Moodys: Negative gearing adds 9% to home prices

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen From The AFR comes some interesting analysis from Moody's estimating that allowing property investors to deduct rental property losses against unrelated wage and salary income - known as "negative gearing" in Australia - has added some 9% or $44,000 to the typical Australian home value: The report said that negative gearing costs the federal government around $4 billion in lost revenue and recognised by some economists as an “unfair and unproductive” distortion... With low interest rates the impact of the subsidy has fallen from a 2008 peak of 15 per cent, “yet...
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Hockey biography ignites leadership tensions

ScreenHunter_3458 Jul. 24 11.45 By Leith van Onselen The Australian's Dennis Shanahan has reported that Treasurer Joe Hockey's new authorised biography - Hockey: Not Your Average Joe - has invoked the wrath of the Coalition party room, with many viewing Hockey's public statements as an act of self-indulgent treachery: That Hockey wanted an even tougher budget with even more pain not only hurts him and the “team” in the eyes of his cabinet colleagues, it is a clear inference that Tony Abbott was not up to the task. ...coming after a flawed political selling of a budget that had much to economically recommend it, some of...
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AMA warns on US-style health system

ScreenHunter_3457 Jul. 24 10.51 By Leith van Onselen The head of the doctor's union, Australian Medical Association (AMA) president, Brian Owler, yesterday gave an address to the National Press Club, in which he raised concern that Australia is heading down the path of a US-style health system. From The AFR: He said the $7 GP co-payment, cuts to hospital funding agreements and changes to general practice training programs as the worst aspects... Apart from the budget, Dr Owler said another top concern was the back-door entry of private health insurers into primary care... “Despite the protests of innocence, I fear a...
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RBNZ hikes again, but signals pause

ScreenHunter_3456 Jul. 24 09.56 By Leith van Onselen The Reserve Bank of New Zealand (RBNZ) has once again hiked the official cash rate (OCR) by 0.25% to 3.50% - the fourth rise in five months - but also signaled a pause while it assesses the impact on the New Zealand economy. The RBNZ has also warned on the New Zealand dollar, claiming that it is overvalued and risks a potential "significant fall". From the Statement: New Zealand’s economy is expected to grow at an annual pace of 3.7 percent over 2014... Construction, particularly in Canterbury, is growing strongly. At the same time, strong net immigration is adding to...
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Australia gives digital economy the bird (members)

ScreenHunter_3455 Jul. 24 08.32 By Leith van Onselen Boston Consulting Group CEO, Andrew Clark, and Deloitte Digital head, Frank Farrall, have today urged Australian business to embrace the digital revolution to ensure that it maintains competitive with the world. From The AFR: “Australian companies are in danger of being pushed aside by innovative competitors from at home and abroad unless they move more quickly to catch up with the digital revolution”... Mr Clark said in an interview... “Up until a few years ago, you had Bernie Brookes from Myer saying our customers don’t want to shop online and you had Gerry...
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Tony and Rupert’s $5 billion PPL thought bubble

ScreenHunter_3454 Jul. 24 07.36 By Leith van Onselen A new biography of Treasurer Joe Hockey has dropped a bomb on Tony Abbott's contentious Paid Parental Leave (PPL) scheme, revealing that Abbott gave Rupert Murdoch a "full rundown" of the proposed scheme before announcing the policy in 2010 and without consulting his shadow cabinet or MPs. From The Guardian: “The new leader, like many before him, had dinner with Murdoch, where he gave the media mogul a full rundown on the scheme – supplying enough detail for Murdoch to later have his Australian-based editors briefed on Abbott’s plan, which he considered a visionary...
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APM: House prices still booming (members)

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen Australian Property Monitors (APM) has released its June quarter house and unit price results (below), which recorded a 1.9% increase in house prices over the quarter at the national capital city level, and a 2.5% rise in national capital city unit prices. In the year to June 2014, APM recorded an 10.9% increase in national capital city house prices and an 8.3% rise in unit values - a slight deceleration from the 11.3% (houses) and 8.3% (units) annual growth recorded in the March quarter release. Looking at the capital city breakdown, you can see that Sydney...
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Links 24 July 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Why the narrative about emerging markets is likely to shift - The Irrelevant Investor A better measure of bond market sentiment - Humble Student of the Markets Market inefficiencies are interesting only to the degree they can be exploited - A Wealth of Common Sense Can individual investors time market bubbles? Some evidence says yes - SSRN Free ride ending for money market funds - Barry Ritholtz Russia’s stock market is quite a drag on the BRICs - Dr Ed's Blog North America: Seven optimistic charts about the American economy - Quartz IMF...
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Why rental growth just keeps on falling

