks lowering the living standards of the pre-existing population: ...high migration levels are not achieved without a cost. High population growth puts pressure on existing infrastructure and commonly leads to greater congestion on our roads and public transport. Not to mention the impact on our natural resources and environment. There is also considerable debate as to whether high migration policies...
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No Albo, Australia doesn’t need high speed rail

ScreenHunter_06 Jun. 06 09.33 By Leith van Onselen Former infrastructure and transport minister, Anthony Albanese, is the latest to jump on the high speed rail (HSR) bandwagon, writing a spirited article in The Guardian over the long weekend entitled No ifs, no buts: Australia needs high speed rail: High-speed rail would revolutionise interstate travel, and would also be an economic game-changer for dozens of regional communities along its path. That's why the politicians need to exercise vision, and think way beyond the current political cycle... The passage of time is likely to make high-speed rail more and more...
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It’s super, not pensions that’s killing the Budget

ScreenHunter_08 Feb. 03 14.45 By Leith van Onselen Think tank, the Australia Institute, will release a new report today arguing that it is superannuation that is the major burden on the Federal Budget and calling for superannuation concessions, which overwhelmingly benefit the wealthy, to be scrapped in favour of a non-means tested Aged Pension. From WA Today: Four in five retirees eventually get either full or part age pension... However, that cohort of wealthier retirees, currently enjoys a major advantage over other taxpayers because the flat 15 per cent rate on super contributions... ...the rate of growth of super...
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Bob Day slams Australia’s housing policy failure

ScreenHunter_2125 Apr. 22 06.56 Above is a must watch video interview featuring Senator-elect, Bob Day, explaining to Business Spectator's Alan Kohler why Australia's housing policy is a complete failure and what can be done to fix it. The interview follows Day's eye-opening submission to the current Senate standing committee on affordable housing, which fleshed-out the issues in greater details. Australia is very fortunate to have someone entering parliament that has such a good understanding of Australia's dysfunctional housing system and genuinely cares about housing policy and the issue of housing...
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Links 22 April 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets: Forget Passive vs. Active--Here’s How To Evaluate Any Investment Strategy - Millenial Invest North America: Wall Street deregulation pushed by Clinton advisers, documents reveal - The Guardian Princeton Study: U.S. No Longer An Actual Democracy - Talking Points Memo 5 Questions on the State of Mortgage Lending - Wall Street Journal Has US household deleveraging ended? - VOX Mortgage Reform Is Worth the Small Extra Cost to Borrowers - New York Times Student debt holds back many would-be home buyers - LA Times Europe: A UK housing bubble or...
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Australia is failing its youth

ScreenHunter_2121 Apr. 17 14.29 By Leith van Onselen Business Spectator's Callum Pickering has written another good article today on a particularly important issue: Australia's growing youth unemployment: Australian society is failing its youth and setting itself up for economic disaster. The persistent rise in youth unemployment will reverberate across the economy for decades to come, potentially reducing productivity and limiting creativity and innovation... The unemployment rate for 15 to 24 year olds has increased significantly since 2008, rising to around 12.5 per cent in February... Since 2008 the participation rate...
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An interesting debate on housing affordability

ScreenHunter_2119 Apr. 17 13.30 Please find below an interesting debate between economist, Matt Cowgill, and Godfrey Moase. Assistant Secretary of the National Union of Workers General Branch, on housing policy. The debate was in response to an article that Matt wrote in The Guardian late last year in which he challenged the notion that affordable housing can be achieved amid solid population growth, restrictions on development in pre-existing areas, as well as an urban growth boundary that restricts sprawl. Godfrey took issue with Matt's piece, expressing disappointment that he viewed neighbourhoods in “mercantile terms”....
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The Bitcoin uprising

ScreenHunter_2118 Apr. 17 13.12 If you get a spare half an hour today, check-out the above documentary from CNBC entitled The Bitcoin uprising. In the video, CNBC's Mary Thompson takes a detailed look at Bitcoin by speaking to the currency's faithful, who believe the open source currency will upend the global financial system. Thompson also speaks to those who believe Bitcoin is an easily manipulated tool that empowers criminals, hackers and drug barons in the dark online underworld. It's essential viewing for those who don't already have a deep understanding of Bitcoin, shedding a much needed light on the speculative...
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New car sales keep falling

ScreenHunter_01 Apr. 17 11.28 By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released new motor vehicle sales for the month of March 2014, which registered a 0.3% seasonally adjusted fall over the month and a 2.8% decrease over the year (see next table). It was the third consecutive monthly decline in sales. Sales in March fell in six states and territories and rose in two. As shown in the below, overall new car sales peaked in the first quarter of 2013 and have since drifted downwards, with even sales of the once booming Sports Utility Vehicles (4WDs) slowing: Looking at the...
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Eslake vs HIA on negative gearing

