A view from the housing top

By Leith van Onselen

I was lucky enough to be invited to speak yesterday at the Property Council’s annual Property Congress event at Sydney Town Hall.

My topic was Super Trends, and the format was a panel discussion between James O’Loglin (moderator), Rachel Botsman (social innovator and author), Rebecca Huntley (Director, Ipsos Research), Tim Harcourt (Economist & multiple author), and yours truly.

The discussion centred around the future of cities, technology, changing demographics, Australia’s engagement with the world, risks facing the Australian economy and business, amongst other things.

I focused my discussion around Australia’s ageing population, and what it means for the economy, taxes and asset prices, as well as the risks facing the economy as the mining boom unwinds. I also raised concerns about urban consolidation policies, and there adverse effect on land prices, housing affordability, etc, and argued that technological change should facilitate decentralisation, since many workers should (in theory at least) be able to work remotely via the Internet.

Prior to my presentation, I attended the View From the Top session, which featured key property industry players discussing the outlook for the sector. The speakers were:

  • Geoff Elliott (moderator)
  • Daniel Grollo (CEO of Grocon)
  • Angus McNaughton (MD of Property for Colonial First State)
  • Mark Menhinnitt (CEO of Lend Lease)
  • Matthew Quinn (MD of Stockland)

The session was dominated by Matthew Quinn, who first made the following interesting remarks about the state of the property industry (paraphrased):

  • The housing cycle is at a low point, although most forward indicators are looking more positive.
  • Policy makers recognise that the fast track of the economy (mining) is slowing down, and that Australia needs to get the slow track (housing) going to fill the void.
  • Housing starts are around 20% below the long-term trend. Every 10% pick-up in new housing adds around 1% to Australia’s GDP growth. Therefore, if housing construction can ‘mean revert’ (increase by 20%), then Australia’s GDP growth could lift by 2%, thereby mitigating the unwinding of the mining boom.
  • Interest rates will need to fall further to increase confidence and housing demand.

Quinn also lambasted the lack of innovation and drive across the Australian economy in the wake of the mining boom (paraphrased):

  • Australia has lost its entrepreneurial flare and has become a “nanny state”. Agrees strongly with Donald Horne’s famous quote that “Australia is a lucky country, run by second-rate people who share its luck“.
  • Basically, Australia has lost its desire to innovate and reform. Instead it had become self indulgent via the mining boom, which is now coming to an end. Australia needs to get over its addiction to easy mining money and start to make its own luck.
  • Intergenerational equity is now also a big issue. Younger generations will find it a lot harder to achieve like their parents did.

Mark Menhinnitt came across as fairly bearish, essentially suggesting that he doesn’t see much of a recovery in housing (paraphrased):

  • Job worries are driving down confidence.
  • Interest rate cuts won’t do much to increase housing demand, since households are more worried about their balance sheets and paying down debt.
  • The overall level of household indebtedness in Australia is still very high.

Angus McNaughton, by contrast, was fairly upbeat about Australia’s prospects, and talked about our relatively strong position when compared with most other developed nations (paraphrased):

  • Lot’s of positive in Australia compared with abroad, including: positive income growth; positive GDP growth; and positive population growth.
  • Property markets will move-up once confidence improves.
  • The new normal is volatility rather than low growth per se.

Daniel Grollo didn’t enter too much into the discussion on economics. Instead, he focussed on the policy paralysis and lack of leadership across Australia’s governments. One notable exception is the Newman Government in Queensland, which is showing strong leadership and making tough (but unpopular) decisions neccessary to get the state back on track.

Later on today, I plan to attend the Forecasting the Future Session, whereby key industry players will debate the data, trends and forecasts facing the property industry. Should be interesting…

Twitter: Leith van Onselen. Leith is the Chief Economist of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.

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Comments

  1. So On Quinn

    ‘The session was dominated my Matthew Quinn, who first made the following interesting remarks about the state of the property industry’

    “Interest rates will need to fall further to increase confidence and housing demand.”

    ‘Quinn also lambasted the lack of innovation and drive across the Australian economy’

    So Quinn lambasts all and sundry but yet asks for even more subsidy for the housing industry to the extent of even worse theft from savers to save him! Hells bleedin bells!

    • I would like to get Quinn on a panel and question him on his record low new home sales, the size of his growing stockpile of new houses and land..and if he wants sales, why he doesn’t drop his prices to meet demand

      • ..and if he wants sales, why he doesn’t drop his prices to meet demand.

        Yep – that very simple solution to the moribund housing sector seems to elude just about everyone.

        Considering only 30% of the population have a mortgage and a only a small percentage of them are at any real risk of negative equity if house prices fall – the hysteria about deflation in house prices is well and truly over done.

