Australia needed a Churchill, it got a real estate agent

Australia is fantastically ill-prepared for the historic challenge that is upon us. The shift from the globalisation regime to one of an unwinding Chimerica evokes the classic strategic parable:

At first you go bankrupt slowly, then all at once.

It did not need to be this way.  We should have prepared for the inevitable Chinese showdown from the beginning.

We should have taxed commodity prices properly and saved that money in a sovereign wealth fund to be recycled whenever and however the boom ended. That would have given us an immense fiscal stabiliser, and a lower currency during the boom to prevent non-mining tradables hollowing out.

Second, we should not have persisted with the mass immigration economic model when commodity riches dried up after 2011. That was nothing more than doubling down on Chinese growth for education exports and realty.

Both of these are historic mistakes that leveraged us far more than we ever needed to be to Chinese growth. Now, as Cold War 2.0 intensifies, and China goes ex-growth, we will be smashed.

Yet, are we preparing for it? No. Another convulsion of deluded policy making is underway. The recent election offered a very poor choice between a reforming but open borders Labor versus a an economically backwards but more hawkish Coalition. We chose the latter in a tow horse race but it was not a good choice in and of itself.

The newly elected Morrison Government has only one clear economic objective, to re-inflate house prices as soon as, and as high as, possible. To achieve this its policy settings are to:

  • run a fiscal surplus despite weak aggregate demand, forcing the RBA to slash and print;
  • misallocate fiscal resources into demand side housing pump priming;
  • lie about cutting mass immigration while running it full tilt, and
  • corrupt regulators to ensure more credit.

The problem is that this economic strategy is now aimed directly at a head on collision with a geostrategic environment that demands the opposite:

  • US/China relations are crashing and there is no saving them;
  • China will be forced ex-growth over the next five years;
  • Australian universities are exposed as deeply corrupted by CPC cash;
  • the same cash has driven a foreign policy wedge between states and the federal government;
  • Australia’s visa system is likewise corrupted by interests;
  • public debate has been severely curtailed owing to encroaching CPC violence.

We need immediate policy remediation that includes:

  • a royal commission into university corruption;
  • a federal ICAC to root out corrupt CPC cash;
  • deep cuts to immigration to ensure CPC influence does not get worse;
  • and a entirely new economic reform model to boost non-Chinese exports.

The only reason a Morrison Government was preferable to Labor at the last election was the latter appears hopelessly in thrall to the CPC, directly and tacitly.

But Australian history is acclerating into the “bankruptcy all at once” phase and the Morrison Government looks horribly dated and lost within it.

We needed a Winston Churchill, we got real estate agent.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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Comments

  1. Just let it burn. We are so horribly compromised in every facet it’s the only way things will change. We have politicians bought on the cheap by the CCP on both sides of state, federal and council politics. We have FTA’s that let the Chinese developers bring in coolies to build death sky kennels that the taxpayer will pay to fix. We have the likes of Trigoscum cheering it on so he can ruin the amenity of Sydney (who knows the reason the old cvnt needs to make more money other than absolute greed and avirace) We have the entirely corrupted Uni sector pushing for more full paying Chinese students whilst they act as the arm of the CCP in quashing dissent from Hong Kongers in our own supposedly democratic country while the media, police and politicians ignore the death threats made against the HK protestors which if it were white kids would have caused a furor. We have banks that have been let off the leash AGAIN after a damning RC and being encouraged by both the government and the piss weak regulator to go nuts on fraudulent lending. We have honestly, what I suggest are morons at best, but frankly retards running the country with Frydenburg thinking his pleas to stop the trade war would make a spit of difference. All the while the media gaslights us into believing that the congestion on roads, in schools and hospitals is good for us so we can be good global non racist citizens by taking millions of the third worlds refuse is actually good for legacy residents. Honestly, just let it burn. And the sooner the better.

  2. TailorTrashMEMBER

    Oh I dunno …Scomo is indeed a man of his time
    in property obsessed straya …..

