Forum Replies Created
- Originally posted by Dazzling:
Having just spent the last 10 minutes reading all of the above really intelligent dross, the only thing I can suggest to lift the poor hapless chaps and chapesses in NSW and Vic is for all of the vocal greenies to finally take a back seat and allow some lads to start ferociously drilling and digging some dirty big mines to lift your end up a bit.
I mean, Qld and WA like helping you out and all by paying some of your debts that you continually rack up. I guess Melbourne & Sydney being;
” Australia’s global cities: its creative hubs, its centres of finance, business, research, innovation, sport, entertainment and fun. They should be magnets pulling young Australians where their futures can be made. “
Underline that word should. What a load of old cobblers. Written by myopic Melb & Sydney journo’s who’s small world doesn’t extend beyond their small daily existence…who are quite happy to feed this dross to a like-minded myopic public who lap every word up as gospel.
I’m also confused how this high level analysis actually helps Mr & Mrs Average purchase an investment property where local issues over-ride the macro level fluff. They need to get down in and inspect the weeds of individual titles, not take a satellite fly by. Maybe I’ve missed it ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
I have not visited this forum for around a week. In every cyber forum board that I have visited, I always find that there is a resident “loud mouth” arrogant type of person, who always thinks he knows it all.
During the time I joined this forum, I avoided any discussion with “Dazzling” as I knew I did not have any respect for him. His ego is beyond belief.
In real life, I avoid such people. Same in cyberworld. Signing off. Moderator, please close my subscription.
Originally posted by wezwaz:My perspective on financial independence:
Paid work in some respects does have advantages – every week you know what you get to take home and the risk is taken by your employer. Can you say that about your own business? No. These are the trade-offs when we make our choices. Having said that, the disadvantages in paid work can make a life of financial freedom worth fighting for – office politics, working for a boss you don’t like, doing work you don’t want to do, being in a regimented job where you must turn up every day of the week. All that stuff makes it very restrictive. ….Wes.
Agreed. I think there is another aspect to consider. Retrenchments. Telstra will be reducing 1,000 jobs by Oct. 2005, Qantas has reduced 200 and could reduce more by Christmas. The banks will probably do their annual retrenchments as the months go by. Also, some businesses will collapse and the staff will not have a job, unless they can find another.
Many IT jobs have been lost through outsourcing to India and will probably continue. This has spread to bookkeeping as well. Many manufacturing jobs have been lost to China (latest is Hills Hoist). Many will go over the next few years.
During my previous career, like most people, there were times when I enjoyed working and times when I did not. I saw many colleaques in the bank, get retrenched.
I am glad that I no longer have to work as I have achieved financial freedom. It takes time and effort but looking back, I am thankful. There were a few “morons” that I had to call “boss” in the past. These were people that did not do much work in the office, took credit for subordinates’ work and blamed subordinates whenever anything went wrong. They did not accept responsibility and were merely “bludgers” on the payroll – they were unemployed people that companies paid on the payroll for doing nothing. Gee, there were a few of them along the way. It was like the book “Animal Farm.” Anyone read that?
Resources boom changes growth engine
By Ross Gittins
August 13, 2005The two great factors influencing the economy at present are the end of the housing boom and the continuation of the resources boom.
These factors show how the economy’s source of growth is in the process of shifting from the domestic engine to the external engine. They also explain why some states are growing only slowly while others are leaping ahead.
The Reserve Bank in its quarterly Statement on Monetary Policy, issued this week, unveiled a new and greatly improved set of figures for the rise in house prices, which shows that the housing boom ended abruptly at the beginning of last year.
In the 18 months since, house prices nationwide have been unchanged — although the national average conceals a wide disparity between the state capitals.
Prices fell by 7 per cent in Sydney and were flat in Melbourne, whereas prices rose 5 per cent in Brisbane and 19 per cent in Perth.
This is the first housing boom in memory that’s ended with a whimper rather than a bang. It wasn’t choked off by the usual leap in interest rates, but simply died of natural causes.
Just ran out of puff. Which means that, if our luck holds, we’ll escape this housing boom with nothing worse than a slowdown in the economy, rather than the usual recession.
The slowdown has certainly begun — and it’s begun because people have decided they’d better stop borrowing and spending so freely and start getting on top of their debts.
Household spending on new housing has fallen, while spending on consumption has slowed from the unsustainable rates seen in 2003 and early 2004.
That earlier surge in consumer spending seems to have been very much linked to the housing boom. There was a lot of spending on consumer durables to put in new or newly renovated homes, while the doubling of house prices made people feel wealthier, encouraging them to save less and spend more.
But we’re now seeing signs that some households are becoming more financially cautious, after a long period in which debt and debt-servicing costs rose rapidly.
“The household saving ratio increased slightly over the year to the March quarter, after declining for many years,” the Reserve’s statement says.
“Although debt growth continues to outpace that of income, it has slowed to its lowest quarterly rate in more than six years.”
And after four years of letting the equity in their homes decline — by borrowing more against their homes than was needed to finance investment in new homes or renovations — households switched to repaying housing loans and increasing home equity.
The nation’s income is receiving a considerable boost from the continuing improvement in our terms of trade — the prices we receive for our exports, relative to the prices we pay for our imports.