        If the great brains want to get the housing sector ‘moving’ the solution is not lower interest rates, it is lower prices for new and existing homes.

        • Wasted OpportunitiesMEMBER

          “only 30% of the population have a mortgage and a only a small percentage of them are at any real risk of negative equity”

          …except most who own their home outright have the majority of their wealth locked up in that single asset, and it forms a large part of their retirement plans.

          • Wealth? Most of the value is not the result of accumulated saving – merely passive observation of a debt boom.

            They will adjust to a level of wealth that more accurately reflects their earnings and savings over a lifetime

    • “lambasted the lack of innovation and drive across the Australian economy”

      This statement really cheesed me off. Why whinge about there being no innovation? Isn’t it good for your company if you are innovative and your competitors are not? Where are the innovations coming from stockland/Mr Quinn? What a waste of air.

      • Mining BoganMEMBER

        Perhaps the next innovation to come from the housing industry would be to make houses out of something stronger than cardboard.

    • I agree that “interest rates will need to fall further” to bring down AUD.

      I mean, every major economy is busy devaluing its currency. Why should Australia remain the odd one out?

      After all, the RBA can jack rates up again if the cut causes unintended consequences.

      • I came to believe that playing chess must be made compulsory for all kids in primary schools.

        I mean, people need to develop skills to read a few moves ahead. For example,

        (1) the RBA aggressively cuts rates
        (2) AUD will tank
        (3) petrol, denominated in AUD, will rise
        (4) the price of all the secondary items will rise (after all which business can operate without using energy?)
        (5) my income, also denominated in AUD, will come under pressure.
        (6) not a good idea to take on more debt.

        • Exactly!

          And it does not take much brain to figure out that one’s disposable income will very likely be less, not more, after rate cuts.

  2. It’s heartening to see that the range of views across the community are echoed by the leaders of industry.

    So they are not out of touch at all.

    • reusachtigeMEMBER

      But still slow to cop on fully! It’s the start of the capitulation phase after all…

    • Yes it is! And let’s hope that they, having seen the results of over-reliance for the well being of the economy on “Holes” they have the sense not to rely on that other H….” After all. What cause Ireland’s Boom and Bust? Overbuilding…..

    • Sure, these leaders as you put it are standing around scratching their heads lamenting the lack of innovation and drive in the economy….presumably with their guide dogs sitting beside them?

      Innovation and drive requires risk and effort, speculation with the implied protection of taxpayer and central bank bailout is far easier.

      Why would one bother with the innovation path these days?

      • “Innovation and drive requires risk and effort, speculation with the implied protection of taxpayer and central bank bailout is far easier. ”

        To create INCENTIVE , you need first to abolish the prevailing counterproductive “incentives”. This is where we have got it all wrong. The Policies from Govt and the RBA incentivise the “bail me out” mentality. Policies that re-inforce the prospect of being bailed out are currently in force.

        And it goes right through the economy and society. Govt bails out uneconomical and quite worthless Green schemes, Govt bails out selected businesses hit from the carbon tax, able bodied unemployed get bailed out with Govt Benefits, Govt bails itself out ( of bad news UE stats) by employing PS’s in make work jobs, Education gets bailed out with more money yet produces still poor results and so on it goes.

        Money and the politics of bailing out is never the answer. Incentive, innovation and good old commonsense often are.

        • Exactly why would anyone bother when there is no incentive? You take risks, innovate and build a successful business, the government lambasts you as a ‘rich bastard’ then raises taxes on you and gives your employees all the power within the negotiations.

          You work hard and get to the top of an organisation, the government takes 40% of your money and spends it on Green subsidies and welfare.

          Has our government learnt nothing at all from Europe or history for that matter?

          • You work hard and get to the top of an organisation, the government takes 40% of your money and spends it on Green subsidies and welfare.
            That is what the rich want you to believe. They worked hard. They earned. They deserve.

          • It’s all a conspiracy! Those evil rich people! We should take ALL their money and give it away! They didn’t earn anything.

          • It’s all a conspiracy! Those evil rich people! We should take ALL their money and give it away! They didn’t earn anything.
            You forgot to mention Hitler.

          • “You forgot to mention Hitler.”

            Why would I? You’re the one that wants us all to live in a socialist paradise. lol..

          • You’re the one that wants us all to live in a socialist paradise. lol..
            Where is this paradise that I want us all to live in?

          • Ask the evil rich people that want us all to think socialism, big government, high taxes and excessive welfare are a bad idea.

          • You take risks, innovate and build a successful business, the government lambasts you as a ‘rich bastard’ then raises taxes on you and gives your employees all the power within the negotiations.

