How to make the retirement system sustainable

Cross-posted from The Conversation: Our current retirement system is simply not sustainable, as our population ages and life expectancy increases. Australia incentivises people to structure their finances so they are asset rich and cash poor. They are then able to claim the pension and can leave an inheritance, which is in part paid for by


Manufacturing: Australia’s forgotten industry

By Ross Elliott, cross-posted from The Pulse Predictions of the demise of manufacturing in Australia as the economy slowly becomes more service oriented are increasingly widespread. The reason – we are told – has mostly been an uncompetitive labour cost structure. We just can’t make stuff as cheap and as quickly as they can in


Capex preview: Q1 2017

By Gareth Aird, Senior Economist at CBA: Key Points: A second estimate of 2017/18 spending plans of around $85bn would imply no change to investment intentions compared to the first estimate. We expect the sixth estimate of 2016/17 spending plans to come in near $113bn. Our forecast is for the actual volume of QI capex


ABS data quality thrust back into spotlight

By Gareth Aird, Senior Economist at CBA Key Points: Employment rose by a solid 37.4k in April following a massive lift of 60.0k in March. The unemployment rate dropped by 0.2ppts to 5.7% and the participation rate held firm at 64.8%. Hours worked fell in April and the data looks at odds with the reported


Sydney would peak at 4.9 million with zero migration

Cross-posted from Crude Oil Peak: Immigrants to blame for high house prices, businessman Dick Smith claims Mr Smith said “jumbo loads” of immigrants arriving each week were the “main driver” behind the country’s housing affordability crisis 21/2/2017 Fig 1: Dick Smith: “But the most fundamental right is to own a house with a backyard


Australia’s declining household savings

By Philip Soos, cross-posted from LF Economics: In 2013, Credit Suisse presented some interesting research regarding the issue of household sector savings. While the commonly cited net saving ratio indicates the proportion of income the household sector collectively saves, Credit Suisse noted the measure of savings also includes superannuation payments. The issue is that compulsory


How to encourage seniors to downsize

Cross-posted from The Conversation: Encouraging senior Australians to downsize their homes is one of the more popular ideas to make housing more affordable. The trouble is, incentives for downsizing would hit the budget, but make little difference to housing affordability. It sounds good: new incentives would encourage seniors to move to housing that better suits


Book review: Game of Mates

By Phil Soos, cross-posted from LF Economics This is LF Economics’ first review of a book, entitled Game of Mates: How Favours Bleed the Nation by economists Cameron K. Murray and Paul Frijters. The name is a play upon the wonderful TV series Game of Thrones and rightfully so, given both are about how a


Looking through the spin of ‘good’ and ‘bad’ debt

Cross-posted from Independent Australia: The PM and Treasurer are now spinning their extensive Government debt as “good” after years of depicting Labor’s modest borrowings as “disastrous” and “a timebomb”. Economics reporter Alan Austin unpacks the hypocrisy. Treasurer Scott Morrison told business economists on Thursday that there is “good and bad debt”. He explained “it can


The private health insurance subsidy isn’t worth it

Cross-posted from The Conversation: Almost 20 years after the 30% subsidy for private health insurance was introduced, premiums continue to rise every year. This comes at a cost to the federal budget – which was forecast at A$6.5 billion in the 2016 federal budget from the subsidy alone. Meanwhile, consumers continue to view private health


Legalising Airbnb may make housing more unaffordable

Cross-posted from The Conversation: Australia, and particularly Sydney, are gripped by a housing affordability crisis. So the NSW government’s omission of any concrete commitment to monitor the conversion of permanent rental housing to holiday accommodation, like Airbnb and Stayz, is concerning. It would seem regulators in NSW and many other states in Australia are out


CPI Preview: Q1 2017

By Gareth Aird, senior economist at CBA: Key Points: We expect the headline CPI to rise by 0.6% in QI (2.3%pa). The underlying CPI on our forecasts will print at 0.5% (1.8%pa). Inflation outcomes in line with our forecasts are commensurate with monetary policy on hold given concerns around rapid dwelling price growth. Overview The


‘Blowout’ in welfare spending is largely a myth

Cross-posted from The Conversation: For some time, the largest single component of federal government spending has been social security and welfare. In the last federal budget it made up an estimated 35.2% of total expenses and this was projected to rise to 37.5% by 2019-20. Given this, it’s not surprising that it’s also has been


Do-Nothing Malcolm prepares to squib on PRRT

By David Collyer, cross-posted from Prosper Australia: The Petroleum Resource Rent Tax has been a successful revenue-sharing device since 1987, delivering well over $33 billion to Consolidated Revenue, derived entirely from the economic rents of resource extraction with no harm to producers. It has never deterred exploration or hindered output. Treasurer Scott Morrison commissioned a


The Coalition’s housing war on youth

By Rob Burgess, cross-posted from The New Daily: It is almost unbelievable that the Coalition is still fighting internally over whether or not to allow young Australians to use superannuation savings to help fund the purchase of their first home. In political terms, it is doubly damaging. It highlights not only the weakness of the


The great housing bubble arse-covering begins

Cross-posted from Rational Radical. Well this is all getting very exciting isn’t it?! The hills are suddenly alive with the sound of housing bubble music. Never mind that a growing mosh-pit of ‘doomsaying’ international economic peak bodies, ratings agencies, investment houses, economists, researchers, entitled Gen-Y bloggers with an axe to grind, and the odd journalist and politician


Is Australian housing undervalued?

Cross-posted from the LF Economics Blog: The most recent bout of irrational exuberance provides an opportunity to examine the financial fundamentals underpinning the housing market. Housing prices are escalating as the mortgage debt accelerator rises; the former lagging the latter by two quarters. In contrast, rents are experiencing low growth. According to CoreLogic’s asking rental


Much has been lost from decades of asset privatisation

Cross-posted from The Conversation: The privatisation of urban infrastructure in Australia is an ironic story. The vehicles of urban infrastructure – the utilities and the state-owned enterprises – were so central to the life of cities that they became perfect entities for private sell-off. We now live with the consequences of the sell-off. The utilities


Half of households are in rental stress

By Martin North, cross-posted from the Digital Finance Analytics Blog: According to the latest modelling from Digital Finance Analytics, around half of all households in rental accommodation are struggling to pay their rent on time. Across all households, more than 30% are renting, and this has been rising as the costs of property escalate, mirroring


Carrying capacity is central to the immigration debate

Cross-posted from Independent Australia: We need to recognise Australia’s very limited human carrying capacity before it’s too late, writes Sue Arnold. THE AUSTRALIAN‘S Greg Sheridan writes that, as a nation, we would be better off with 40 million people ‘rather than 28 million elderly people’, who apparently ensure a declining economy. No surprises there. The 2016 State