    Never before in the field of real estate was so much owed by so many to so few

    If the strayan real estate boom should last for a thousand years ,this period of the sell off of its children’s homes to China was their finest hour

    We shall sell them the beaches , we shall sell them
    the mines and the farms . We shall sell them the dodgy apartments…we shall sell them the water rights …we shall sell them the hills ..
    we shall never surrender an opportunity to do the property councils bidding .

  3. The boomers will just kick the can until they’re dead.
    Then the people to pickup the pieces will not even be Australians, so no one will care.
    As long as the shares and realestate values stay high, Aussie kids will get the inheritance.

    As always those that suffer are working class Aussies.

  4. C.M.BurnsMEMBER

    Macro business spends 5 1/2 years campaigning for a policy platform that was 90%, maybe 95% in harmony with Labor’s. Finds itself in furious disagreement with the other 5-10%.

    Backpeddles support and flip flops between all options (except the greens. Booo. Hate those guys. Apparently) in lead up to election.

    Australia votes for LNP government. Macrobusiness shakes fist furiously from the sidelines.

    You’re as bad as the greens in voting against the first, proper carbon tax scheme that Gillard ran with. You let perfect be the enemy of good… and here we are.

  5. C.M.BurnsMEMBER

    “”Never before in the field of real estate was so much owed by so many to so few””

    Err. Feudalism is on the phone for you and would like a word. How did that Stephen Morris (?) member/contributor phrase it for those few years he was posting? Neofeudalism. Meet the new landholders. Same as the old ones up till the 19th century.

  6. There is a historical precedent for an extremely embarrassing similar episode of folly being whitewashed out of the collective consciousness.
    Quadrant Magazine, April 2013
    Peter Ryan, on “The Land Boomers” by Michael Cannon
    Melbourne. University Press, 2013; revised, print-on-demand edition, 409 pages, $34.99

    It was my privilege, over almost half a century, to have followed in intimate detail the triumphant “best-seller” course of one of the most remarkable Australian books of all time: The Land Boomers, by Michael Cannon. No full understanding of the concluding decades of the Colony of Victoria, nor the subtler character even to this day of its jewelled city Melbourne, is possible without some apprehension of the land boom era, and of its appalling “bust”.

    For reasons which escape my understanding, the publisher over recent years has ceased to put copies into the bookshops – “Out of print”. More reprehensibly, the author himself seems to have been left in the dark about the intended future fate of his great work. No matter. The publication last month of a fresh edition, liberally illustrated and with a new Author’s Introduction makes us look ahead rather than backward, not so much a happy ending to The Land Boomers as its resurgent continuation.

    Michael Cannon tells his absorbing, often scandalous story with verve and clarity. We see the respectable middle classes hurling their money away as madly as any drunken sailor, frantic to “get rich quick” through wildly inflating land prices and “development”. We see supposedly upright and conservative bankers and other business leaders throwing caution overboard out of similar breathless greed. Some of these were themselves dupes of the delusion. All too many others were mere brigands in shiny silk top hats consciously setting forth to swindle humbler citizens of their lifetime nest eggs. The Melbourne mood was all wild optimism: “We’re all going to be millionaires! Every blessed one of us!”

    Came the bust. Proudly independent “comfortable” families dismissed their troops of long-serving retainers, and then themselves became dependent on the dreaded “paying guest” to meet their own grocers bills; ordinary workers were simply sacked in their thousands, starving with their families as they tried to beg bread on the streets, or scavenge among the scraps in Melbourne’s garbage cans. Lacking any system of organised state relief, churches, charities and citizens of good will tried to sustain them. For example, it was recorded that “200 souls were Maintained at Werribee Sewage Farm at an average cost of Sevenpence ha’penny a week”. (One forbears to inquire what they were eating.)

    The land boomers themselves seem to have included a remarkably high proportion of what poet Rabble Burns would have called the “uncommon good”: stern teetotallers, wowsers, sabbatarians, churchgoers, vestrymen, pew-renters, puritans of every Stripe. Their mortification when their bubble burst was extreme, and their efforts to suppress the story strenuous and largely successful. Victoria’s bankruptcy laws were shamelessly rigged so that outrageous defaulters could escape in secret. Honest judges were threatened with removal. Eighty years later I knew two Melbourne scholars of high achievement and blameless academic reputation who would almost blush if the land boom were mentioned; their well-known grandfathers had played an equivocal role in that boom so long ago.