ScreenHunter_19 Mar. 06 16.12 By Leith van Onselen The June 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 0.6% over the June quarter of 2014 – down slightly on the 0.7% growth recorded in March – but moderated to 2.4% growth in the year to June – the lowest annual growth recorded since December 2005 (see below charts). The outlook for rental growth is weakening. While population growth is still 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 June quarter 0f 2014, which registered a modest quarterly increase in prices, with the result also coming in line with economists’ expectations. According to the ABS, headline CPI rose by a modest 0.5% in the June quarter, which follows March’s 0.6% rise (see next chart). On an annual basis, headline CPI growth rose to 3.0% from 2.9% in the March quarter, which is at the top of the Reserve Bank of Australia’s (RBA) target...
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Labor left calls for higher taxes

ScreenHunter_64 Jul. 29 15.04 By Leith van Onselen The left faction of the branch of the Australian Labor Party (ALP) calling for a national debate on the size of government, arguing that taxes should be raised rather than cutting expenditure. From WA Today: The Left will introduce a resolution at this weekend's NSW Labor conference noting that Commonwealth revenue has fallen over the past decade - from 25.6 per cent of gross domestic product to 23.6 per cent... The resolution asserts that: ''In order for Labor to deliver on the community's aspirations for role of government, the revenue to GDP ratio may need to...
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Ex WTO chief slams flawed TPP trade deal

ScreenHunter_3418 Jul. 23 10.44 By Leith van Onselen Former World Trade Organisation (WTO) director-general, Supachai Panitchpakdi, has slammed the Trans-Pacific Partnership (TPP) – the proposed regional trade deal between 12 Pacific Rim countries, including Australia – claiming that it represents a step backwards to the days before the WTO when the US and Europe controlled the global trading system to the detriment of other economies. From the New Zealand Herald: "TTIP [Trans-Atlantic Trade and Investment Partnership] and TTP together could drive the world back into the old days before the WTO was conceived, a world...
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Is Australia isolated on health care inflation? (members)

ScreenHunter_3414 Jul. 23 08.19 By Leith van Onselen The New York Times has produced a report on the significant slowdown in health care cost inflation throughout the developed world, whereby every major high income country experienced a sharp deceleration in the growth of health care spending between 2001 and 2011: The rate of health cost growth has slowed substantially since 2000 in every high-income country, including the United States, Canada, Britain, France, Germany and Switzerland, according to data from the Organization for Economic Cooperation and Development... What’s behind the pattern? Economic growth...
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Australia’s roads investment “hideously inefficient”

ScreenHunter_02 Apr. 02 20.10 By Leith van Onselen Australia's independent infrastructure umpire, Infrastructure Australia, has launched a scathing attack on road-based infrastructure investment undertaken by Australia's governments, arguing that it has been "hideously inefficient" in a new leaked report. From The Canberra Times: More than $20 billion a year of national road funding is being spent in a “hideously inefficient” manner, according to a leaked assessment by Australia’s independent infrastructure umpire... “The unhealthy focus of road agencies appears set on ‘getting, controlling and spending’ more...
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Links 23 July 2014 (members)

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Checking in on some market breadth measures - Short Side of Long How to reduce portfolio risk without going to cash - Pension Partners What traders have in common with climate change deniers - The Irrelevant Investor Value is at best a nebulous concept - Pragmatic Capitalism Investors are fleeing core bond funds for more exotic fare - Morningstar Millennials could use a good dose of inflation - Money When is housing too expensive a hedge to hold? - Principles & Interest North America: Why now is the time for business to really begin...
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Kohler slams the super gravy train

ScreenHunter_2952 Jun. 24 12.41 By Leith van Onselen Business Spectator's Alan Kohler has written a stinging critique of Australia's superannuation system, slamming the high level of fees due in part to compulsory contributions and the lack of price regulation: A chart in the Financial System Inquiry’s interim report shows that since 2009 the average super fund has increased in size from $1.5 billion to $3.5bn, while the average fee has fallen from 1.3 to 1.2 per cent. That means the average fees received by each fund have doubled from $20 million a year to $40m. What better business can there be? Contributions are...
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Should Australia invest in mass public transit?