China’s booming demand for our iron ore and coal (and other countries’ oil) is greatly increasing the earnings of our mining companies.
So that’s the second factor having a major effect on the economy at present: the global resources boom.
As the housing boom ends but the resources boom continues, the economy is in the potentially tricky process of changing engines.
Until recently, the housing boom has made domestic demand (consisting of consumer spending, spending on new housing, business investment spending and government spending) the chief engine of the economy’s growth.
At the same time, external demand (consisting of production of exports minus spending on imports) has been a drag on overall growth ( aggregate demand).
On the one hand, strong growth in domestic demand has meant strong growth in spending on imports. On the other, growth in our production of exports has been held back by the high value of our dollar, the production capacity constraints and infrastructure bottlenecks facing our miners and —going back a bit — the effect of drought on our farmers.
But now that’s starting to change. Slower growth in domestic demand means slower growth in the volume of imports, while additional mining production capacity has begun coming on line and the recent rains have made the prospects for rural exports a lot less bleak.
The last thing to note is the way the combination of these two major factors has led to such disparate growth in the various states.
The end of the housing boom is having its greatest dampening effect in those state capitals where it began earliest (in late 1995) and reached the greatest heights — Sydney and Melbourne.
By contrast, the boom started later in Brisbane and Perth, which helps explain why prices still grew by 5 per cent over the past 18 months in Brisbane and 19 per cent in Perth.
Turning to the resources boom, its greatest benefits have been felt in the two main mining states, Queensland and Western Australia.
Put the two factors together and you start to see why, in the year to July, NSW had growth in total employment of only 2.3 per cent and Victoria 2.6 per cent, while Queensland had 6 per cent and WA 7 per cent.
From 60 minutes:
Paul Barry has hunted down some elusive villains in his time, but this one — King Con — takes the cake. He’s been feted as one of Australia’s richest men, a property developer with a taste for the high life. A couple of penthouses worth $12 million, a Mercedes that cost another million. But the man’s a crook. He’s ripped off scores of investors in a massive real estate racket. Mums and dads, ordinary investors along with some of our best known sports stars, they all fell for the scam. And thanks to King Con, many of them have lost everything. No wonder he’s such a hard man to catch.
Households’ $1000-a-week splurge
Caroline Overington, The Australian
12aug05VAST numbers of Australians are now spending more than $1000 a week on housing, food and clothes — and, increasingly, on new technologies such as mobile telephones, text messaging, the internet and pay-TV.
In some states, spending on such new technologies has increased by 500 per cent in five years.
The Australian Bureau of Statistics’ Household Expenditure Survey, a five-yearly snapshot of the spending habits of Australians, revealed households in 2003-04 spent an average of $883 a week on goods and services, an increase of $182 or 26 per cent since the last survey in 1998-09.However, many Australians are spending well over $1000 a week. In Canberra, the average was $1052 a week, and in Sydney, it was $1022 a week.
Most of that money still goes on the staples — housing, food and clothes — but the survey found that spending on mobile phones had increased by 183 per cent in the past five years to an average $12.36 a week. By comparison, spending on old-fashioned, fixed-line telephones increased by only 15 per cent to $16.42 a week.
Spending on the internet is up 236 per cent in the nation since 1998-99 to a weekly average of $0.94. In Victoria, it’s up by 445per cent. Also, spending on pay-TV is up by 274 per cent across the nation to $2.69 a week.
Some of the most significant increases over the past five years have been interest payments on mortgages, up 47 per cent to $38.24 a week due to the increasing size of the average mortgage, and education, up 41 per cent to an average $16.32 a week as parents opt to send their children to private rather than government schools.
The cost of childcare has also increased, up 34 per cent to $4.78 a week, as has petrol, up 26 per cent to $29.72 a week.
Some of the survey findings were intuitive. For example, people who receive most of their income as wages spend more than people who rely on government pensions, single people spend less (about $483 a week) than families with dependent children (who spend about $1521 a week) and capital cities cost more to live in (an average of $938 a week) than living in the country (about $789 a week).
The most expensive capital city wasn’t Sydney but Darwin (average household spending, $1080 a week, compared to Sydney’s $1022 a week). However, the differences between Darwin, Canberra and Sydney were not large enough to be significant. Tasmanians spend less per week (about $753) than other Australians.
The survey also provided revealing state comparisons. For example, people in Darwin spend more on alcohol and cigarettes than people in other states, and Queenslanders spend the least on clothes and shoes.
South Australians either don’t like vegetables or have access to a cheap supply. They spend less than $9 a week on them.
Sydneysiders spend more on seafood, and Melbourne women spend more on clothes than other women.
The proportion of income spent on recreation increases with household income, with the rich spending about five times more on sports than the poor.
Rates move a 50-50 chance, says RBA
12-08-2005
From: AAPRESERVE Bank governor Ian Macfarlane has ruled out any move on interest rates in the near term, saying an interest rate cut is just as likely as an increase.
Inflation was largely under control, the economy was moving along well, and the global economy was strong, Mr Macfarlane said in evidence to the House of Representatives Economics committee sitting in Melbourne.
Although an interest rate rise could not be ruled out, there was no more than a 50 per cent chance, he said.
“This is a pretty comfortable position in which to be,” he said.