ScreenHunter_2113 Apr. 17 11.32 By Leith van Onselen In case you missed it, attached is an interesting debate aired last night on ABC's The Business  on the merits of negative gearing. In the one corner is Saul Eslake, chief economist at Bank of America Merrill Lynch, arguing (as I have done) that negative gearing is a wasteful policy that simply inflates house prices, without boosting housing supply and improving rental availability or affordability. In the other corner is the Housing Industry Association's (HIA) chief economist, Harley Dale, arguing that negative gearing is a non-issue. An interesting outcome from...
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Uber takes the fight to taxi cartel

ScreenHunter_24 Jun. 25 08.09 By Leith van Onselen Around six months ago, I attended a friend's bucks party in Melbourne's CBD. As bucks nights usually go, we ended up at some seedy bars along King Street, where the night ended around 2 am. As is so often the case in Melbourne, we were unable to find a taxi. Luckily my friend, who is seemingly more technologically savvy than I am, had the Uber app installed on his smart phone and used it to order a town car, which arrived around five minutes later. For those of you that have not heard of Uber, it is a company that has been recently acquired by Google, which links...
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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 17 April 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.37%. It was the seventh consecutive weekly rise in values (see next chart). Values rose in four major capitals and fell in one (see next chart). Values are up 0.55% so far in April, again with values rising in four major capitals and falling in one (see next chart). Values are now up 4.12% so far in 2014, driven by big gains in Sydney and Melbourne, with Perth values falling: Over the past 12 months,...
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Why won’t high speed rail die?

ScreenHunter_06 Jun. 06 09.33 By Leith van Onselen While driving home from the swimming pool on Tuesday night, I listened to an ABC radio interview  featuring former leader of the National Party, Tim Fischer, alongside Beyond Zero Emissions' Gerard Drewe, lamenting how the proposed second Sydney airport would lessen the prospect of building a high speed rail line linking the East Coast cities, along with their justifications as to why high speed rail is warranted. Below is an extract of the interview transcript: Advocates of high speed rail had their hopes boosted by the previous Labor government, though, which...
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Melbourne’s ghost city sounds alarm bells

ScreenHunter_1605 Mar. 12 07.49 By Leith van Onselen Melbourne’s “build it and they will come” approach to construction, which has seen it rank high-up on the global skyscraper index, appears to be suffering more indigestion. Following recent reports that CBD and St Kilda Road vacancies have rocketed and rents plummeted, as apartment supply runs well above demand, The AFR is today reporting that apartment prices are falling as more off-the-plan stock hits an already oversupplied market: More than 2000 properties have been on the market for over two months around the CBD. About 14 per cent are selling for less than...
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Why tax deductible childcare is a bad idea

ScreenHunter_2006 Apr. 10 10.24 By Leith van Onselen The Australian's Particia Karvelas has produced a good article today explaining why making childcare tax deductible and removing the $7,500 cap, as proposed by several submissions to the Productivity Commission inquiry into childcare, would be a bad deal for lower-to-middle income families: The chief executive of advocacy group Early Childhood Australia, Samantha Page, says the “regressive” measure being considered would impact heavily on low-income families and should be ruled out... ECA’s analysis shows that all families would lose from tax­deductibility,...
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Apartment construction booms

ScreenHunter_06 May. 06 09.27 By Leith van Onselen Yesterday's dwelling construction data, released by the ABS, revealed a fall in actual completions over the December quarter, but a big pick-up dwelling commencements, which are following approvals upwards. The below chart, presented below in rolling annual terms, summarises the situation well, with approvals and commencements finally beginning to catch-up to the recent strong population growth, with actual completions set to follow later this year: What is most interesting about the current cyclical upswing in housing construction is the extent to which it is...
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Highrise Harry to sell-out to Chinese?

ScreenHunter_19 May. 16 15.12 By Leith van Onselen "Highrise Harry" Triguboff is reportedly considering selling Meriton Apartment's development business to a Chinese developer, in a deal that would net him close to $3 billion. From The AFR: Triguboff told AFR Weekend he re­ceived an offer for his business on a trip to China two weeks ago from the owner of a property developer that builds 200,000 dwellings there annually... “It is very early stages, but I could be prepared to sell the development part of the business and then the family could continue to collect the rent on the units I already own"... He [the...
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Melbourne’s rental market tightens

ScreenHunter_02 Apr. 09 08.45 By Leith van Onselen SQM Research has released rental vacancies data for March, which revealed a 0.1% monthly fall in the national vacancy rate to 2.0%. Year on year, vacancies are also down 0.1%, bucking the trend for the first time in several months where we have witnessed a loosening of vacancies when compared to the corresponding period of the previous year: According to SQM: Melbourne’s vacancy rate continues to tumble, now currently recorded at 2.1% - a figure it has not reached since September 2010. The capital city recorded both the largest monthly decline (0.3 percentage...
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