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- Ralph – 15th Mar
Can Australian home prices keep rising?
The housing market in Australia becomes ever more interesting by the day. It would be difficult for any rational observer to disagree with the notion that the Aust gov’t has been madly stoking the fire in the form of first home buyers grants, allowing foreigners to buy Oz houses and ramping up immigration. Then there is the government’s bank borrowing guarrantees (to encourage banks to keep pushing mortgages). It would also be difficult to disagree with the thought that one of the major reasons Australia didn’t suffer much in the GFC was because we didn’t have a house price crash.
It would seem that the government has done a pretty good job of keeping the bubble inflated. They’ve stacked all their chips on the real estate market and it seems to have been a winning bet. And based on its recent performance, you’d have to back the government to keep stoking the fire for as long as they are able to do so.
It looks like the Australian economy is almost entirely dependent on increasing house prices. The mining boom is what keeps the government coffers ticking over and allows the massive welfare spend that we have. But I don’t think it contributes massively to the mainstream economy, except for a handful of ute-driving bogans in mining states and their immediate circle of influence. The government would have to cut spending, but I think things would go on. It’s increasing house prices that provides the impetus behind the vast majority of consumer spending. If house prices fall, the economy falls with them. Very sad.
I think the key will be that it is ultimately unsustainable. It will reach a point where the average person simply can’t afford to pay the ridiculous prices. At that stage, house prices will probably become a political liability rather than an asset. Unfortunately, I think that day of reckoning is probably several governments away yet.
Ralph – 15th Mar
Ken Henry and his tax review: should we be worried?
I’m sure we’ll see it. K-Rudd and Swannie thought they could get away with burying it. Now, of course, they realise that they’ll look like cowards for having commissioned a tax review but not having the guts to even present the findings to the public. Not to mention, as Greg suggested, an insult to all those members of the public who provided suggestions.
So I’m sure we’ll have it released – it’s part of Kevvie’s new pledge to be someone who is ‘all talk and perhaps a perception of action’. Whether our fearless government has the courage to do anything with it is going to be another matter altogether. Kev doesn’t even have enough courage to do tough stuff in his first term. Imagine how populist and weak he’ll be in his second term. Best to vote this clown out now before he becomes an even more ineffectual PM.
Greg Atkinson – 15th Mar
Can Australian home prices keep rising?
Ned as I wrote a while back, the Governments decision to throw extra money at first home buyers was a major blunder. As a result, instead of our housing market remaining flat or dipping a little during the GFC, what has actually happened is that prices generally rose.
Remember our housing market is fuelled largely by debt and much of this is sourced from overseas. Therefore prices are not going up just because houses/homes are becoming more valuable, but also because people are willing to pay more and fund their purchases via debt.
So the question I cannot answer is this: how much are house prices being distorted by the availability debt at the current interest rates? If interest rates were 10% would prices remain the same? Also would house prices remain at current levels if people thought prices could fall?
As to where to invest, I am confused also 
But I tend to lean towards cash and stocks which give me exposure to Asia. But this is not financial advice, just my own personal view.
Ned S – 14th Mar
Can Australian home prices keep rising?
What is a bloke supposed to think/do when he reads the following two articles back to back:
http://www.smh.com.au/business/reserve-should-nip-rising-house-prices-in-the-bud-20100314-q64z.html
http://www.smh.com.au/opinion/society-and-culture/batten-down-the-hatches-the-waters-are-still-treacherous-20100314-q5yg.html
Funny ole world at the moment!
Senator13 – 14th Mar
Ken Henry and his tax review: should we be worried?
Believe it when I see it…
Ned S – 14th Mar
Ken Henry and his tax review: should we be worried?
http://news.smh.com.au/breaking-news-national/govt-to-release-tax-review-by-may-budget-20100314-q5ky.html
Ned S – 14th Mar
Can Australian home prices keep rising?
I grant all your points Greg but still come back to the issue of what is a chap to invest in? And I pretty much do have to discount stocks for myself – I don’t have the stomach or the skills for coping with making and losing 1, 2 and 3% (and more) in one day. I guess when it comes right down to it, I also just don’t have the fundamental faith in stocks as an asset class as I do in residential RE.
Following expresses some significant doubts about China as well. But the comment that suggests the author is being unfair by including local government debt while omitting it for the US and wanting to conclude both countries are about 100% of GDP does sound reasonable to me? :
http://articles.moneycentral.msn.com/Investing/JubaksJournal/is-china-actually-bankrupt.aspx?page=1
I don’t have faith in anything much at the moment. Except I’m expecting developed nations to become more socialist and for taxes to be increased. And providing globalization continues, standards of living in the West are going down and standards of living in the East are going up. That doesn’t mean the West’s quality of life HAS to go down a whole lot – But it probably will because our governments have gotten into the habit of living beyond our means.