“We are not expecting to change monetary policy in the near term, and when we look further into the future we no longer see a clear probability of it moving in one direction rather than the other.”
But Mr Macfarlane cautioned investors against thinking the bank would not lift rates at all.
“We haven’t rung that bell, we think there’s a 50 per cent chance that we might have to go up again, and a 50 per cent chance that we might have to go down,” he said.
Mr Macfarlane said the bank’s 25-basis-point lift in rates in March did its job particularly well.
He said even he was surprised by the way homeowners and consumers reacted in general to the decision.
“There is also some evidence that the momentary policy tightening itself may have had a quicker affect than normal,” he said.
“I don’t want to make too much of this point, but the saturation coverage of the event in the print and electronic media must have had some dampening effect on expectations, as some surveys have suggested.
“It would not be surprising if the household sector had become more sensitive to news about interest rates given the increased debt and debt servicing loads it is now carrying.”
Mr Macfarlane said although sharp increases in oil prices were a concern, they were not lifting because of supply restrictions but instead because of demand.
He said the prices had not pushed up inflation, or even the expectation of inflation in the near term.
Mr Macfarlane said the size of the United States current account deficit, which had raised concerns on global markets, was not a big worry.
“In fact, the US current account deficit has been financed relatively easily, and the US dollar has risen over the past year,” he said.
“More importantly, long-term real interest rates around the world have stayed exceptionally low, which indicates a more-than-adequate supply of world savings, rather than a shortage.
“Although China has been cited as a third source of risk to the global expansion, it continues to power ahead, and the recent changes to its exchange rate regime, although small, will improve its prospects at the margin.”
Mr Macfarlane said despite the hopes of the real estate industry, he did not think house prices would move up quickly anytime soon.
“I think after the size of the boom we had, it’s going to take a lot longer,” he said.
Households saving falls
10-08-2005
From: AAPTHE proportion of Australian households saving some of their income has fallen in the past six months, suggesting a decline in their financial capabilities and an addiction to credit cards.
The latest ING Direct Melbourne Institute Household Saving and Investment Report shows in the past two quarters the number of Australian households saving part of their income has fallen to 51 per cent from 56 per cent.
ING Direct chief executive Vaughn Richtor said the data suggested a decline in the financial capabilities of Australian households.
Mr Richtor said the nation’s continuing addiction to credit cards was concerning.
Credit debt was the most common form of household debt (35 per cent), slightly ahead of the home mortgage (33 per cent), bank loans (18 per cent), car finance (11 per cent) and HECS debts (9 per cent).
He said the nation’s savings efforts were being hampered by a lack of planning.
“What is alarming is that over half of Australian households either don’t have a budget or don’t stick to one and some 30 per cent don’t know how much they are trying to save,” he said.
“It’s like hopping into a car and not knowing where you’re going. You’ve got to know where you want to end up.”
“With the drought, rural households seem to be doing it tougher than their city counterparts and are much less likely to be saving part of their income,” Mr Richter said.
Originally posted by coreyjay:In 2003 this forum used to be a busy little place there were posts coming and going every minute of the day.Where’s every one gone are you all sitting on the sidelines just watching see what happens or is it that the fad of property has been thrown in the too hard basket because the booms over maybe everyone is in NZ or maybe on their way to the US.What’s happened?
Coreyjay
It is probably because the boom in Sydney and Melbourne and perhaps a few other cities (except Perth) ended a while ago. The forums on shares are “booming”. Some of the people on those forums stated that they moved out of property investments into the sharemarket.
For the past few months, I have been thinking that the mining boom in Australia will inject a lot of wealth into the Australian economy and continue to do so for the next year, at least.
Shareholders in mining companies are reaping huge profits and collecting big dividend cheques. Employees in the mining industry are rising in numbers and collecting big pay rises. They are likely to buy better and bigger houses and spend more money on consumer goods (furniture, renovations and electronic goods).
This mining boom is already causing house prices in Perth to soar. This is likely to continue, as long as the mining boom continues.
The following article in The Australian, provides an indication:
10aug05
THE two things most Australians want to know about interest rates is what they will do to their mortgage and what they will do to house prices. Hardly surprising, given the large share of our wealth tied up in housing.
Monday’s monetary policy statement from the Reserve Bank of Australia tells us interest rates won’t be going up for a while, good news on both fronts. But it also has some interesting things to say on the links between monetary policy, housing prices and economic activity.
A careful reading of the central bank’s housing analysis throws up a riveting question: how close has Australia’s housing boom come to ending in a real bust?
First, the new RBA data on housing prices. The bank has been very unhappy about the available information on housing prices for some time. It has been out of date and unreliable, making it a dangerous basis for policy.
The bank commissioned Australian Property Monitors to produce a house price series that is comprehensive, less volatile, more reliable and timelier.
Among other things, the new series shows that the rise in house prices stopped dead in the March quarter last year. In the 18 months to the December quarter 2003, average nationwide house prices rose nearly 30 per cent. In the 18 months to the June quarter this year they didn’t rise at all.
The picture isn’t uniform across capital cities, with Sydney prices falling 7.0 per cent and Perth prices rising by 19 per cent, for example.
But right across Australia, in every suburb in every capital, there was a dramatic slowdown in house price growth. Why?
