Unconventional Economist


RP Data: Confidence in housing still strong

By Leith van Onselen RP Data, in association with Nine Rewards, has just released its May housing market sentiment survey (below), which asked 1,030 participants a range of questions on what they expected from Australia’s property market over the next six to twelve months. According to the survey results, housing market sentiment remains fairly strong,


High home ownership bad for employment?

By Leith van Onselen Overnight, the Peterson Institute of International Economics (PIIE) released an interesting study exploring the hypothesis that high home ownership damages the labour market. The study, which is based on an examination of data from the US, found that rises in the rate of home ownership are a precursor to eventual sharp


Building our way out of the mining capex hole

By Leith van Onselen Jessica Irvine has posted an interesting article on Business Spectator today arguing that Australia’s governments should borrow and build infrastructure in order to fill the void left as the mining investment boom unwinds. Let’s take a look: Australia has a significant urban infrastructure deficit, and a deep pool of superannuation savings


Links 28 May 2013

Global Macro/Markets: Economic reality finally cracks market fervor – Reuters Reinhart and Rogoff defend themselves – Econbrowser North America: Larry Summers has an edge in the race to head the Federal Reserve – Financial Times The Obamacare Shock – New York Times Californias New Problem – Too Much Money – New York Times Stiglitz Says


REIA slams falling FHB subsidies

By Leith van Onselen Back in February, after first home buyer (FHB) mortgage demand collapsed in New South Wales and Queensland, I made the following statement: Expect political recriminations to fly over first home buyers being ‘locked-out’ of home ownership, as well as increased special pleading from the property industry demanding that taxpayer funds once


Ignoring the land price gorilla

By Leith van Onselen In Wayne Swan’s weekly economic note, published yesterday, he reiterated the Treasury’s/RBA’s expectation that the non-mining economy (read housing construction) would fill the void left as the mining investment boom unwinds: We see evidence all the time that Australia’s economy is currently undergoing some substantial transitions… These challenges were underscored on


I’m the Kouk and I’m addicted to daily house prices

By Leith van Onselen The “Greenspan put” was a term coined in 1998 after the Federal Reserve, under Chairman Alan Greenspan, dramatically lowered interest rates following the collapse of the investment firm Long-Term Capital Management. By allowing investors to borrow funds cheaply, the Federal Reserve effectively acted to prop-up securities markets, thereby averting a potential


Auction clearance rates dip (updated)

By Leith van Onselen The auction clearance rate in Australia’s biggest auction market – Melbourne – fell slightly over the weekend, with 71% of the 665 auctions reported to the REIV selling, with 40 auctions still listed as “no result”, which will likely lead to some minor downward revisions to the clearance rate as the


Secret of the Howard Government’s surpluses

By Leith van Onselen Little-by-little, inch-by-inch, the common misconception that the Howard/Costello Government were fiscal superheroes is unravelling and the truth is being revealed. The latest salvo came from the Sydney Morning Herald’s economics editor, Ross Gittens, who published a well reasoned article on Saturday arguing that the lion’s share of the current budget deficit


Links 27 May 2013

Global Macro/Markets: How Gold Rallied for Years on a ‘Misunderstanding’ – CNBC The case for 4% inflation – VOX Stock markets lose nerve on fears of end to quantitative easing – The Guardian Warning signs at the punchbowl – The Age North America: Gold Drops as U.S. Growth Signs Fuel Concern Fed to Cut Stimulus


Canadian housing market hits the wall

By Leith van Onselen The Canadian housing market, ranked by The Economist as one of the world’s most overvalued, looks to have finally hit the wall. After peaking in August last year, house prices have begun to fall, down -1.2% nationally (see next chart). More importantly, a new report from the Canadian Association of Accredited


Links 24 May 2013

Global Macro/Markets: Austerity: the history of a dangerous idea – The New Yorker ‘Recessions Hurt, but Austerity Kills’: Study – CNBC The banking crisis as a giant carry trade gone wrong – VOX Don’t fear the bubble – Reuters Are we living in a time of asset bubbles? – Marginal Revolution Fears grow over EM