            First, the idea that the average employee has much power over their employer at all, let alone “all” of it, is laughable. As trivially demonstrated by the consistent decrease in profit share for labor.

            Second, taxes haven’t been raised on “rich bastards” in Australia since at least 1983.

            (It’s probably longer, but that’s as far back as the ATO’s page goes: http://www.ato.gov.au/individuals/content.aspx?doc=/content/73969.htm)

            This continual reduction in tax levels is, of course, a major part of the problem.

            You work hard and get to the top of an organisation, the government takes 40% of your money and spends it on Green subsidies and welfare.

            Mathematically impossible.

          • Has our government learnt nothing at all from Europe or history for that matter?

            Obviously not, otherwise they’d be emulating those evil, high-taxing socialist countries with the highest living standards metrics on the planet.

          • Again get out of your protected safe income guaranteed superannuation guaranteed ivory tower just once in your life!

        • dumb_non_economist

          GSM, you’re full of it! So the only businesses receiving bailouts are affected by the carbon tax? Companies have had their hands in the taxpayers pockets for as many decades as I can remember, regardless of which party is in power.

        • GSM, I’m interested to hear of your track record of innovation & good old commonsense ,care to share with the group?

  3. ‘Quinn also lambasted the lack of innovation and drive across the Australian economy in the wake of the mining boom (paraphrased):
    Australia has lost its entrepreneurial flare and has become a “nanny state”.’

    I presume he’s refering to all the private businesses like Stockland being bailed out on the public purse with FHOG schemes and bank deposit guaruntees

    I agree with him

    • I guess the lack of innovation etc has nothing to do with the fact that the malignant tumour known as the politico-housing complex is sucking the nourishment and energy away from the productive and innovative sectors of the economy?

  4. Why do you seem surprised when business managers ask for things that will make the businesses they manage (and (part) own) and their share options more valuable?

    The fundamental role of these guys is to get money and profit from wherever they can. Easier to get it from politicians than the marketplace!

    It will only be noteworthy when any business lobby group or manager asks for support for their business to be reduced.

    Unions and employees support their businesses being maintained and made more profitable by government so they can increase employment and wages.

    Business 101:
    Privatise revenue and profits and socialise/externalise costs and losses.

    Do economic libertarians campaign for the freedom to fail on their own?

    • “Do economic libertarians campaign for the freedom to fail on their own?”

      Yes, yes we do, all the time.

      I agree, stop subsidies to these businesses. At the same time, remove red tape, de-regulate the labour market, lower taxes and get the government out of the market place.

      Freedom to fail AND freedom to keep the fruits of your success!

          • Getting rid of government is a bit like trying to get rid of the tallest child in the classroom. Think about it.

          • The Claw,

            Get rid of BIG Gov’t, wasteful Govt – certainly.

            Easy to spin the argument into Govt is benevolent and good, hey. Depends on how much you personally receive from Govt I guess.

          • GSM,
            I like the idea of smallish constitutionally limited government. Free market nonsense actually does damage to the cause.

          • “Free market nonsense actually does damage to the cause.”

            Yeah, free markets have never worked in history. We should justn socialise everything and let the government centrally plan the economy. What could possibly go wrong.

            Honestly…

          • One problem with free market nonsense is the problem of deciding who owns the land – the earth, the soil, the water, the air. Who gets to own the scarce natural resources that no human created?

          • “One problem with free market nonsense is the problem of deciding who owns the land – the earth, the soil, the water, the air.”

            Really? The ‘problem’ with the free market is this? I would have thought this is the best thing about it! Whoever pays for it, owns it. Done, case closed, can we move on?

            Natural resources can be owned by all and companies can pay a fee to the government to mine them, but, once paid is owned by the mining company. We could call it a ‘royalty’. Smart idea huh?

            The problem with excessive government is when everyone owns everything nobody has an incentive to do anything.

            Bubbly, was that meant as an insult? Wait let me guess, the TEA party are actually crazy extremists. I mean, limited government, individual rights, low taxes and freedom? Nutcases!

          • Get rid of BIG Gov’t, wasteful Govt – certainly.

            Please define these terms objectively so we can determine when “BIG” and “wasteful” “Govt” has been removed.

          • Yeah, free markets have never worked in history.

            They work fine. The problem is what they work at doing is not always what we want to get.

            We should justn socialise everything and let the government centrally plan the economy. What could possibly go wrong.

            Lots of things. Which is why nobody is arguing that should be done.

            Bubbly, was that meant as an insult? Wait let me guess, the TEA party are actually crazy extremists. I mean, limited government, individual rights, low taxes and freedom? Nutcases!

            Yes, because they expect their plan to produce something other than an oligarchy.

