Forum Replies Created
- I think everyone is aware that the property market is still very strong.
Sorry that should have read:
I think everyone is aware that the Perth property market is still very strong.If America has nothing to sell how can they be lifting their export performance?Its not a case of ‘if’, they have lifted their export performance and their lower than expected current account deficit (CAD) is evidence of this.
This is because the US dollar is at 10 year lows, making their exporters much more competitive.
Australia, on the other hand has a CAD that is worse than the US (7.5% of GDP vs 6% of GDP) but we have a currency that is near 10 year highs.
I’m not saying the US is out of the woods. The US budget deficit is horrendous (Bush’s financial mis-management verges on the criminal) but don’t get the idea everything’s just dandy in Australia.
Those tax cuts we’re getting were funded out of booming tax reciepts from mining companies. That can’t last forever because our competitors are investing in the infrastructure required to increase production. Meanwhile, we happily suck in imports like there’s no tomorrow.
Yeah the sellers will drop prices to help those who can’t afford themWhere did it say that? Sellers will drop prices if they can’t sell their property (and they have some pressing need to sell).
Perth is surging ahead.I think everyone is aware that the property market is still very strong.
Just an update on the Australian dollar story…
Greenback, metal prices cut down dollar
http://smh.com.au/news/Business/Greenback-metal-prices-cut-down-dollar/2005/05/16/1116095907830.htmlThe AUD is now below 76c for the first time in months. Here is a five day chart:
http://finance.yahoo.com/q/bc?s=AUDUSD=X&t=5d&l=on&z=l&q=l&c=I thought you might enjoy having a dig at my apparent economic knowledge handicap.I have no interest in putting people down, or making them look like idiots.
Are you implying something Mr Michie???
))Not at all. I only care if I look like an idiot, other people can post unsubstantiated drivel if they like.
I knew you couldn’t resist throwing a link in David.I link because I double-check my facts before posting. It takes about 5 seconds to Google, not much time if it saves you looking like an idiot.
Did you miss this???No. My advice: let it go.
Robert, you do seem to have a habit of p*ssing people off. Suggestion: If someone has a go at you, don’t respond in kind. It just escalates into a shouting match that really doesn’t help anyone.
As for the FIRB, I’m not a foreigner looking to invest in Australia so I really don’t know much about it. I do know Australia has double-taxation agreements with most OECD countries so you don’t end up paying tax twice:
http://www.ato.gov.au/large/content.asp?doc=/content/15737.htmI think David is being worn down and moving to the ‘Force’. Forget the ‘Dark Side’!!!Not at all. Colebatch makes a compelling case that Sydney is in a serious slump, and our absurd house prices are a major cause of this. Colebatch concludes that a ‘painful correction’ is a long way off, because NSW investors are still borrowing like crazy. My view is that NSW investors are getting out faster than Colebatch realises (he quotes March quarter data) and the recent tax cuts make negative geared investment properties with a 3% yield and negative capital growth even less attractive than they were before.
dmitchie – is that tongue in cheek or are you serious? his position seems quite different to yours that’s all i.e. correction is a long way off (read: never)I didn’t say I agreed with what he has to say, but I respect Colebatch’s opinion, he is one of the better economic commentators. If you want to read biased, one-eyed clap trap, read Terry McCrann.
Another good article today:
http://www.smh.com.au/news/Paul-Sheehan/How-a-clever-world-could-selfdestruct/2005/05/15/1116095851377.htmlOn one side, the city-based politicians are handing out $20 billion in tax breaks to millions of people who are counting increased wealth built on a nine-year prosperity uplift caused by rising property values, superannuation payments, tax cuts, increased productivity, and a China-driven commodities boom
…
On the other side, 90 per cent of the largest state is drought-declared, yet again thousands of farmers are in financial distress, the river system is falling apart, the landscape has been cleared, scoured and eroded, leading to desertification, leading to a hotter landscape, leading to less rain, a water shortage for Sydney and catastrophic water levels in some country townsThe Prime Minister, supposedly a champion of lean government and private enterprise, has to be concerned that he has led one of the biggest-spending, highest-taxing governments in Australian history.“The Howard Government has made no substantive progress in the direction of small government, indeed it has gone backwards,” says Des Moore, director of the Institute for Private Enterprise and a former deputy secretary of the Treasury Department.
“Since 1995-96, federal spending, excluding interest, has actually increased as a per cent of [gross domestic product], and it is even higher than in the Whitlam government’s final year,” says Moore, a flinty fiscal hawke. “It is absurd to have 2.7 million, or 20 per cent of the working-age population, receiving income support compared with only 15 per cent at the end of the 1980s, and 4 per cent in 1969. Social assistance benefits now contribute 14.3 per cent of gross household disposable income. This compares with just 8 per cent under Whitlam.”