Well, in November and again in December 2003 the Reserve Bank put up official interest rates by 0.25 per cent. It could be a coincidence, of course. Australia’s property bubble might have burst of its own accord, as bubbles can.
Property prices in Sydney, Melbourne and Canberra looked seriously overvalued and due for a fall.
However, the timing is suggestive. It looks like a relatively modest rise in interest rates rang the bell on the housing boom. The impact of the rate rises on prices was psychological. The rate rises and, importantly, the fear of more to come sent a shock wave through heavily indebted households.
The extraordinary plunge in consumer sentiment after the next rate rise, in March this year, lends credence to the view that against the background of highly geared households and overpriced assets, a modest movement in interest rates can have a remarkably swift and powerful psychological effect. Particularly when the RBA indicates there are more rises to come, as it did.
The RBA also looks at the effect of house prices on the broader economy. It says that, given the importance of housing in the economy, it is not surprising the sharp slowing in house prices has been associated with a slowing in the growth of domestic demand. It notes signs that households are beginning to cut back on borrowing and spending as they consolidate their balance sheets in the face of flat house prices and high gearing. Looking at developments on a state by state basis, it concludes the swing in house prices has had big direct and indirect effects on the Australian economy.
It doesn’t say so directly but there is little doubt the sharp reaction to its 0.25 per cent rate rise in March is the main reason the RBA has modified its inflation forecast and backed away from further interest rate rises.
Was the March rate rise a bridge too far in an economy apparently so sensitive to small changes in interest rates? The economic picture presented by the RBA this week doesn’t support such a view.
It shows an economy where domestic demand is slowing from an unsustainable to a more moderate, but still respectable, pace against a background of a continuing global economic expansion.
Despite the plunge in the growth of house prices, the boom hasn’t been followed by a crash, the adjustment to household borrowing and spending seems to be proceeding smoothly and employment growth remains strong.
But as the RBA concedes, there has been an important element of luck in this. Or as it puts it, “the prospect of an excessive and unwelcome slowing in domestic demand has been reduced by the boost to national incomes coming from the favourable terms of trade”. This is the commodities boom, with the RBA’s commodity price index at its highest level in its 23-year history.
And China hasn’t been the only piece of luck. The economic impact of the drought looks like being much less severe than feared and Peter Costello’s tax cuts will keep household incomes growing.
The chatter at budget time about tax cuts pushing up interest rates has proved ill-founded yet again.
Without this luck it is certainly possible the effect of interest rates on housing prices could have turned much uglier, but there is no way of knowing for sure. England may provide us with some insight.
Like Australia, it has had a long economic expansion, developing capacity constraints and a housing bubble. Like Australia, it put up interest rates. But unlike Australia, England hasn’t had a terms of trade boom, linked as it is to a barely growing Europe. Last week the Bank of England cut interest rates 0.25 per cent on concerns about the economy.
The RBA doesn’t have rate cuts in mind but is certainly sensitive enough about the response to its last three rate rises to have dropped its view they will need to rise again. As for luck, as with any Test cricket team, every central banker needs some.
House prices falling
By Nicki Bourlioufas
09-08-2005
From: NEWS.com.auFalls in house prices were recorded for Sydney, Melbourne and Brisbane in the June quarter.
HOUSE prices are falling in Australia’s big cities, while the resources boom is pushing prices sharply higher in the west, according to an index of house prices.
A new housing price index released yesterday by Australian Property Monitors (APM) reveals that on a national scale, house prices have been flat in 2005.
Falls in median house prices were recorded for Sydney, Melbourne, Brisbane, while Darwin and Perth recorded healthy rises.
The series has been commissioned by the Reserve Bank of Australia (RBA) to gauge the growth of median house prices in capital cities.
Overall, the national house median house price fell 0.1 per cent during the June 2005 quarter to $390,600, according to the index. For the 12 month period, house prices rose 0.6 per cent.
Sydney house prices have fallen through 2005. Following a 2.6 per cent fall in the March 2005 quarter, prices fell again by 1.2 per cent in the June quarter to $526,000.
House prices in Sydney have now fallen by 8 per cent from their peak in the March quarter of 2004.
Melbourne house prices fell by 0.3 per cent during the June quarter to $339,000 after a 0.1 per cent drop in March quarter.
Melbourne prices have fallen in five of the last six quarters, though the falls have been slight compared to Sydney.
The median house in Brisbane dropped 0.9 per cent in the June 2005 quarter to $325,000.
But in the west, house prices are surging, following the resources boom. House prices jumped 2.8 per cent in Perth to $323,000, giving a sharp rise of 12.5 per cent over the year.
In Darwin, house prices jumped 4.5 per cent over the quarter to $326,000, to be a strong 17.1 per cent higher than a year earlier.
The housing market is slowing in Australia’s eastern states as housing affordability has plummeted in recent years due to the sharp rise in house prices.
A recent rise in interest rates has also weighed on demand for houses and prices. The central bank in March raised interest rates to their highest level in four years, taking the official cash rate to 5.5 per cent, and standard variable lending rates to 7.3 per cent.