      • Amazing how people who lament lack of innovation bristle at the idea that lower taxes might actually be a way of encouraging people to invest and innovate. Who’d a thunk it ? The US has been a powerhouse of innovation largely because people are able to reap what they sow, although Obama’s socialist roadmap had brought things to a creative cul de sac of late. Can’t say he’ll be missed. If people genuinely want an innovative country, then our model should be the US, not sone failed socialist European dystopia.

        • For some reason it looks to me that the US model was already copied here since the end of WWII. Albeit not 100% but every visitor I had here has remarked that. Didn’t work that well did it?

  5. I wonder if Mr Quinn would see any connection between land prices and innovation. Is he delusional or just talking his book?

  6. Just another of Australias special breed of parasite that enrich themselves via the public purse whilst publicly lecturing everyone about the tax system, layziness, the evils of social welfare etc

    The larger the parasite the louder and more holier than thou they are

  7. Diogenes the CynicMEMBER

    Any discussion of new building materials (solar modules inside roof material etc) and techniques like pre-fab?

  8. @UE

    “I focused my discussion around Australia’s ageing population, and what it means for the economy, taxes and asset prices, as well as the risks facing the economy as the mining boom unwinds”

    So what did you propose about the future form of taxation in aging demographics?

    My view is that the ATO will progressively need to shift to more “stock based” taxation from the current “flow based” taxation. After all, the total volume of flows will diminish with aging of the population.

    • Mr SquiggleMEMBER

      Leith, +1 on Dumpling’s question

      What did you actually say?

      Any chance you could put your speaking notes up (assuming they are presentable :-))?

      It would be an interesting read.

  9. When I was an apprentice (70’s) it was thus:

    INCENTIVE & MOTIVATION = you get to keep your job.

    COMPANY THANKS YOU = What you get in your pay packet at the end of the week.

    It was a clear and workable arrangement. Until the Unions got involved and then it all went to $hyte.

      • What people cannot get, refuse to get is that they were born into and live within and likely will die in a CAPITALIST society.

        The argument for Socialism was miserably lost decades ago but some deluded people still believe that we all must be the same, that all must be fair. That it is a crime that some are better off than they are. A lifetime of delusion awaits there I’m afraid.

        • What people cannot get, refuse to get is that they were born into and live within and likely will die in a CAPITALIST society.
          What is a CAPITALIST? Is it someone who misuses the caps lock key?

        • What annoys me is that when you argue for limited government people go into a head spin and think you want no government and no regulations at all. It’s not about this, it’s about limiting the government to only a few required functions (defense, law and order, infrastructure, financial regulations, some health and education etc…) and letting private individuals organise the rest. It’s about getting efficient outcomes and not having an all encompassing government sticking their nose in every orifice possible.

          • Why is the government building more roads and bridges when there are already many existing private tollways.

            Case re-opened 🙂

          • Phil the engineer

            “Mav, how did you post that question?

            Case closed.”

            I can’t get crappy ADSL 2 in the middle of the Gold Coast. Case not closed at all.

          • “Why is the government building more roads and bridges when there are already many existing private tollways.”

            So you can get free access to the internet can you? Roads and internet access are NOT the same thing.

            Internet access does not fit under the description of a public good. It is divisible, the market can charge for it and it isn’t a basic human right.

            Phil, then maybe you should start a company, you could provide it to everyone and charge a high premium as you will be the only person offering access to it?

            Perhaps it would be a good idea to first ask “why is there no fast internet here” before shouting “the gummint should do something about it!”

          • Internet access does not fit under the description of a public good. It is divisible, the market can charge for it and it isn’t a basic human right.

            Now that I have stopped laughing, I have multiple questions:

            1. How do you determine what is a public good?
            2. Roads are divisible too and markets do charge for it.
            3. Roads are a basic human right, eh? That one is a clanger.

          • Lol Mav, now that you have stopped pretending to laugh (and I have stopped actually rolling my eyes). Let’s find the definition of a public good shall we? Took me a whopping 2 seconds to find:

            “In economics, a public good is a good that is both non-excludable and non-rivalrous in that individuals cannot be effectively excluded from use and where use by one individual does not reduce availability to others.”

            General roads are public goods as all houses have access to them whereas highways are not.

            No I don’t think roads are a basic human right (yes Im aware that the syntax was misleading there), I was merely stating that as internet access is not a human right, nor is it a public good the government should stay out.

            Keep trying kid.

          • LOL.. Thanks for the wikipedia cut-paste 🙂

            General roads are public goods as all houses have access to them whereas highways are not.

            Oh dear.. We are back to square one: I will re-phrase my question again:

            Why is the government building more highways when they are not a public good?

            Stop going around in circles and stop calling me a kid.