    When Cannon sought help with his researches at the Public Library in 1963 that vast repository could point to no more than a single chapter in H.G. Turner’s conservative History of the Colony of Victoria published in 1904. Only that trace remained about a trauma which had rocked the colony to its foundations!

    The arrival at the State Archives of a series of wooden crates from the Crown Law Office transformed Cannon’s resources. The crates contained dust-coated original records of the Bankruptcy jurisdiction, court transcripts of evidence, old company files and indeed most of the bare facts needed to piece together the tales of horrid fascination which The Land Boomers tells.

    The feat of analysis and reconstruction of all this material would have been a challenge to any mature and hardened research scholar; it was brilliantly performed by a young man who lacked a single hour of research experience or university training.

    The outstanding quality of this “amateur” manuscript was testified by two impeccable authorities: Sir Hugh Brain, after nearly a lifetime experience in the Collins House Group of companies, a familiar with the powerful magnate William Lawrence Baillieu and the Baillieu family interests. Brain said that Michael had got the business side right, and furthermore helped him with additional rare documentation. Then Australia’s pre-eminent historian Geoffrey Blainey pronounced it to be sound and important history.

    With such distinguished support, the manuscript was swiftly adopted for publication by the Board of Management of Melbourne University Press: this despite the unease of the Vice- Chancellor, and murmurs of the risk of the Baillieu family withdrawing its support for the university library and the nascent archives department.

    The book was published in 1966 to sensational acclaim, and a fresh printing was required within days — and then promptly another one — to satisfy exuberant demand. It almost seemed as if the sedulous cover-up of the Edwardian years had bottled up latent curiosity under pressure.

    Hundreds of copies were sold to lawyers summoned to advise upper-crust families on whether they might sue for defamation, or otherwise put Cannon’s “vile book” out of circulation. Over the teacups at Darren Baillieu’s Toorak mansion, council of war was held by the family over how “The Land Boomers” might be silenced or smothered.

    Not one writ was ever issued by anyone, and for about the next forty-six years, through at least ten different impressions and various editions, The Land Boomers has continued to share with its readers its rich freight of wisdom and warning, and the entertainment of a lively, racy yarn.

    The author’s new introduction to the fresh edition enables him to do not only the usual minor corrections and tidying up, but also to deal with one new matter of substance. A Melbourne academic (encouraged by the Baillieu family) last year published a scholarly volume entitled William Lawrence Baillieu, Founder of Australia’s Greatest Business Empire. Says Cannon, the book “seems to me to worsen the case against W.L.’s boom-time activities, making his financial recovery after the crash even more astonishing”. Clearly The Land Boomers still surges with active life. To help modern minds grasp the immensity of the disaster of the 1890’s, Cannon cites the example of Benjamin Fink: when that super-boomer went bung for 1,800,000 pounds, his debts would have been worth some $300,000,000 today…

  7. For some reason I can’t “reply” to others comments, I can only post new ones. C. M. Burns is right about the current time being a return to the conditions of the 1800’s. It is so tragic that big systemic changes have been so little understood and so easily forgotten. It was better understood in the 20th century, that the reach and flexibility of the automobile was what was ending the old urban land rent trap that had so concerned classical economists and given rise to Marxism and Georgism. Alfred Marshall was clear about this by the early 1900 and succeeded in convincing the famous planner Ebenezer Howard that Marxism was unnecessary; Robert Murray Haig wrote the definitive theoretical framework in the 1920’s that was accepted and referenced by all the greats such as Alonso and Wingo; non-economists like Frank Lloyd Wright and Henry Ford referred to the phenomenon, and the famous social reformer Charles Booth praised it as a major positive force for good. Our ancestors were not stupid and malicious planet-rapists as the Eco-Taleban would have us believe; they knew full well that the positives of automobility far outweighed the “negatives” which to them, weren’t even worth thinking of. For one thing, the amount of land necessary to grow food for horses and draft animals was several times greater than the “urban sprawl” the eco-Taleban condemns. Humans ended up living on the land they’d previously been growing hay for horses on – shock, horror! City streets ceased to be inches deep in horse shit; particulates from large scale coal burning were eliminated, and local environments for households improved massively simply from the “dilution” of environmental toxins that is associated with spreading out more widely.