Ahhh … Colebatch, knows his stuff.
SALACIOUS, good article, but how about a link?
The fundamental problem in Sydney is that when the baby boomers start selling off their investment properties to fund their retirement, there will be no-one left in Sydney who can afford their overpriced nest eggs.
A depression!!!!!
Only a fool would want one. The thought scares the sh-t out of me.
Misery on the world.
How many of “us” lot would survive in a depression?No-one wants a depression, but depressions and severe recessions almost always follow an out-of-control boom. The Great Depression followed the Roaring 20s, the recession of the early nineties followed the “Greed is Good” 80s. That’s why I get so annoyed by people who cheerlead the property boom. Unless Howard and Costello have cured the business cycle there will be consequences for the recent period of irrational exuberance.
The role of central nanks and governments is to curb the excesses of a boom, and soften the impact of a bust. Problem is, while everything is going up people start believing the hype of the time, and that “this time its different”. In the late 90s Greenspan refused to call the Nasdaq bubble a bubble, and concurred with the “new paradigm” nonsense of the time. Consequently the bubble (and the subsequent bust) was bigger than it otherwise would have been.
Common sense tells you that property prices increasing by five times the rate of incomes is completely irrational, but people keep coming up with reasons why it is; immigration, population growth, low interest rates etc. This is today’s equivalent of “new paradigm” nonsense of the 90s.
seriously most americans cannot get their head around how they end up with more AUD than USD anywayOver the past 7 years I have dealt with thousands of American customers. Most Americans have no clue that other countries have different currencies, they cannot comprehend different timezones, and refuse point blank to believe that the seasons are reversed in the southern hemisphere.
It is without doubt the most insular and inward-looking society on earth. That said, if you were to ask Americans which country they’d most like to visit (if cost was not an issue) Australia would be miles ahead.
I think you guys misunderstand what the Reserve Bank can actually do. They are not restricted to cash rate movements.Sure there is more than one lever to monetary policy, the RBA has considerable powers, the restriction lies in what their stated objectives are. i.e. The government never told them it was ok to target asset inflation so they don’t.
http://www.rba.gov.au/MonetaryPolicy/statement_on_the_conduct_of_monetary_policy_1996.html
In pursuing the goal of medium term price stability the Reserve Bank has adopted the objective of keeping underlying inflation between 2 and 3 per cent, on average, over the cycle.They obviously know something that many doom and gloomers here don’t about why it is good to keep the currency at the higher end.Robert, I can assure you that the RBA does not, has not, and never will target a specific value for the Australian dollar. The value of the dollar is determined by the markets, and the RBA’s role is to smooth any sudden changes in the value of the currency by buying and selling dollars.
By the way, the RBA is autonomous.Not entirely. Its more of a friendly agreement and the RBA’s independence is not enshrined into law.
The 1996 Joint Statement on the Conduct of Monetary Policy served only to codify existing practices. While the Statement included explicit acknowledgement of the Bank’s “independence” this was merely an affirmation of an existing institutional reality. There was no change in relation to the Treasurer’s statutory powers to override the Bank’s monetary policy decisions. The fact that these powers have never been used demonstrates the substantial amount of de facto independence the RBA has always enjoyed. The 1996 Statement only saw the government discontinue the practice of issuing a largely redundant press release in parallel with the RBA’s interest rate decisions.http://www.institutional-economics.com/index.php/section/just_how_wrong_can_the_economist_be/
More info about the history of RBA independence here:
http://www.econ.usyd.edu.au/drawingboard/digest/0502/smith.htmlWhy specifically do they focus on consumer prices?Because that’s what their charter tells them to do.
Runaway asset price inflation is every bit as damaging as runaway consumer inflation (if not more so) but all the RBA is allowed to do is express concern.
Here’s an interesting article about the issue:
http://www.henrythornton.com/article.asp?article_id=2723Methinks if the housing boom ends with a crash the rules may change.
Inflation increases prices across the board in most cases.Not for the past eight years it hasn’t. The CPI has been running at 2-3% while house prices have been increasing by 10-20% p.a. Almost makes you think there might be something out of whack doesn’t it? [blink]
Note: The RBA is not required to control asset price inflation. Why? I dunno.
maybe it’s ‘buckflation’ – a weaker form of stagflation?Maybe … its stagflation with low unemployment. They had high unemployment in the 70s.
hmmmm inflation – inflates property values, deflates mortgage values in real terms. a great environment for property investment.That’s price inflation (as in the CPI) not asset inflation. We’ve had a eight years of unprecedented asset price inflation already.
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