The nation’s biggest property market, Sydney, has suffered more than most after the New South Wales state government slugged investors with stamp duty on the sale of investment properties last year. Combined with an interest rate rise in March 2005, property buyers in Sydney have been scared off.
However, the recent removal of the tax should help put a floor under house prices, said Louis Christopher, head of research at APM.
“While I don’t think we’re going to go back to growth rates of 10-per-cent-plus anytime soon, I don’t rule out a 5 per cent annualised growth rates over the next year,” he said.
Confidence is starting to return to the Sydney property market, he said. “There are still more sellers than buyers out there, but gradually we will get into a position of more equilibrium,” he said.
The main points from the RBA’s statement:
â– “Recent economic data continue to suggest that domestic demand is growing more slowly this year than it was in 2004.”
â– “Households now seem to have entered a phase in which they are consolidating their balance sheets, borrowing less and increasing their spending less quickly than they were a year or two ago.”
â– “Combined with the mild downturn now under way in the housing construction cycle, the adjustment in consumer spending is helping to put overall growth in domestic demand on to a more sustainable trend, after the period of rapid growth in demand that was experienced particularly in 2002 and 2003.”
â– “… the slowing in domestic demand that has now occurred should help to contain (inflation) pressures in the medium term. Underlying inflation is forecast to rise to a peak of around 3 per cent by the second half of next year.
â– “Businesses seem to be in a good position to continue expanding their investment spending.”
â– “… the easing in domestic demand could have a larger-than-expected dampening influence, and the current below-trend pace of GDP growth should contribute to some easing in labour market pressures over time. Currently the risks to the (inflation) forecasts are judged to be evenly balanced, whereas earlier in the year they had appeared to be weighted to the upside.”
â– “Data on producer prices in the quarter suggest that upstream prices are no longer accelerating.”
â– “While the board’s judgement remains that underlying inflation is likely to increase over the next year or so, the extent of the increase should be quite limited, unless there is a significant re-acceleration in domestic demand. The latter seems unlikely …”
Why young people are leaving our big cities
August 9, 2005 (The Age)First home buyers are being outbid by investors for homes, writes Tim Colebatch.
Melbourne and Sydney are Australia’s global cities: its creative hubs, its centres of finance, business, research, innovation, sport, entertainment and fun. They should be magnets pulling young Australians where their futures can be made.
Around the world, throughout history, that’s how big cities work. But that’s not happening here: not now, not for many years.
Adelaide University geographer Graeme Hugo has come up with some amazing research on where Australians are moving to and from. Over the 30 years to 2001, census figures show, Sydney lost a net 463,771 people to the rest of Australia.
While thousands of Australians moved to Sydney each year, they were heavily outnumbered by Sydneysiders moving out. The net exodus from Sydney averaged more than 15,000 people a year: half moving interstate, and half to the coast.
Only one other place in Australia lost people at anything like that rate. It was Melbourne.
Melbourne’s losses were far less, but still staggering: a net exodus of 237,325 people over the 30 years, about 8000 a year. Two-thirds of them went interstate, and a third to the rest of Victoria, mostly between 1976 and 1991.
In both cities, growth came mainly from overseas migration. But as migrants moved in, Australians moved out.
By contrast, Brisbane gained a net 236,580 people from the rest of Australia. Perth gained 120,266, while in Adelaide and Hobart the inflows and outflows were even. Regional NSW gained 84,133 people, mostly along the coast, while regional Victoria lost 11,411.
Professor Hugo says part of the story is that retirees have sold their homes at premium prices and moved to the coast. But they are a small minority, he says. Most migration is by people in their 20s and 30s and their children.
“It’s when people are at the stage of starting families that they look at different locations, and housing is very much part of that decision,” he says. “Housing costs are partly the issue.”
The census figures end at mid-2001. They predate the housing boom that inflated Sydney house prices by 63 per cent in three years, to what the Reserve Bank points out equalled almost 10 years of average wages. What has happened since?
Well, population growth in NSW has plunged to barely half the national average, and its economy has slowed with it. In three-and-a-half years, the state lost almost 100,000 people to other states, almost as many as in the entire decade of the ’90s.
Who is leaving? Even including overseas migrants (almost all of whom are under 40), the Bureau of Statistics estimates that in the three years to mid-2004, NSW lost a net 11,400 people aged under 40: essentially young people and their children.
Why are they leaving? You don’t have to be Bob Carr to know that they want to live where it won’t cost them 10 years’ wages to buy a home.
Sydney will always attract professionals and executives. But for many of the ordinary workers it needs to keep functioning, it has priced itself out of the market.
KPMG’s urban guru, Bernard Salt, blames the Carr government for not zoning enough land for urban development, and the figures suggest he is right: in 2004-05 Sydney councils approved barely a third as many houses as Melbourne.
But the other problem is that even now, after developers told us the Carr government’s vendor tax had driven them to Queensland, tax-favoured housing investors are outbidding the first home buyers.
NSW has 34 per cent of Australia’s people, yet for years, the bureau figures show, it has hosted 42 per cent of lending for investor housing – but only 28 per cent of sales to first home buyers.
In Melbourne, first home buyers are pouring back into the market. But even now, NSW provides 42 per cent of the property investment that led to a net $2.6 billion in tax losses in 2003-04 – thanks to our dopey tax system that allows investors to use their losses to cut tax.