As to investment in the West, it seems to me it’s more about politics than ever now. And in Oz, residential RE is the one and only political “holy cow” with superannuation coming a pretty distant second.
Greg Atkinson – 13th Mar
The S&P/ASX 200, the gold price bubble and the global recovery.
SV I agree with you. I have written for over a year about the problems the Australian economy needs to face up to and one day our luck will run out. I am not suggesting it is business as usual but on a global level, things are certainly better than they were 12 months ago.
In Australia the use of debt to pump prime the economy has been a disaster and for all the billions that have been spent I doubt we will see any long term boost to productivity. Instead of investing in high speed rail, R&D or nuclear power etc we blew our dough on imported sub-standard home insulation, iPod docking stations and school halls that are not even fitted with solar panels.
SV – 13th Mar
The S&P/ASX 200, the gold price bubble and the global recovery.
Greg,
understandably people don’t quite believe that things are back to normal, notwithstanding ASX200. There was the GFC, there were problems that caused it (ie unproductive and irresponsible use of debt); you would expect structural changes before you conclude the problems are fixed.
Where are these changes? It seems to be business as usual, especially in Australia – where irresponsible and unproductive use of debt only accelerated.
Greg Atkinson – 12th Mar
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Greg Atkinson – 12th Mar
Can Australian home prices keep rising?
Mendes I do worry how hooked on housing the Oz economy has become. It is now an addiction that will be hard to voluntarily kick because politicians know that it is career suicide to do anything that might cause home prices to cool.
Ned the situation with higher interest rates in 2008 was probably a little different to now because there was plenty of overtime and less unemployment back then. Also the full impact of the GFC had not hit yet.
Now many households I suspect no longer have a healthy investment portfolio to fall back on, dividends payouts are down and many people are taking home less pay than they were in 2008. Therefore I would suspect that interest rates would not have to get much higher than now to start causing some real heartache.
On top of this, much of the economic activity that is keeping people in work has been funded by Government debt and that gravy train is going to end one day. (well at least I hope so)
Maybe it will be okay if the Chinese economy roars ahead for the next 10 years but personally I think we will see the Chinese economy come off the boil fairly soon. When that happens, things will get very interesting in Australia!
mendes – 12th Mar
Can Australian home prices keep rising?
The problem with demand in this country is that its fuelled by large amounts of debt. The first home buyers grant has saturated the market and sucked in buyers who wouldnt have normally borrowed or would have bought in the next few yrs. where are all the buyer going to come from in the next few yrs? and dont tell me overseas. once interest rates rise further and families are looking to deleverage we will see a correction that will see debt to GDP decrease and therefore see the economy contract. then you will hear a loud pop.
Greg Atkinson – 11th Mar
Ken Henry and his tax review: should we be worried?
Ned this is a big part of the problem, you just don’t get a lot of talent into the political ranks because the profession is held in such low regard. The same could be said for journalism as well, it scores pretty low when they do surveys about which professions are respected.
As for the Henry Taxation Review, what a complete waste of time and money. If I were Ken Henry I would not be a happy camper and I feel sorry for the members of the public who put in the effort to forward submissions.
All in all, pretty disgraceful behaviour by Rudd & Swan.
Ned S – 11th Mar
Ken Henry and his tax review: should we be worried?
Remind me again – Why exactly do we have politicians and just what do they add to our lives? The last time I can recall one doing something of significant use was back in the 1970s when Whitlam finally bailed on Vietnam. And that was just reversing another bloke’s cockup.
Ned S – 10th Mar
Ken Henry and his tax review: should we be worried?
And truth be told it’s often/usually(?) all three – “stupid”, “self-serving” and “arrogant”. Geez … No wonder a man has become a conscientious objector when it comes to voting. My personal opinion is that the sooner we all stay home on polling day to tell the twaddle-hards what we really think of them, in overt defiance of their having conscripted our votes, the better!
Ned S – 10th Mar
Ken Henry and his tax review: should we be worried?
I find it very, very difficult to respect anyone who actually wants to be a politician in a reasonably affluent democracy. They are either stupid and don’t realise what the job entails; Or self-serving and don’t care; Or arrogant and think they can improve things regardless! Hmmm … Don’t mind me; I’m just having one of my I hate politicians days.
Ralph – 10th Mar
Ken Henry and his tax review: should we be worried?
Nice commentary, guys. Keeping the Henry tax review on the shelf is more than anyone expected, I think. If there was ever anything that tags Rudd as gutless, this is it. It really does show they are afraid of offending anyone.
My guess is that it’s not even that explosive. More that K Rudd doesn’t know how to respond in a way that doesn’t alienate at least one key voter bloc. He’s already on the nose due to a perception of lack of delivery. So he responds with a grand health proposal that has absolutely no chance of being implemented. That’s more evidence in the public’s eye of “all talk, no action”.