IMF recommends taxes on vacant UK land

By Leith van Onselen Earlier this month, I posted an article arguing strongly that Australia’s state and territory governments should look to replace stamp duties on property transfers with a broad-based land values tax, levied on all properties: Broad-based land value taxes (LVT) would… assist in the provision of new housing via two channels. First,


RP Data: Rental market chugging along

By Leith van Onselen RP Data has today released a short note (below) on the state of the nation’s rental markets, which it notes are posting solid (but unspectacular) gains, with both rents and rental yields rising: Across Australia’s capital cities over the past 12 months to April 2013, rental rates have increased by 3.5


The decade of deficits

By Leith van Onselen The Australian newspaper today contains some interesting discussion on the state of Federal Government budget finances, which it argues are likely to remain in deficit for a prolonged period of time following reckless tax and spending decisions undertaken by both the formal Howard Government and the current Labor Government, which has


The Great Property Bubble of China

By Leith van Onselen The Federal Reserve Bank of St Louis recently released an interesting short report on China’s epic housing bubble, which it warns could burst in the event that both household income growth and the savings rate start to decline, and/or capital controls in China begin to relax, removing housing’s preferred status as


Joe Hockey ignores budget truths

By Leith van Onselen Yesterday, Shadow Treasurer, Joe Hockey, delivered his budget reply speech to the National Press Club (below), which contained some spurious assertions about the causes of recent budget deficits, whilst ignoring the former Howard Government’s role in creating the current structural budget deficit. Let’s take a look. The Government’s sixth budget fundamentally


Links 23 May 2013

Global Macro/Markets: Lessons at the Zero Bound: The Japanese and U.S. Experience – Federal Reserve Bank of New York – New York Fed Low yields and high uncertainty – businesstimes.com.sg Headed for euphoria – Sober Look Market Insight: Central bankers turn deaf ear on balance sheets – Financial Times North America: How Rail is Reshaping


Falling consumer sentiment to dent housing?

By Leith van Onselen As noted earlier by Houses & Holes, today’s sharp fall in the Westpac-Melbourne Institute Consumer Sentiment Index was an unwelcome wake-up call for an economy that has struggled to gain momentum despite -2.00% of cuts to official interest rates since November 2011. The Consumer Sentiment index fell for the second consecutive


Kyle Bass bets on full blown Japanese crisis

By Leith van Onselen Back in April, Kyle Bass, head of Dallas-based hedge fund Hayman Advisors LP, outlined to CNBC (above) why he is shorting the Yen and Japanese Government Bonds: Kyle Bass: I think it’s really important to understand the magnitude of what they’re embarking on. It’s essentially doubling the monetary base. It is


We blew the boom. Taxes are gonna rise.

By Leith van Onselen The fallout from Treasury Secretary, Dr Martin Parkinson’s, speech yesterday on budget forecasting processes has continued, with economists questioning the Treasury’s forecasting abilities given the big writedown to budget revenues over the past year. The above segment from ABC’s The Business summarises the debate well. As explained yesterday, the Treasury has


Master builders forecasts big housing rebound

By Leith van Onselen Master Builders Australia (MBA) has forecast a big recovery in housing construction, although non-residential construction (including mining-related engineering construction) is expected to struggle. From Property Observer: The embattled residential building sector is forecast to recover strongly over the next three years, with the catalyst being low interest rates… Masters Builders Australia


Links 22 May 2013

Global Macro/Markets: “The gold standard remains the best available monetary mechanism” – marketmonetarist.com On Whose Research is the Case for Austerity Mistakenly Based? – harvard.edu The “Austerity Myth”: Gain Without Pain? – repec.org How bad could the crisis get? Lessons from Iceland – VOX Instead of Low Rates, Let’s Have Bigger Deficits – Bloomberg New


Parko defends Treasury’s budget forecasts

By Leith van Onselen Please find below a speech today by Treasury Secretary, Dr Martin Parkinson, to the Australian Business Economists. The speech goes into great detail about the Australian Treasury’s budget forecasting processes and record, arguing that the Australian economy has been buffeted by large shocks – both positive and negative – which have