The problem of tax-driven housing investment is a national one, but Sydney is where it is most intense. The Carr government’s vendor tax, coupled with the abolition of stamp duty for most home buyers, was a gutsy effort to correct the imbalance; new Premier Morris Iemma’s decision to axe it may lower prices for a while, but will make it harder to restore the equilibrium Sydney desperately needs.
The good news is that in Canberra at least, Labor is talking sense. Shadow treasurer Wayne Swan declared last week: “We need to take an axe to the Tax Act, and think long and hard about the need for many of the concessions, exemptions and deductions which mean our marginal tax rates are higher than they need to be.”
Treasurer Peter Costello should join him, and stop trying to defend the indefensible. Anyone who thinks these tax breaks are better than lower tax rates needs their economic head read.
Tim Colebatch is economics editor.
The demographic profile in Japan needs to considered. It is the fastest ageing population in the world and will soon have falling population numbers.
The fertility rate (children per couple) has been hovering around 1.1 to 1.3 for over a decade. One of the lowest in the world.
I have read that there are parts of Japan, where children can hardly be found.
When the population falls, demand for housing falls. I think many people in Japan are aware of this.
Hi Giddo,
You are doing well.
You might be pleased to know that even Warren Buffett keeps his car for 10 years before he buys a new one.
In today’s media:
Men’s life crises at age 25
04-08-2005
From: The Daily TelegraphDoubt .. these days men are suffering mid-life crisis as early as age 25.
TO qualify for a mid-life crisis, a man used to have to be at least 40-something.
Today, he is succumbing to the classic self-doubt and anxiety as young as 25.
A study has found one in 10 men are racked by worry.
This peaks at one in seven among those between 25 and 44, showing that the mid-life crisis is more like an “early-life crisis” these days.
Only one man in four considers himself “carefree” with no worries.
Experts say the worriers fret over their jobs, pressure on their time and how to pay for the lifestyles they aspire to.
“The key problem is their over-ambitious aspirations for themselves and their families,’ said Angela Hughes, from UK research company Mintel which did the study.
“Over the next few years, this group wants it all — a better job, better home, more holidays, more time for themselves — and they hope to achieve all this while reducing their debt levels as well,” she said.
“Adopting more realistic ambitions would result in many men feeling happier and less stressed.”
One in three men were bogged down with what was called “health woes”.
“These men seem to be pre-occupied with concerns of their own personal health and that of others around them,” said Ms Hughes.
“While this group is prevalent in those aged 65 and over, well over a third of men aged 20 to 44 also feel this way.”
Another 16 per cent were suffering “provision apprehensions” worrying about having enough for retirement and being able to pay for children’s education.
“The role of men in society has been the subject of much debate over the past three decades,” Ms Hughes said.
“It is clear that many of the changes taking place, particularly in family and working life, have challenged traditional male roles, which seems to have left many feeling that they lack direction.
“This will of course contribute to their levels of stress and anxiety.”
Prepare for more traffic congestion on the roads.
By Ross Gittins, The Age newspaper
August 3, 2005“What do you do with your money after you have moved to a bigger and better house, acquired a whopping mortgage and the price of petrol is going through the roof? Buy a new car, of course.
You haven’t bought one lately? Oh dear. You’d better look to your laurels because the Joneses are leaving you for dead. Oldest car in the street, eh?
Sales of new cars are booming, even though the property market has come off the boil and retail sales have been weak for about a year. New vehicle sales reached a record 102,000 in June, taking sales for the first six months of the year to 500,000 and making it likely sales will crack the million this year.
That would be up 5 per cent on last year, following growth of 5 per cent the year before, 10 per cent the year before that and 6 per cent in 2001. When you remember that the population is growing by only about 1 per cent a year, car sales are booming as never before.
Why? Because we can afford it. And what we know about Australians is that if we can afford to buy new stuff, we do.”
Originally posted by kendo5181:… Techno .. in what line of work or interest do you gather so much information? ..
Hi Kendo,
I only “drop in” to this forum once a while. My previous work was stated in my previous post in this thread. Now, I am merely an investor.
I enjoy reading. I find it helps me to understand the world I live in, a little bit better.
Sometime ago, I read an article in the media that went along the lines of “If we are so wealthy, why are we not happy?”
The suggestion was that Australians are now the wealthiest we have ever been, in terms of net worth and income levels.
Yet, there are many indications that beneath the “veneer” lies some troubles. Example, the level of anxiety and mental depression is at very high levels (one of every five people, apparently, although I do not know the veracity of this data). There are instances of road rage (some very serious), “air rage” (passengers losing control and unable to manage anger), supermarket rage (customers fighting over lane space for trolleys), parental rage in parent-teacher interviews in schools (giving teachers nightmares), parents fighting over Saturday morning sports, etc. Illicit drug use is quite alarming. Anti depressants and use of drugs for A.D.D. in children at rising levels. There are other social issues as well, but that’s another story.
In today’s The Age newspaper:
Why aren’t we having fun yet?
By Dr Shane Oliver
August 3, 2005Humanity has long focused on improving material living standards, and this has been hugely successful over the past century in much of the world.
But despite obvious material gains in developed countries in the past 50 years, happiness, or people’s feeling of general wellbeing, has not improved commensurately.
