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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Westpac sees rising inflation

ScreenHunter_30 Sep. 19 10.36 Westpac has released its March quarter consumer price index (CPI) forecasts, with the bank seeing inflation edging-up to a headline 0.9% QoQ/3.2% YoY (from 0.8% QoQ/ 2.7% YoY) and an underlying 0.7% QoQ/ 2.8% YoY (from 0.9% QoQ/ 2.6% YoY): Our Q1 headline CPI forecast is 0.9%qtr/3.2%yr. Core inflation, as measured by the average of the trimmed mean and weighted median, is forecast to rise by 0.7%qtr/2.8%yr. March is traditionally a seasonally strong month and has historically been worth about +0.2ppts on the CPI. We see this seasonality again this quarter which is part of the reason for the...
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Asia’s growing importance in the global economy

ScreenHunter_02 Jun. 20 09.39 Cross-posted from Tom Conley at the Big P Political Economy Asia's rise has been Australia's economic gain. The rise of Japan, followed by South Korea and Taiwan, Singapore, Malaysia, Thailand and other non-communist countries of Southeast Asia had provided significant export markets for Australian commodities, though not a sustained structural increase in their value. Then along came China, changing everything. Not only did rapid Chinese demand increase the prices Australia received for its exports, but also Chinese manufacturing production helped to decrease the price of Australian imports....
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Links 17 April 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets: What Drives the Complexity and Speed of our Markets? - SEC Watch new documentary: "Bitcoin Uprising" - CNBC Bitcoin Creator ‘Satoshi Nakamoto’ Unmasked–Again? - Wall Street Journal The problems of HFT - Reuters North America: Obama, Michigan in talks to free up $100M to aid Detroit pension deal - Freep.com Housing Starts at 946 Thousand Annual Rate in March - Calculated Risk Construction vs manufacturing re(-re)visited, and the US labour market - Financial Times Tight Job Market in U.S. Cities Prompts Higher Pay - Bloomberg Yellen says QE...
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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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