          • dumb_non_economist

            MattR, the internet is no different in this day and age as power/water etc. Most importantly for any students education/study.

          • I’ll stop going round in circles when you stop asking the same questions over and over.

            “Why is the government building more highways when they are not a public good? ”

            How about you ask them yourself? Last I checked the most recent highway built in Melbourne was tolled and owned by a private company.

            Your comment is a strawman anyway. You simply cannot compare roads to internet access and both have completely different supply mechanics.

            I’ll do you a deal, you stop commenting like a stoned teenager and I’ll stop calling you a kid, fair?

          • DNE, whislt I agree that the internet could be considered a 4th utility, it is by no means comparable to power and water. Without power and water society would very quickly break down. People without access to these are potentially at a serious safety risk.

            Now, whilst I do like to say that I’d die without the net, I think it’s fair to say that’s a bit of an exaggeration.

            Even so, it can very easily be provided by private companies as power has been.

            Also, if you want proof the NBN is a massive waste of money, just look at any news around it. Over budget, way behind schedule, fractional take up. It’s a waste of money.

            Schools all provide internet access already, well they did over a decade ago when I went, maybe all has changed now…

          • Wrong – many highways are built/being built and maintained by the government as we speak – F3, Westconnex, Pacific Highway expansion.

            And wrong again – Both are undeniably public infrastructures.

            And I’ll continue to be politely call you out on your hypocrisy. 🙂

          • “And wrong again – Both are undeniably public infrastructures.”

            Well you said so, therefore it MUST be true right kiddo? Lol…

            Like I said before, roads maybe, internet no. Feel free to point out hypocrisy that’s not there, I think the Tooth Fairy and Santa are on there way too buddy. 😀

          • So your argument is the government can build something therefore they should? They have built something in the past therefore they should now?

            I guess it’s my turn to start laughing hahahaha.

            Yes, I get it, the NBN is public infrastructure. You clearly haven’t been paying attention. I am saying that the government should build it as internet access is not a public good. For the same reason they shouldn’t build mobile phone towers or retail outlets to sell fairy costumes for halloween.

            Just because you can, doesn’t mean you should.

          • Yet you never came round to telling us why the internet or the highways are not a public good.

            Highways are a combination of private and public good.. so is the internet. Get over it.

          • Honestly…

            “General roads are public goods as all houses have access to them whereas highways are not.”

            Due to the nature of commenting here elaborating is hard, therefore I will concede, yes highways and freeways can be (are) public goods as well, my point was that the private sector can build profitable freeways as well. However, my initial point was that freeways/highways are different to internet access, bringing them up is a strawman. Yes they are both private and public, not the point.

            I have already told you several times already why internet access is not a public good, therefore the government has no place entering a free market. Private enterprize can easily provide it on their own.

            Internet access is a completely private good, get over it.

          • Actually, NBN is a wholesale-only data network, with retail “internet access” actually provided by private companies.

            i.e. your “Internet access is not a public good” is a furphy.

          • You just contradicted yourself, private companies provide the internet access but because the NBN is government owned internet access isn’t a private good? Do you even know what you are arguing any more or are you just replying for the sake of it?

            I could call optus or telstra tomorrow and get cable internet access. I’d pay for it and ONLY I would get access to it from my appartment, I’d have access but my neighbours wouldn’t unless they paid for it. If the market wanted an NBN it would build one!

          • Umm..No. I did not contradict myself..

            Highways are a combination of private and public good.. so is the internet. Get over it.

            NBN the wholesale-only network is a public good. internet access is a private good delivered via NBN.

            Tollways/Highways are a private good, but to get there, you need to use a public good. i.e. public roads.

            No need to thank me for the free education – it is a public/private good 😛

          • So your entire argument is, “the NBN is owned by the government therefore access to this network is a public good” Right…

            So I guess that means, other networks that are owned and built by private companies are private goods. Lol, just lol…

            Thanks for the ‘education’.

            I guess if the government buys Coles and Woolworths then supermarkets all of a sudden sell public goods? Hahahaha.

          • I could call optus or telstra tomorrow and get cable internet access. I’d pay for it and ONLY I would get access to it from my appartment, I’d have access but my neighbours wouldn’t unless they paid for it.
            Yes, “ONLY” you right up until it runs into that trunk line at the bottom of the building.

            Telecoms is a shared technology. Just like roads (only for data).

            If the market wanted an NBN it would build one!

            This is what’s called a circular argument.

            The NBN should be public infrastructure for the same reasons electrical transmission infrastructure and utilitities should be: natural monopoly and the inefficiency of massively duplicated infrastructure.

        • The argument for Socialism was miserably lost decades ago but some deluded people still believe that we all must be the same, that all must be fair. That it is a crime that some are better off than they are. A lifetime of delusion awaits there I’m afraid.