The 19th century saw the start of rapid global economic growth. This really took off in the 20th century as technological innovations such as electricity, the internal combustion engine and silicon chips came together to rapidly boost productivity. Consequently, real income, or gross domestic product, per person surged globally after being virtually flat in preceding centuries.
This led to a massive rise in material prosperity, with all sorts of previously undreamt of creature comforts, among them large climate-controlled houses, high-speed travel, high quality food regardless of season and a huge array of consumer goods.
But none of this has been enough to create a happiness surge.
Stagnant happiness is confirmed by rising crime rates and increased instances of depression, suicide and drug abuse.
This doesn’t mean there is no link at all between income and happiness. At low levels of income small increases can make a big difference to happiness. But for countries beyond a certain income level — about $US15,000 ($A19,700) per person — extra income has little happiness impact.
It is also interesting to note that within rich countries, rich people are happier than poor people. However, this seems to be due to a focus on how one compares with others, rather than the intrinsic happiness that the extra income or wealth provides. It does not mean that society as a whole becomes happier as aggregate income for everyone rises…….
Dr Shane Oliver is the chief economist at AMP Capital Investors.
There is a full page review of the book “Affluenza” in today’s Financial Review.
Also, a cover story in today’s BRW on the trend towards self employment.
Yes, I agree that the next recession will come. That is as certain as night follows day. It is only a matter of time.
I also agree that when it hits, the highly geared are likely to suffer financially, as happened in every previous recession.
However, between now and when it hits (2006 or later – just keep an eye on interest rates and rising petrol prices for better forecasting), some of the highly geared would probably be reducing gearing through gradual income cash flows used to pay off debt or asset sales (I am speaking from experience as a previous Senior Manager in a major bank).
I also agree about the imbalances. If dealt with, they would have repercussions, very rapidly.
Cheers.
No, I do not see a recession yet, for the rest of this year (but I could be wrong).
The mining boom and stock market boom have contributed a huge amount of liquidity into the economy. Western Australia is booming. QLD and SA also receiving gains from the mining boom.
Interest rates remain reasonable (albeit high relative to international levels). Employment rates seem okay for the time being.
Household debt levels will be an issue for years to come (except for the 1/3 of households who are debt free), but interest rates and employment rates would be the prime determinants of what happens down the track.
The following article by Ross Gittins, in today’s media is indicative:
“Our love affair with debt will cost us dearly
July 27, 2005The first half of the noughties will be remembered as the time when Australians finally gave up the practice of saving. But I have a feeling it won’t be a milestone we look back on with any joy.
Consider this. In 1975 the nation’s households saved 16 per cent of their after-tax income. Today they’re saving minus 3 per cent. That is, households’ consumer spending is 3 per cent more than their after-tax income.
And it’s not that we’ve become more hard-pressed since then, having more trouble making ends meet while still putting something aside. Quite the reverse. Over the past 30 years our standard of living — our real income per person — has increased by three-quarters.
No, it’s simply that saving has gone out of fashion.
As Clive Hamilton and Richard Denniss observe in their book, Affluenza, in the modern world — and by some kind of financial alchemy — “saving” has become something we do while we’re spending.
Bargain hunters can easily “save” hundreds of dollars in the mid-year sales. Choose what you buy carefully and the more you spend, the more you save.
The abandonment of (genuine) saving is all the more surprising when you remember how many baby boomers are approaching retirement. But here too financial alchemy is in evidence.
How often have you heard boomers explaining that they bought a negatively geared property investment as a way of saving for retirement? So, these days, “saving” involves borrowing almost all the money needed to buy a property, then hoping to clean up through capital gain.
The two great middle-class virtues are a belief in the value of education and saving. What they have in common is an acceptance of delayed gratification. Both require the exercise of self-discipline.
And in this we gain a clue to what’s changed. Economists define saving as “deferred consumption”. So the hard part is that you can only save more by consuming less.
Saving and borrowing are, of course, opposite sides of the same coin. We save when we spend less than all our income on consumption. How can our consumer spending exceed our income? By borrowing the difference (or running down past savings).
What has changed — and what has led us to go from being positive savers to negative savers — is the greater ability for people of ordinary means to borrow freely and relatively cheaply.
One key change is the advent of credit cards. Credit cards reached Australia in the mid-1970s with the unsolicited distribution of Bankcards.
Over the past decade or so, however, the banks have been really pushing credit cards. So much so that the total amount we owe on our cards has more than quintupled in the past 10 years to almost $31 billion.
A more recent innovation is the highly advertised “home equity” loan. Any home owner with a fair bit of equity can now borrow — for any purpose — simply by increasing the size of their mortgage. And do so at the mortgage interest rate, which is far cheaper than borrowing through a credit card or personal loan.
Historically, home owners have been keen to pay off their mortgages ASAP, increasing their equity. Home equity loans put paid to that and we’ve just been through our first ever period of declining equity.
In consequence, the past 10 years have seen a blow-out in total personal debt — including credit cards, personal loans, car loans etc — from $44 billion to $119 billion.
Of course, not all debt is bad. Borrowing to buy your home makes sense because you’re buying an asset that will at least retain its value, as well as eliminating the need to pay rent.