If K Rudd were to release the tax review, it’s inevitable we’d see no concrete tax reform come out of that – Kevvie has the brown underpants on. So yet another example of all talk, no action. The poor guy is damned if he does, damned if he doesn’t. Rather than release a report he can’t act on, he chooses not to release it at all and be seen as a non-actor. Not that I feel sorry for him, mind you.
Ned S – 10th Mar
Ken Henry and his tax review: should we be worried?
Swan and Rudd between them presumably know way less about taxes than pretty much any CPA. So they’d be poking their necks out a lot to tell a bloke like Henry who presumably knows more about tax than just about anyone in Oz, that he is wrong. No, their input really just boils down to figuring out what is politically acceptable to implement when – Precisely “because Ken said they were a good idea”.
And at the moment, they don’t feel it is politically acceptable (for them), to even see the report discussed it seems?
As to Abbott, well dropping clangers like he is going to up taxes on big business by 1.7% out of the blue is rather strange behaviour – A measure of just how much he’d desperately like to be PM perhaps?
Greg Atkinson – 10th Mar
The ASX All Ordinaries Index, ETF GOLD, BHP and QBE.
Well I know my reading of the charts above is not popular with a lot of people but the markets have rallied since I wrote the post above and it looks like we might be in the middle of rally that will take the ASX 200/All Ords above 5000.
As for China, my hope is that as the Chinese economy slows (as it will) things will pick up in the U.S and Europe, thus the ying/yang of the global economy will be balanced.
I am not sure I agree with Marc Faber that China will have a “bad year”, I just guess it won’t be a great one like they have been having for the past decade. All economic booms come to an end, if you believe otherwise then you are setting yourself up for a nasty fall.
Greg Atkinson – 09th Mar
Ken Henry and his tax review: should we be worried?
MHL I would say Rudd and Co have looked at the Henry report and realised it is simply too hot to handle in the public domain before the election. Then after the election I guess what you suggest will probably happen and suddenly there will be tax increases because Ken said they were a good idea.
I am not sure why Abbott is on about paternity leave, he should focus on giving people a choice between a big spending government that wants to run everything, and a smaller government that stays out of our way as much as possible.
Ned S – 09th Mar
Ken Henry and his tax review: should we be worried?
As I said Senator, it’s more about the fact that he wants to up taxes to buy votes, than about what he wants to spend the taxes on per se. But Yes, I’ve got lots of reservations about governments fiddling to bring about societal change. And the example of them choosing who will and won’t be paid and how much to breed, is one that Australia has an extremely poor track record on – IMO.
Senator13 – 09th Mar
Ken Henry and his tax review: should we be worried?
I would have to agree with you Ned. I am not a fan of the scheme or any paid maternity type schemes. It just encourages people to take on more then they can handle and compensates people for lack of forward planning. It also makes it harder for the organisation to do business.
I do not think that now is the time for any new expenses especially those that involve raising additional tax.
So I am far from being sold on the idea.
I am sure the tax review would have covered such matters – but it looks like we will never know.
But maybe this is the price to kick Rudd out and hopefully in the long term the good things that come of kicking out Rudd out weigh the bad?
Ned S – 08th Mar
The Japanese economy: trying to get a balanced view.
It’s nice to know that ciao enjoyed his stint in Okinawa. At least enough to be miffed about leaving I’d guess?
Ned S – 08th Mar
Is the golden era for the Australian stock market over?
Ken Henry will be very disappointed if he doesn’t get his “50 Golden Years” I suspect Greg? (I can only assume he is planning to live to 102 so he enjoys it all? )
As to the US, I must admit that a graph sometimes pops into my mind from early 2009 I’d guess, that indicated the bulk of Obama’s “real world stimulus”(?) was timed to peak around 2012 when he stood for re-election. So Dow 12,500 by then mightn’t be too silly?
Ned S – 08th Mar
Ken Henry and his tax review: should we be worried?
Abbott has blotted his copybook straight off for mine – He wants to up taxes on big business and pay people to breed. Hey, I don’t care what he wants to use the money for; Or who he wants to take it off – The minute he says “increase tax”, that’s one strike. And he’s got lots of time yet to rack up two more and be “out”!
We’ll see. But another high taxing, high spending, vote grubbing politician doesn’t sound like what is required to me.
I think back to a supposedly funny yarn I heard once about a pretty unsophisticated old bloke in a third world democracy, who when asked how he intended to vote, replied along the lines:
“Well, the first bloke who came through said he’d give me 10 dollars to vote for him; And the second bloke said he could only manage $5; And the third bloke offered me $2. I figure I’ll vote for the third bloke because he is the most realistic and least corrupt.”