          I guess that’s why all the best places in the world to live practice some form of socialism and – typically – the less of it they have, the worse the living standards for the average person.

          Tell us GSM, did you go to one of those evil socialist public schools ? Have you ever been treated by the evil socialist public healthcare system ? Do you drive on the evil socialist roads or catch an evil socialist public transport system ? Do you live in a house that was built to evil socialist safety standards ? Are you confident that the labels on your food are reliable thanks to evil socialist regulations ?

          • And all countries that are good to live in, whislt practicing some forms of socialism, are predominantly capitalist in nature. Only capitalism can pay for socialism.

            Also, what are the living standards in Greece and Spain like right now? Typically countries with the freest markets with a small amount of socialism (a social safety net) have the highest living standards, in the long run.

            You are pointing to the car and saying, if it wasn’t for the seats it wouldn’t work! Yes, the seats are an added nicety, but the engine makes the car!

          • How on earth can you equate a road with a publicly funded hospital or school ? One is an essential service vital to connecting people from their place of residence to a place of business (you know, those things that make the money the govt can tax to build roads and overpay nurses and teachers). The others are a service that could be provided more efficiently and cost effectively by the private sector, which are subject to union thuggery and interference, and which inculcate people into believing that they don’t need to take responsibility for their own lives. People are never more innovative than when there is some sense of actual struggle and necessity.

          • loonyright, to be fair healthcare and education should be taken on by the government to a certain extent but only in conjuction with a competetive and strong private sector. Everyone deserves basic healthcare and education whether they can afford it or not.

            That being said, those who opt out of the public system shouldn’t have to pay for it!

          • I would disagree that govt should be involved in the health or education system at all. They have demonstrably failed to manage costs and deliver results – why would they when there is NO incentive and nothing holding them to account. I am certain that a properly free market in health and education would deliver far superior results and at far less cost than which the populace is taxed to provide a worse service. Governments involvement in health and education is a relatively recent phenomenon – but kong enough to have established that it is a failed experiment. There will always be a market for lower cost services for those who can’t afford the premium product so to speak. Competition and innovation will ensure they are still delivering a quality service.

          • loonyright, yes I agree the private sector can produce far better results overall. However, a social safety net isn’t a bad thing to have. Think of it as having another competitor in the market. People will chose the provider that provides the best value right? OK, so why not simply make all out of pocket healthcare costs tax deductable?

            If the government provides poor quality service people are more likely to take out health insurance. Result, more people in the private system, less revenue for the government.

          • ” those things that make the money the govt can tax to build roads and overpay nurses and teachers

            Just wow. What a limited world view you have to think that of all the occupations that these two are overpaid. Perhaps you should get out more.

            Of course bankers are never overpaid (just the amount that the [free – ha] market sets, right?)

            Nice one de Clerk; really living up to your moniker today.

          • I dont know Matt. I have come to the conclusion that we require a fundamental shift in how we think about what we are entitled to from government. I’ve yet to see a social safety net that doesn’t just get bigger from generation to generation. Government has failed, and its worse crime is that people are no longer able to countenance life without it. As you say, it should provide for the basics of defense, security, property rights. It’s up to us to make everything else work out for ourselves. Our ancestors have done it, I am confident we can be masters of our own destinies again without a problem.

          • looneyright, I understand your sentiments and yes I certainly agree, the government has got way too big and regulations have gone way too far. Still, I don’t see a reason to throw the baby out with the bathwater.

          • DrBob
            People working in financial services are mostly working in an open, deregulated labour market. If the market can support a wage of $10m and someone is generating a commensurate level of innovation and wealth for that business, then that is how a free market operates.

            Teachers and nurses and working in highly unionized and regulated environments where they are able to dictate wages growth in isolation to their innovation and productivity and performance. More importantly, there is no one to hold those wages to account, which are gained under the duress of union power to disrupt services.

            Create a free-er market for those jobs, free of ludicrous regulation, and they will genuinely have to earn their wage growth.

          • And all countries that are good to live in, whislt practicing some forms of socialism, are predominantly capitalist in nature.

            What’s your point ? No-one here is even vaguely suggesting we eliminate capitalism.

            Also, what are the living standards in Greece and Spain like right now?

            Why does it matter ? No-one is arguing we should be like Greece and Spain.

            Typically countries with the freest markets with a small amount of socialism (a social safety net) have the highest living standards, in the long run.
            The Northern European countries vs USA (or Hong Kong or Singapore) suggests otherwise.

