Unconventional Economist

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Weekend Reading: 23-24 February 2019

Global Macro / Markets / Investing: Mysterious 8,500% Stock Gain Attracts Big Funds (And Big Questions) – Bloomberg Warren Buffett Can’t Find Anything Big to Buy – WSJ Don’t Abolish Billionaires – NY Times Deutsche Bank Lost $1.6 Billion on a Bond Bet – WSJ The Rise of the WeWorking Class – NY Times Look Who’s

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New GST law nets windfall from foreign retailers

By Leith van Onselen Overseas retailers that sell inexpensive products to Australians recently had to start paying the goods and services tax (GST). The new impost collected $81 million in its first quarter of operation, significantly higher than the $17.5 million that had been forecast by Treasury. From The AFR: Governments have collected $81 million,

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“Peak rort”: Why Labor’s franking credit reforms are justified

By Leith van Onselen Chief economist for The Australia Institute, Richard Denniss, has penned a brilliant article explaining why Labor’s franking credit reforms are justified: Some of the wealthiest Australians pay negative tax and still get to call themselves self-funded… Most self-funded retirees have been receiving enormous amounts of other people’s money for a long

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VET rorter caught in student-migration scandal

By Leith van Onselen It was dubbed the “biggest public policy scandal in Australian history: the systematic rorting of the vocational education and training system (VET)”. It was the reckless policy first introduced by the Howard Government and then expanded by the Gillard Government, which gave private VET providers virtually unregulated access to government subsidies for

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Flammable cladding debacle spreads to suburban homes

By Leith van Onselen Australia’s dwelling construction industry is literally falling apart. After firefighters last month identified 10,000 buildings along Australia’s east coast with suspected flammable cladding, the fiasco has now spread to Australia’s suburbs, with nine more materials commonly used on low-rise dwellings also classified as non-compliant. From The ABC: The alert affects an

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First home buyer demand fading as housing busts

By Leith van Onselen CoreLogic has released an interesting report suggesting the surge in first home buyer (FHB) activity is fading as housing values fall: The latest data on housing finance from the Australian Bureau of Statistics for December 2018 shows that perhaps that trend is reversing… In December 2018, there were 8,476 finance commitments

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CoreLogic weekly Australian house price update: more falls

By Leith van Onselen In the week ended 21 February 2019, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, tanked another 0.22%: Values fell across all major markets except Adelaide: So far in February, home values have fallen by 0.70% at the 5-city level, with all major markets

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Links 22 February 2019

Global Macro / Markets / Investing: Deutsche Bank Lost $1.6 Billion on a Bond Bet – WSJ Global Recession Fear Is Suddenly Stalking the Credit Market – Bloomberg Stressed Outflows and the Supply of Central Bank Reserves – NY Fed Deficits are Raising Interest Rates. But Other Factors are Lowering Them. – Medium Amazon’s $0

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NZ mulls land bankers’ tax

By Leith van Onselen New Zealand’s Tax Working Group (TWG) – an 11-member group chaired by former Labour Finance Minister Michael Cullen – has delivered its final report, which recommends creating a local government tax on vacant residential land in a bid to stop land banking. From Interest.co.nz: The Tax Working Group (TWG) is recommending a new tax on vacant

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ATO tax avoidance measures net $7.7 billion

By Leith van Onselen The Australian Taxation Office’s (ATO) has collected an extra $7.7 billion in unpaid tax liabilities since July 2016 over the past two years through its tax avoidance taskforce. In particular, 44 multinationals have changed their business models in order to meet their Australian tax liabilities, whereas $4.7bn worth of unpaid tax liabilities have

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ABS employment in detail: Good for jobs but bad for wages

By Leith van Onselen As summarised earlier, the Australian Bureau of Statistics (ABS) today released its labour force report for January, which registered a strong 39,100 increase in total employment and but no change in the headline unemployment (still 5.0%) because of a small rise in labour force participation. In trend terms, the unemployment rate

7

Are Brisbane high-rise values about to enter growth phase?