ScreenHunter_3402 Jul. 22 11.12 By Leith van Onselen Business Spectator's Rob Burgess has written a spirited post slamming the Abbott Government's roads fetish and advocating a massive lift in public transport investment: In the past decade there has been a shift back to public transport as sprawling Australian cities make commuting by car more expensive -- both in terms of fuel, time spent battling congestion, and skyrocketing parking costs... Infrastructure Australia... recommended recently: “Australia's transport systems are especially struggling ... with public transport growing rapidly in recent years and reaching...
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Consumer confidence recovers post-Budget losses

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index has now more or less recovered from its Budget-induced slump, rising another 4.8 points in the week ended 20 July to 113.5, and is now basically in line with its long-run average reading of 113.7, and only some 2.2% lower than April’s pre-Budget high (see next chart). The below chart, which plots the most recent Westpac-Melbourne Institute’s Consumer Sentiment index against the ANZ-RM Consumer Confidence index, highlights the mood of the Australian consumer more clearly: Expect next month's Westpac...
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Modelling falling living standards

sock By Leith van Onselen The inaugural Melbourne Economic Forum was held yesterday, which brought together a wide range of economists to discuss the Australian macroeconomic outlook and policy choices following the end of the mining boom. The discussion was centered around new modelling by the Centre of Policy Studies at Victoria University, which found that real per capita incomes and consumption will continue to slide for the rest of the decade and beyond as the fallout from falling commodity prices and the terms-of-trade takes hold, with real income per Australian forecast to be around 2%...
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Kiwis flood home from Australia (members)

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen Yesterday, Statistics New Zealand released its permanent & long-term migration figures, which revealed that New Zealand net migration is booming and Kiwis are returning home from Australia: In the June 2014 year, permanent and long-term (PLT) migrant arrivals numbered 100,800 (up 14 percent from 2013), the first time more than 100,000 arrivals have been recorded in a year. Migrant departures numbered 62,400 (down 22 percent). This resulted in a net gain of 38,300 migrants, the highest annual gain since the October 2003 year (39,300)... In June 2014, New Zealand had...
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PC slams Abbott’s paid parental leave scheme (members)

ScreenHunter_3079 Jul. 02 09.04 By Leith van Onselen The Productivity Commission (PC) has today released its Draft Report into Childcare and Early Childhood Learning, which explicitly criticises the merits of Tony Abbott's Paid Parental Leave (PPL) scheme, and recommends that some of the $5.5 billion earmarked for PPL would be better spent on childcare: The Commission considers that it is unclear that the proposed changes to the Paid Parental Leave scheme — which is more generous than the existing scheme and that recommended in the Commission’s 2009 report on paid parental leave — would bring significant additional...
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Links 22 July 2014 (members)

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: The Fed’s intervention in biotech and internet stocks - Financial Times Speculators cut bets on higher oil prices - Financial Times Regulators split on too-big-to-fail banks - Financial Times Hedge funds braced for some of their worst returns since 2008 - Financial Times Emerging market debt issuance hits record high - Financial Times The Boom Is Coming, and Sooner Than You Think - Bloomberg View North America: The Chicago Fed National Activity Index slowed in June - Calculated Risk How much are demographics affecting wage growth figures?...
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Coalition backs pork over productive infrastructure

ScreenHunter_06 Jun. 06 09.33 By Leith van Onselen I noted on Friday how the Senate had responsibly placed limits on the Abbott Government’s “asset recycling” program, pushing through changes to the bill that would: 1) require that infrastructure projects worth more than $100 million be assessed by Infrastructure Australia with a published cost-benefit analysis; and 2) require that all incentive payments by the Commonwealth to the states require a legislative instrument, effectively meaning the upper house can reject payments which it does not believe deliver taxpayer value. Unfortunately, the Coalition has rejected...
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The Coalition’s mounting Budget black hole

ScreenHunter_3379 Jul. 21 14.34 The Conversation has undertaken a detailed stocktake of the major budget savings measures that have been either opposed, at risk, or yet to be legislated. According to their analysis, the Budget is facing $38.6 billion of at-risk savings. _________________________________________________________________________ The Australian government is facing billions of dollars of lost savings and revenue as a result of the divided Senate, which last week moved to block several measures the government had been relying on to improve the budget bottom line. Several other measures are yet to be debated or...
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No Callam, high rise cities are not the solution

ScreenHunter_07 Feb. 10 11.46 By Leith van Onselen Callam Pickering at Business Spectator has swallowed the Grattan Institute's Kool Aid and wholeheartedly accepted the findings of their latest report (debunked here) that the CBDs are the centre of Australia's economic universe: Australia’s economic activity is highly concentrated within our cities but poor town planning and public transport services mean many Australians are unable to take advantage of the choices that offered by city-living. A shift towards higher-density, inner-city living could provide a boost to productivity and activity in the years ahead... Few...
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