    All this, and the effects on land rent, is apparently to be forgotten as the eco-Taleban “Baptists” enable a racket for the resurgent “Bootlegger” rentiers in property and finance.

  8. proofreadersMEMBER

    Ditto for me re Phil’s remark above about only being able to post new comments. Anyway, +1 to Timmeh.

  9. The Horrible Scott Morrison MP

    A lot of moaning avocado munchers on here today. Why don’t you do the right thing and get some negatively geared investments properties, and become a full member of our society. Your country needs you.

    • MB readerMEMBER

      We elected him not thanks to our electoral system, which is fine, but because this is what most Australians wanted. That is what is so frustrating!

      • he got less than 40% of votes despite people voting for big parties to avoid “wasted vote” due to voting system

        Our voting is not fine, it’s been crated by aristocracy in 18th century to keep the power while pretending to give people choice

  10. thanks Phil and Timmeh, good posts. I still don’t think people are thinking catastrophe. Yet a depression is what we are facing. Who is going to pull some cash out to invest in Australia? Not this government

  11. Another + 1 to Timmeh. I purchased the Land Boomers from Readings in Carlton as a Birthday present for my younger son in March. They will print off a copy for you for $35. He thought it was astonishing and fabulous ( or so he said)!
    When creditors assail ya
    Do not try to leave Australia
    Imitate the House of Bailieu
    And stage a great financial failure!

    When debtors went bankrupt at pennies in the pound… And then made a miraculous recovery.

  12. Up here in Sunshine Coast Hinterland Area (Beerwah, Glass House Mountains, Landsborough, Moolah Valley) I have seen a number of houses selling. There are places that have been on the market 8- 18 months and all have Sold signs on them now. Amazing keep on pumping that debt wheel Australia. WOW

  13. @LBS. The Sunshine Coast (any of the coasts, in fact) is always difficult for sales. If you’re not retiring there you need jobs and well paid jobs are extremely difficult to come by up there.

    • Dominic but some of these properties have been on the market for a long long time and all of sudden they are sold. There were a ton of properties in the last 5-8 weeks that came on the market and still sitting there. I swear in the last 2 weeks all of them have SOLD signs on them. Crazy.

      • That does sound crazy. I know there are an awful lot of people moving up to the Sunny Coast from NSW and VIC.

        The thing is: slow moving property puts people off but then suddenly 2 or 3 homes sell and the rest of those buyers who’ve been sitting on the sidelines jump into action cause of fear of missing out.

  14. Do we think that any party would be doing it differently? We’ve been sold out by the collective political power and bureaucracy who have no vision outside their own power and consumption economy. No real policies on long term nation building, in fact it goes against their globalisation mantra. All you can do is try to be self reliant, because before long there will be very little for services and the nation in general.

  15. @Dominic

    @LBS. The Sunshine Coast (any of the coasts, in fact) is always difficult for sales. If you’re not retiring there you need jobs and well paid jobs are extremely difficult to come by up there.

    That’s the case just about everywhere else. northern Rivers is the same. Most people in those areas barely scrape $50,000, you looks at the available jobs in those areas and yeah, they’re just subsistence jobs, but hey, you wanna buy a 600m sq. postage stamp in Buttf*ck Iceville, that’ll be $400,000 thanks…

    Then you get douche-bags who think that after they lived a lifetime in Syderney, they’ll be able to cut it living in the middle of nowhere with no amenities anywhere near them, because, you see, the places they are looking at are so much ‘cheaper’ than syderney… reality hits home after about 3 years though so they have to sell because ‘they want to be closer to the kids’ … which they just left behind 3 years ago…

    • I see it far and wide in my travels, sleepy towns, many far, far from swimmable or surfable beaches, not much on offer, yet these ridiculous prices and woe betide you if you loiter too long at the window of the local RE office for a squiz at asking prices. The agents swarming over a pale southerner who looks like he might have more money than sense is akin to the blowflies swarming the dead roos killed the night before by the 0300AM road train out on the bypass.