By Leith van Onselen CoreLogic’s most recent Pain & Gain report showed that 29% of Brisbane apartment owners sold for a loss in the September quarter of 2018: CoreLogic’s hedonic index also shows that Brisbane unit values have declined by 11% since peaking in March 2008 (obviously much further in real terms): Now, Place Advisory has

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Westpac hit with class action over ‘irresponsible’ mortgages

By Leith van Onselen Westpac will face a class action in the federal court for issuing home loans that breached responsible lending rules. From SBS News: Westpac is facing a class action for allegedly giving loans to people who couldn’t afford to pay them back. The class action, in the Federal Court, is the first

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Final auction clearance rate continues seasonal bounce

By Leith van Onselen Last weekend, CoreLogic released its preliminary auction clearance rates, which revealed the following results: Today, CoreLogic has released its final auction results, which reported a 3.0% decline in the final national auction clearance rate to 51.2% – basically the same as last week (51.1%): As you can see, Sydney’s auction clearance rate

17

Business leaders warn of crumbling consumer

By Leith van Onselen Australia’s business leaders have finally admitted they are concerned about Australia’s crashing property market and falling consumer demand. From The Canberra Times: Woolworths chief executive Brad Banducci… said cautious consumers at the shopping giant’s stores were buying less each time they shopped… Mark Steinert, chief executive at housing and retail property

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NSW belatedly cracks down on towers inferno

By Leith van Onselen The independent report on the Opal Tower farce, which saw residents evacuated from the 34-storey structure after huge cracks were discovered, has forced the NSW Government to crackdown on shoddy high-rise construction. From The Daily Telegraph: The state government is expected to hand down its final report into the 36-storey Sydney

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Look on the brightside: falling inflation lifting real wages

By Leith van Onselen Yesterday’s wages price index released by the ABS revealed a softening of annual wages growth to 2.27%: However, when adjusted for underlying inflation, which has softened, real wages firmed to 0.45% growth in the year to December: However, there remains a big disconnect between the private and public sectors. The private

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Peak Chinese visitors?

By Leith van Onselen The Australian Bureau of Statistics yesterday released its overseas short-term arrivals and departures figures for December, which continued to show a trend rise in the number of inbound visitors, with both Chinese arrivals and student arrivals hitting an all-time high. The number of short-term visitor arrivals surged by a seasonal 32%

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Links 21 February 2019

Global Macro / Markets / Investing: A Centuries-Old Idea Could Revolutionize Climate Policy – The Atlantic What’s Really in Your Index Fund? – NY Times This Hedge Fund Reaps Huge Returns But It Doesn’t Want Your Money – Bloomberg The 2018 Global Corporate Venture Capital Report – CB Insights Investors Sound Warning About Markets’ Complacency

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Travel scandal spreads through Coalition

By Leith van Onselen Earlier this week, The SMH reported that Finance Minister Mathias Cormann was found to have received free flights for a family holiday to Singapore from Hello World – a company controlled by Liberal Party Treasurer Andrew Burnes – within weeks of the company winning a $1 billion contract from Cormann’s Finance Department.

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Desperate REA economist spins negative gearing rent lie

By Leith van Onselen REA Group chief economist, Nerida Conisbee, has falsely claimed that Labor’s negative gearing policy would stop investment in homes and force-up rents: “We’ve already kind of scared property investors off. They don’t like buying in falling markets. The sentiment has really slipped,” she said. “The challenge I think for the policy now

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Melbourne motorists gouged 10 more years of CityLink tolls

By Leith van Onselen In late 2017, the Victorian Labor Government completed a shady $6.7 billion deal with Transurban to build the West Gate Tunnel Project, which will see Transurban contribute $4.4 billion towards the cost in exchange motorists paying $15 billion in additional tolls on CityLink until 2045. Former Premier Jeff Kennett described the

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Net long-term migrant arrivals highest in 4.5 years

By Leith van Onselen The Australian Bureau of Statistics (ABS) has released visitor arrivals and departures data for the month of December, which posted record annual permanent and long-term arrivals, as well as the highest net arrivals in 4 1/2 years. In the year to December 2018, there were 832,560 permanent and long-term arrivals into

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Weak wages growth again shatters Budget forecasts

By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released its Labor Price Index for the December quarter of 2018, which revealed more disappointing wages growth: According to the ABS, wages grew by just 0.54% (s.a.) and 0.54% (trend) in the December quarter. Private sector wages grew by 0.62% (both s.a. and

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ATO fails to police illegal foreign property sales

By Leith van Onselen Back in December, a parliamentary committee into Managing Compliance with Foreign Investment Obligations for Residential Real Estate lambasted the Australian Tax Office (ATO) for failing miserably to enforce the rules precluding foreign nationals from purchasing established homes: Despite at least 877 breaches of the country’s foreign ownership laws being uncovered in Victoria,

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LF Economics: House prices in 20% “bloodbath” in 2019

By Leith van Onselen LF Economics has released a new report, entitled “Let the Bloodbath Begin”, which forecasts a doomsday scenario for Sydney and Melbourne housing: With many pressures mounting throughout 2019, we are confident that house price declines will accelerate in Sydney and Melbourne. In our baseline scenario, we anticipate nominal house prices to