It’s borrowing for consumption that’s more questionable. And the point is that the change in our access to credit has at last permitted us to indulge our always-present impatience to buy the latest bigger and better consumer durables.
We used to have to save up before we could buy things, now we don’t.
Trouble is, you can only make that shift once. And just as under the old rules you couldn’t buy something before you had saved the money, under the new rules you can’t buy the next thing until you have paid off the last one — with interest.
Interest — that’s the rub. We can get our hands on something earlier, but the interest we have to pay on the borrowed money is the price of our impatience.
With so many people adding to their mortgages (so that the stuff they buy is paid off only over the next 20 years or so) or running a permanent balance of several thousand on their credit card (at piddling interest rates of 16 to 18 per cent), just think how much money we’re losing in interest.
During the first half of the noughties — and quite apart from the record housing boom — we indulged in an enormous credit-fuelled consumption binge.
But binges have to end some time and they invariably lead to hangovers — which are rarely catastrophic but almost always unpleasant.
As we seek to pay down our debts, consumption has to fall and saving rise. As consumption falls, the economy grows more slowly and creates fewer jobs.
The slowdown has already started. We just have to hope it isn’t so sharp as to lead to rising unemployment.”
The borrowing binge consuming our future
By Tim Colebatch, The Age Economics Editor
May 17, 2005“Forget the boom-time budget. We are living way beyond our means.
It’s a strength of the Bracks Government that it understood what its predecessor achieved and kept up its legacy. It’s a weakness of the Howard Government that it never understood what its predecessor achieved and let it rot.
The Kennett government’s great achievements were to put state finances on a sustainable basis and make Victoria a good place to do business. Bracks and Brumby have kept up the fiscal stringency to a fault. We can argue over how well they have looked after business, but they certainly have tried.
Hawke and Keating’s great achievements were to get us to accept tough, painful reforms to make Australia a good place to do business and to focus on generating exports and globally competitive manufacturing. Howard began with more reforms, but then switched to spending our money where it could best buy votes.
The Coalition never grasped the second part of the Hawke-Keating-Button legacy, which saw Australia’s share of world exports grow in the late ’80s and ’90s as if it were an Asian tiger. Between 1986 and 1997 export volumes grew by 10 per cent a year, and manufactured exports by 15 per cent a year, swelling almost fivefold. Had that continued, Australia would be running trade surpluses.
But the 1996 budget junked most of the policies by which Labor achieved this. Since 1997, export volumes have grown by just 4 per cent a year, manufactured exports by 5 per cent. The World Trade Organisation reports that Australia sold just 0.99 per cent of world exports in 2004, down from 1.18 per cent in 1996.
Why does this matter? Because we are living beyond our means. Since 1980, Australia as a nation has spent $105 for every $100 it has earned. To pay our way, we must increase exports faster than imports – not for one year, but for many.
That should have been this budget’s focus. Amid the war of words over its tax cuts and whether they will make the Reserve Bank lift interest rates (they won’t), its real failure is something else. It is a wasted opportunity to win back lost competitiveness.
The Government tells us only the good numbers: GDP has grown rapidly, unemployment has fallen, real wages and net household assets have risen. It tells us good policy has led to sustained growth in demand, lifting all boats.
But it ignores the dark side, without which all this would have been impossible. Australia began the ’80s with negligible foreign debt. Now it is one of the world’s largest debtor nations, owing a net $422 billion, more than half its output. And that debt is growing by $1 billion a week.
Debt can be good for you. Companies use debt to invest in projects that increase their future income. Good governments do the same: the Bolte government went heavily into debt to build Victoria’s infrastructure. Singapore and South Korea did so to make themselves export dynamos.
Households take on debt to buy or renovate homes, then repay it over time. We choose to limit consumption of other things so we can enjoy better housing. Our debts are born big, but shrink as they get older. If we can afford it, that’s fine.
But there is no similarity between these debts and Australia’s foreign debt. We are not borrowing to invest in income-creating projects but in housing. We are not paying back our debts; rather, each year we borrow more.
This budget did some good things. It removed the $300-million-a-year of “nuisance” tariffs Peter Costello imposed on manufacturers in 1996.
The Future Fund will lift savings and put money aside for future governments to pay debts we are running up now. The Government has yet to grasp the real nettle on welfare reform, but these changes should do more good than ill.
Labor’s amendments can only be token. It just wants us to know it stands for making the tax cuts fairer, investing more to train skilled workers, and changing the Future Fund to an infrastructure fund.
I agree with two of those priorities, but they suggest that Labor, too, still hasn’t got it.
Like Singapore and South Korea in the past, Australia needs to invest in its industry: its farmers, manufacturers and miners, who are competing in global markets against countries with much lower wages and/or far greater government support.
We cannot win global markets by undervaluing our currency, as China does. We cannot rebuild the tariff wall. But our governments can invest heavily in research and development to help industry create unique products that command premium prices.
We can put serious money and bite into the action agendas set up by John Moore as Industry Minister, which now lack money, teeth, or friends that matter. We can do far more to give business incentive to export and to produce here.
We don’t know how and when Australia’s borrowing binge will end. But end it will, and the top priority of any government should be to head off a bust by making our economic growth sustainable.
Both sides are failing that test.”