    • +hundreds
      High turnover of properties in these places as a conga-line of people realize butff*ck, Utopia is “not for them”, then try and flick the over-priced pad to the next fool.

  16. Re The Land Boomers (Phil above). This is the most illuminating and relevant Australian book I have read. No wonder Melbourne blue blood families tried so hard to suppress it.
    Hard to get (deliberately?), it is a must read for every thinking Australian.

  17. @Doctor X yes indeed the majority of Australians did not want the LNP at all if one drills into the numbers, this is a matter for the ALP to reconcile in an alliance with others.

    On the flipside of the coin Australian got what they paid for, a conniving, perverse evangelical maniac that lacks any integrity or leadership attractiveness. The baby boomers and new immigrant obsession with neoliberalim and running government like a business has already resulted in the erosion of our social safety net – we are now a neo-feudal state whether some agree or not, the erosion of the purchasing power of the Australia dollar equates our welfare payments to Penny’s……..

    “Lacking any system of organised state relief, churches, charities and citizens of good will tried to sustain them. For example, it was recorded that “200 souls were Maintained at Werribee Sewage Farm at an average cost of Sevenpence ha’penny a week”. (One forbears to inquire what they were eating.)”

    Well done Scott Morrison and little Joshy keep pushing that falsehood of your own inexorable conscious and obey your masters.

  18. @Ino , so the locals are priced out. No different to Melbourne as the rich influx smash the rest of us.

  19. UrbanWastelandMEMBER

    The Land Boomers still surges with active life. To help modern minds grasp the immensity of the disaster of the 1890’s, Cannon cites the example of Benjamin Fink: when that super-boomer went bung for 1,800,000 pounds, his debts would have been worth some $300,000,000 today…

    Nathan Birch?

  20. Mining BoganMEMBER

    Have people started hoarding The Land Boomers? When I got my copy second hand a few years back there were plenty around for twenty bucks. See some for sixty now.

    Pretty sure new Australians aren’t buying them. Maybe it’s the old Australians buying and burning them to hide the shame.

    *waves at old Melbourne families*

  21. Amatures, they should do it with a private public partnership, where the public pays three times what it would cost to build it on their own and then gets a toll on the bridge as well. They really need some Aussie politicians over there to show them how to do it properly.

  22. Being a tighta55 i borrowed one from my local library a year ago. Great read. Looking at the catalogue again it now says ‘item not available’! It was either knocked off or withdrawn.

  23. ErmingtonPlumbing

    This “The Land Boomers” seems like a must read.
    I might buy half a dozen copies for birthday and Christmas gifts.

    That’s how I introduced Les Norton to many of my friends and family.
    Ya just don’t deserve to call your self an Australian in my view if ya haven’t read, Robert G. Barretts,
    “Wouldn’t be dead for Quids”

    The TV show on ABC does the books no justice.

  24. We had choices and we actively sought and voted for the worst long term outcome so that we could enjoy the short term sugar hit.
    A the last election we once again had an opportunity to adjust our economic course but, guess what, we once again voted for the sugar fit.
    Anyone that believes we won’t do so a third, fourth and fifth time is frankly nutso.
    We’ve become Pavlov’s dog….. it’s embarrassing…they ring a bell and we salivate and naturally bid and bid and bid, apparently this is the process by which we Aussies produce winners And who doesn’t want to be a winner?
    I’ve lost count of how many times I’ve been called a loser by Aussie rich and poor alike, apparently winning at anything other than RE (and maybe mining) is a silly waste of time, in their minds no Aussie needs skills beyond the ability to bid at an RE auction.
    It’s sad, truly sad!

    • The Traveling Wilbur

      I have learned two, and only two, things in my life that are 100% true, 100% of the time.

      They are:
      It’s never a good idea to stand between an American and a buffet.
      It’s never a good idea to stand between an Australian and a tax-cut.