          • “The Northern European countries vs USA (or Hong Kong or Singapore) suggests otherwise”

            Let’s see, Hong Kong? One of the best healthcare systems in the world, one of the best public transport systems in the world, one of the richest cities in the world. Singapore, clean, safe, healthy, if a little unfree although this is changing. USA, biggest economy in the world, will probably come through the GFC stronger than ever.

            Northern Europe? Small, homogeounous nations that have been in slow decline for 30 years despite some of the worlds largest oil supplies. Nowhere near as good as the left here make out. Oh and they also have some of the freest markets in the world anyway.

            I love how Scandinavia is used as the ‘perfect example’ of the welfare state, whilst ignoring all other factors. It’s a great example of what happens when you take a rich country and add mass welfare, it declines.

            I recently spoke to a few people from Sweeden and asked them if they would move back there if they had to. Their response? No way! We want to work!

            Feel free to google scandinavian welfare success myth.

            “Why does it matter ? No-one is arguing we should be like Greece and Spain.”

            How about Japan? How is that country going right now? Massive welfare state, where has the economy been for 20 years?

            “Socialism is great until you run out of other people’s money”

          • How on earth can you equate a road with a publicly funded hospital or school ?

            Quite easily.

            One is an essential service vital to connecting people from their place of residence to a place of business (you know, those things that make the money the govt can tax to build roads and overpay nurses and teachers).
            What is this comunism you’re describing ? People don’t need to leech off the public teat by using roads, then can just buy SUVs and drive any way they want.

            The others are a service that could be provided more efficiently and cost effectively by the private sector, […]

            […]

            They have demonstrably failed to manage costs and deliver results – why would they when there is NO incentive and nothing holding them to account.

            Completely at odds with reality (again), where the most efficient education and healthcare systems are the ones dominated by public funding, or extremely tightly regulated.

            Governments involvement in health and education is a relatively recent phenomenon – but kong enough to have established that it is a failed experiment.

            Indeed. That’s why societal metrics on health, education and productivity are so much worse now than they were a century ago.

          • Let’s see, Hong Kong? One of the best healthcare systems in the world, one of the best public transport systems in the world, one of the richest cities in the world. Singapore, clean, safe, healthy, if a little unfree although this is changing. USA, biggest economy in the world, will probably come through the GFC stronger than ever.

            So the two regions with the highest levels of inequality in the world, followed by a country with one nearly as bad.

            Then there’s social mobility where, again, your three examples score amongst (if not the) worst in the world.

            “Socialism is great until you run out of other people’s money”

            So, like Capitalism, then ?

      • It is good that I have got you thinking about the danger of propaganda. Perhaps you should now have a little think about the danger of taking things to extremes.

    • dumb_non_economist

      GSM, rewriting history again, are we? If you did your apprenticeship in the same 70s as I did you, would have found far greater union involvement than you do now by a long shot!

    • When I was an apprentice (70′s) it was thus:

      It was a clear and workable arrangement. Until the Unions got involved and then it all went to $hyte.
      Apparently it escaped your notice that Union participation, power and influence has been declining since the early ’80s.

      Its hard to rationally blame the economic ills of today on the ~18% of unionised workers in mostly average- to low-paid jobs.

      • And yet somehow unions are able to dictate government policy, increase the cost of running schools and hospitals, which acts as a disincentive to private capital investing in these sectors and actually generating the innovation we so desperately need to reduce the size of government, which has failed to manage costs in these sectors and is now creating an ever increasing burden on the private sector to fund an overbearing nanny state.

        • And yet somehow unions are able to dictate government policy, […]

          Hardly.

          […] increase the cost of running schools and hospitals, which acts as a disincentive to private capital investing in these sectors […]

          This doesn’t even make sense.

          […] to reduce the size of government, which has failed to manage costs in these sectors and is now creating an ever increasing burden on the private sector to fund an overbearing nanny state.

          Tax revenue is the lowest it’s been in decades.

      • “Its hard to rationally blame the economic ills of today on the ~18% of unionised workers in mostly average- to low-paid jobs.”

        18% of the workforce that control/are the government of Australia.

        Also, the people I know who work in contruction would have a few words about your ‘average to low paid jobs’ comment right there. Do you know what a basic unskilled labourer on a worksite makes? Hint: it’s not low, nor is it average.

        • 18% of the workforce that control/are the government of Australia.

          I must say that is a pretty good %, considering that the 1% controls the Liberal Party.

          • Those bastard 1%ers! Always sticking their noses where they aren’t wanted!

            In all seriousness, no, they aren’t at least not any more than any other party is.

            Although, the LDP got about 1% of the vote last election, does that make me a 1%er?

          • MattR, dont confuse voting % with controlling %.

            The richest 1% fully control the Liberal party. Sadly, they also partly control the Labor party too along with 18% of the work force.

