Why infrastructure business cases often don’t stack up

Cross-posted from The Conversation: Infrastructure Australia’s latest infrastructure priority list has been criticised for being “too Sydney-centric” and for giving Melbourne’s East West Link, cancelled in 2014, “high priority” status. The cancelled Roe 8 project in Perth was removed from the list. So how does a project get onto Infrastructure Australia’s list? This requires submission


Will company tax cuts trickle down or trickle up?

By Catherine Cashmore The proposal to cut the company tax rate from 30% to 25% has received much media attention. We are repeatedly told it is needed to boost investment. The rational follows that companies are more likely to invest in productivity if they don’t have to pay as much tax on their gross income.


Can auction data be trusted?

By Martin North, cross-posted from the Digital Finance Analytics Blog: In the second part of our series on the anatomy of the property auction results, we dive deeper into the numbers. We compared data from CoreLogic and Domain, two of the players who report auction clearance rates.  We summarised the research in our latest video


Why the natural unemployment rate is lower than thought

By Gareth Aird, Senior Economist at CBA: Key Points: Wages growth has yet to lift despite the labour market slowly tightening. The RBA puts the NAIRU (non-accelerating inflation rate of unemployment) at 5.0%. There are good reasons to believe that it may be lower than the RBA’s estimate which means that a material lift in


Household financial confidence continues to fall

By Martin North, cross-posted from the Digital Finance Analytics Blog: The latest edition of the Digital Finance Analytics Household Finance Confidence Index shows a further drift lower, remaining below the 100 neutral benchmark. It fell to 94.6 in February, down from 95.1 the previous month. This is in stark contrast to improved levels of business


Big Australia and bust: Why mass immigration is destructive policy

Cross-posted from Independent Australia Australia can choose not to be “big” if it wants; both our material income and our quality of life would benefit, writes Dr Geoff Davies. IT’S GOOD that ABC Four Cornershas provoked a debate on immigration and it’s good that it avoided racist, xenophobic or xenophilic claims, but still so many of the arguments presented are


The problems mass immigration is supposed to solve don’t exist

By William Bourke, President of Sustainable Australia: Population is “the everything issue”. It affects all aspects of public policy and our daily lives. It is essential to get population policy right if we are to achieve critical public policy outcomes like secure jobs, affordable housing, better planning and a sustainable environment. That is not to say


Australia’s new boom: bureaucrats

By Gareth Aird, senior economist at CBA: Key Points: General government consumption growth has materially outpaced household consumption growth over the past three years. Public sector jobs growth has significantly outpaced private sector jobs growth over the past two years. Public sector wages have been growing at a faster pace than private sector wages for


Has Tony Jones finally broken taboo on Australia’s population ponzi?

By Mark O’Connor, author of Overloading Australia: The transcript  of this week’s QandA program (one of the Australian Broadcasting Commission’s TV News programs), contains a bombshell. This came at the very end, when presenter  Tony Jones announced the panelists for next week (which include Bob Carr and Tim Flannery). Jones also announced  that the topic


Mortgage stress continues to rise

By Martin North: Digital Finance Analytics (DFA) has released the February 2018 mortgage stress and default analysis update. We analyse household cash flow based on real incomes, outgoings and mortgage repayments, rather than using an arbitrary 30% of income. Across Australia, more than 924,500 households are estimated to be now in mortgage stress (last month


Dodgy RBA revises down household debt-to-income data

By Martin North, cross-posted from the Digital Finance Analytics Blog: The RBA has quietly revised down the household debt to income ratio stats contained in E2 statistical releases and their chart pack. It has dropped by 6% from 199.7 down to 188.4. So far as I can see, there is no explanation for the change.


Interest-only mortgage reset tsunami towers over housing

Via Martin North: Today we discuss which post codes will be most impacted by the interest only mortgage loan reset issue, and update our estimates of the number and value of loans likely to be impacted. This received media coverage in the AFR and the Australian over the weekend. We discussed recently the size of the interest only loan mortgage


Housing affordability drives cost-of-living

By Wendell Cox, cross-posted from New Geography: Housing affordability is what largely drives the standard of living the United States. The 14th Annual Demographia International Housing Affordability Survey showed that, in 2016, there was a 0.83 correlation between the housing unaffordability, measured by the Median Multiple (median house price divided by median household income) and


Why the discount rate for major projects needs to be lowered

Cross-posted from The Conversation: Australia needs to change the way it assesses potential infrastructure projects, to ensure that governments can better understand which road and rail projects are worth building. One way would be to make long-overdue changes to how we value the impact of infrastructure on future generations. This is done through the choice


Capex Preview: Q4 2017

By Gareth Aird, Senior Economist at CBA We expect the fifth estimate of 2017/18 spending plans to come in at $111bn. Our forecast is for the actual volume of Q4 capex to 1.7% which would leave annual growth 5.2% higher. We receive a first estimate of 2018/19 spending plans. There are three key figures in