      Oh. And also it always pays to be good to your wife.
      She says hi btw.
      And wonders why you’re late home tonight. 😉

  25. HadronCollision

    @Horrible ScoMo, speaking of avos, I cast my eye upon my crop of avos – Sharwills, Pinkertons, Hass, Shepherds, etc, as well as the mangos – Bowens, Palmers, Kensingtons and Nam Doc Mais – whole lotta flowers.

    Imma gonna be knee deep in smashed avo and mango smoovies.

    Land Boomers
    On Trove: https://trove.nla.gov.au/work/8500123
    Book Depository: https://www.bookdepository.com/Land-Boomers-Michael-Cannon/9780522846638
    Amazon: https://www.amazon.com/Land-Boomers-Complete-Illustrated-History/dp/0522846637

    @LNO: We’re selling 10 acres in the NR, and down sizing . I hear ya. Fortunately we’re in a good pozzie job wise

  26. SoMPLSBoyMEMBER

    Yeah, nice work Timmeh!
    The mystery to me on all this is how compliant the populace was (is) on all the dramatic changes for the worse that have occurred in the last 3 decades. It’s unquestionable that most ‘saw’ what what was (is) occurring and nary a peep or critical observation. It was as if any pushback would somehow threaten and unravel the ‘benefits to come’ which is all about escalating house prices; there really is no other personal benefit beyond that save the FIRE empire that employs many..
    We’re an apathetic and venal lot and we certainly deserve what we are receiving as it doesn’t have to be ‘this’ way at all.
    In a cynical way, we’re probably lucky that our PM is a ‘property guy’ as we are fast moving towards the classic arrogant agent marketing line of ‘renovate’ or detonate’. The comprehensive inventory Timmeh listed above suggests that the lit fuse is nearing the TNT and most don’t even care. What an outcome for Australia! Put the propaganda IV drip into the
    ‘greed’ vein and no matter what, all will be copacetic.

  27. Strange Economics

    We shall fight negative gearing on the beaches, we will fight for higher property prices forever, we will never surrender to a 10% property correction.

    Anyway Boris Johnson thinks he is Churchill. ScoMo is no WW2 PM telling Churchill to send the troops home.

  28. Jumping jack flash

    @Ino “That’s the case just about everywhere else. northern Rivers is the same. Most people in those areas barely scrape $50,000, you looks at the available jobs in those areas and yeah, they’re just subsistence jobs, but hey, you wanna buy a 600m sq. postage stamp in Buttf*ck Iceville, that’ll be $400,000 thanks…”

    Yes. All made possible with the magic of debt:
    50K x 2 incomes is 100K!
    100K at the HEM should easily get you 400,000 freshly magicked debt dollars.
    If it doesn’t, then they’ll just lower the rates and perform some more contortions so it can.
    Debt has to grow, and for that to happen people need to be able to obtain as much as is required to ensure that house prices grow.
    The whole thing is backwards and upside down, but that’s how banks perceive things.

    Not a single thought about how 400K is an absolutely insane amount of debt and it’ll take 30 years of HEM-level income to repay, and no wage inflation in sight.

    No risk though. Not a skerrick.

  29. We did not need Churchill, terrible man terrible policies. Starvation of 3 million bengalis, deliberate. Last gasp partition of India, to ensure a port in Pakistan that scumbag england could hold for Middle East oil trade. Millions dislocated, millions dead.
    We needed a Putin. He did his higher law degree thesis on how to save Russia, after bankruptcy of the ussr in the 80, the formation of Russian mafia from ex gulag and unemployed scientists and govt geniuses, plus the 85% wealth stripped from Russia in the 90s. Three quarters of a stollen Russian trillion dollars laundered through New York in the 1990s, Yeltsin dying drunken and blackmailed asked Putin an unknown, to save Russia, then pushed him into power.
    Never a Churchill bombing food supply lines in Germany so everyone starved, in work camps or not. Bombing Dresden, whoopee. Aust can do without anymore english sadists, we had plenty as a colony.

    • Not sure about the rest but I’ll give you a thumbs up for Putin props. That lil f*cker knows what’s what. Smart guy.

      While the rest of the world are battling each other he quietly sells his dollars and buys gold.

      The Russian population will thank him one day.