        • “In the universe I live in, yes.”

          Says it all really.

          Well I guess politicians make up less than 1% of the population so maybe this could be true.

        • 18% of the workforce that control/are the government of Australia.

          Laughable.

          Also, the people I know who work in contruction would have a few words about your ‘average to low paid jobs’ comment right there. Do you know what a basic unskilled labourer on a worksite makes?
          I think you’ll find the majority of unionised employees are people like teachers and child carers.

    • GSM – I did my own apprenticeship in the 70s and would agree. The level of union interference under Hawke’s leadership of the ACTU was something to behold. It may have abated somewhat across the board, but it is still a pernicious influence on commercial activity and on government policy. Some people just didn’t get the message that socialism is a failed religion. The sooner they are gone, the better.

  10. “Australia is a lucky country, run by second third fourthfifth-rate people who share its luck“

    And counting.

  11. Innovation is impossible in a country whose populace has been reared at the teat of an overbearing nanny state, and where people have been duped by the public education system into thinking that they will be looked after from cradle to grave. One of the biggest mistakes in this country has been to socialize medicine, subsidize the PBS, and allow unionized nurses to dictate the cost of operating hospitals. This is a repeat of errors in overfunding public education, where cohorts of average academic types are shunted into the university sector to waste tens of thousands of tax payer dollars on a degree which will qualify them for little more than working in a menial public sector role – at best. And so it is little surprise to now see people championing government expenditure on a $30b broadband network that the private sector would have produced at a third of the cost and run more efficiently than the also-ran technocrats parachuted into cushy government roles free of any actual commercial pressure to deliver good results.

    Until we remove our system of socialized medicine, education and infrastructure, cut taxes, cut red tape, abolish unions, and start attracting entrepreneurs prepared to invest and create jobs, then we will remain forever a wasteland of the overindulged, complacent and mediocre.

      • Do you even understand the cause of the problems you come to this site to lament so frequently ? There is no easy adjustment available to us. We require a wholesale shift in our thinking, in our philosophy, and that starts with letting go of the idea that the world owes us anything. That is to say, government. Why can you not accept such a fundamental concept ?

          • Limited government ? Try Hong Kong. And why not try to develop our own model of limited government ? Is it really that scary ? The only thing to fear is failure, but then failure is just a part of life. Used to be, anyway.

          • Try Hong Kong.

            You mean a country with one of the worst levels on inequality in the world ?

            And why not try to develop our own model of limited government ? Is it really that scary ?

            It is when it involves people like you.

    • As usual, the Libertarian Opposites World view is impossible to distinguish from satire, and bears no resemblance to reality.

      • Can we please stop using the libertarian word out of context? Actual libertarians identify as neither left or right wing – we are just “fuselage” or I prefer the submarine analogy. Stay underwater and out of trouble and stop debating with the loony left and loony right like a destroyer called the HMAS WAFTAM…

        • Can we please stop using the libertarian word out of context?

          A word carries the context of its common usage. Hence the reason “liberal” (in political context) bears but a passing resemblance to its actual meaning.

          I don’t mean to attack people like you who call themselves ‘libertarian’, since you appear to be eminently sensible and at least mostly balanced. However, I can count the number of self-identified libertarians I’ve ever met whose views don’t align with the kind of things promoted by loonyright and MattR on one hand.

          It’s the difference between “little l” and “big l” libertarianism. The former is something a dictionary describes, the latter is a political movement.

        • well said. Actually a modern day “l” libertarian is the equivalent of an ancient small “l” liberal – the fact that we have to use the longer word when liberal would just do shows how corrupted that word has become by both the loony left and right.

          I find it fascinating that the big L libertarians stand up for right wing statists who dont have an inch of old-school liberal/libertarian thinking.

          Oh, there’s a veneer to be sure, but its the greatest astroturfing movement out there – get middle class/income right wing leaning “Libertarians” to fight for the upper class rich statists by obfuscating the debate into such topics as
          “business must be self regulating!” – ie no responsibility and rent capture monopolies
          “income taxes are theft! (I used to be one of these) i.e but leave capital gains/land tax alone
          “government should be more efficient” i.e create military industrial or healthcare industrial complexes to takeover those “inefficient” departments
          “we want smaller government” except defense, draconian law enforcement agencies (see above complex) that abrogate the personal liberties and freedoms liberals, err i mean libertarians have fought for since the mid 1700s….

          etc etc ad nauseam

          If it wasn’t so serious we’d be laughing at how its been done.

  12. Basically, Australia has lost its desire to innovate and reform. Instead it had become self indulgent via the housing boom, which is now coming to an end. Australia needs to get over its addiction to easy mortgage money and start to make its own luck.