Why more lending curbs are likely

By Martin North: There is a rising chorus demanding that APRA loosen their rules for mortgage lending in the face of slipping home prices. This despite the RBA’s recent comments about the risks in the system, especially relating to investor and interest only loans.  But this is unlikely, and in fact more tightening, either by


No solid research or theory supports cutting company taxes to boost wages

Cross-posted from The Conversation: The argument that cutting the Australian company tax rate will lead to higher investment and wages, more employment and faster GDP growth does not have solid empirical or theoretical backing. A close look at the economic research in this area shows a lack of consensus. Different studies, looking at different samples


Grattan: Building more homes will help low-income earners

By Brendan Coates and Trent Wiltshire The conventional wisdom among many affordable housing advocates is that boosting the supply of market-rent housing won’t help low-income earners. They argue that most new housing built in Australia is too expensive for low- and middle-income earners. They believe that building more homes won’t lower the rents paid by


Moody’s: APRA’s bank capital reforms credit-rating positive for banks

By Martin North, cross-posted from the Digital Finance Analytics Blog: Last Wednesday, the Australian Prudential Regulation Authority (APRA) proposed key revisions to its capital framework for authorized deposit taking institutions (ADIs). The revisions cover the calculation of credit, market and operational risks. These proposed changes are credit positive for Australian ADIs because they will improve


Australia’s captured financial regulators need policing

Cross-posted from The Conversation: A Productivity Commission report analysing competition in the financial sector has pointed out that our finance regulators have become enablers of an industry that is an impediment to our economic competitiveness and exploitative of their most loyal customers. It proves the need for a board to oversee the conduct of our


Net rental yields are under pressure

By Martin North, cross-posted from the Digital Finance Analytics Blog: We track gross and net rental yields on investment properties via our household surveys. Gross yield is the actual rental stream to property value, net rental is rental payments less the costs of funding the mortgage, management fees and other expenses. This is calculated before


Why Australia’s skilled migration system is failing

Cross-posted from The Conversation: Australia’s skilled migration system has helped us attract hundreds of thousands of highly qualified immigrants since 1988. But one side effect of the policy is that we seem to waste many of these skills. Up to 40% of recent immigrants in Australia are over-educated (having more qualifications than necessary), making it


Rise of the Australian ‘ethnoburb’

Cross-posted from The Conversation: Since the early 1990s, Australia’s skilled migration scheme has brought a new category of migrants into the country. They have higher educational qualifications and economic capabilities than previous migrants. They come from affluent as well as economically disadvantaged countries around the world. The mass immigration of professionals and entrepreneurs has given


Why job automation will worsen inequality

Cross-posted from The Conversation: While companies might reap significant gains in productivity from automating certain jobs, this won’t necessarily lead to pay rises for everyone. The evidence suggests businesses might pass on the gains to some workers, but not to all. Some 40% of all jobs are predicted to disappear with automation in Australia. The


Why political donations and lobbying need to be curtailed

Cross-posted from The Conversation: Political donations and lobbying are a significant drain on the economy as it can damage competition, create monopolies and divert resources to unproductive uses. Every February, the Australian Electoral Commission releases data on political donations for the previous financial year. The data routinely show that among the biggest corporate political donors


The Australian Consumer: Good, the Bad and the Ugly

By Gareth Aird, Senior Economist at CBA Key Points: Strong employment growth, a lift in consumer sentiment and lower job security fears, as well as a recent pickup in retail sales suggests there are some green shoots to the outlook for consumer spending. But these are tempered by household indebtedness, weak wages growth and a


Why unregulated cryptocurrencies could trigger another GFC

Cross-posted from The Conversation: The price of bitcoin hit $17,000 late last year and – although the cryptocurrency has plunged since then – there are signs that an absence of regulation can hurt investors and trigger the next financial crisis. Despite the laudable blockchain technology and the great opportunities it offers in enabling quicker transactions,


What Treasury missed in its negative gearing modelling

Cross-posted from The Conversation: Labor MPs might be rubbing their hands together with glee at a Treasury memo that shows the federal opposition’s negative gearing policy will have a “small” impact on the property market. But insights from behavioural public policy, as highlighted by the 2017 Economics Nobel laureate – Richard Thaler and his colleague


Did the Turnbull Government mislead parliament on negative gearing?

Cross-posted from Independent Australia: The Turnbull Government deliberately misled Parliament on Labor’s negative gearing policy, but few in the Press Gallery asked the hard questions, writes Professor Jane Goodall. “MISLEADING THE HOUSE” is one of the most serious allegations a politician can face. But given that misleading statements are routine fare in Parliament, it’s not a charge


Household financial confidence continues to fall

By Martin North, cross-posted from the Digital Finance Analytics Blog: The latest edition of the Digital Finance Analytics Household Financial Security Confidence Index, to December 2017 shows another fall, down from 96.1 last month to 95.7 this time, and remains below the neutral measure of 100. The trend continues to drift south as flat incomes,