Blues In The Key Of 18C

'The Right To Be A Bigot' Politics Truly Sucks

I don't mean to write a lot about politics or economics. It just ends up that way. I couldn't imagine being a real life political correspondent covering the comings and going in Canberra. I imagine it would be quite insular and tedious to begin with, but made worse by the rhetorical games and the not-answering-your-question-but-shoving-my-agenda thing that politicians do that makes bullshit out of important subjects and perhaps does more to obfuscate things rather than reveal.

The modern cadre of journo covering politics would have the added horror of having to follow politicians through social media as well as having to translate the politi-speak employed by the politicians into plain English. It's not an enviable job. Back in the day when Peter Smark, Peter Ellingsen and Alan Ramsey wrote for the Fairfax, you never got the feeling that they got too exasperated even when the going got silly or for that matter violent as it did in Tiananmen Square.

Then again, they didn't come up against the wall of bullshit that gets erected daily by our contemporary politicians. The wall of bullshit can get so high, it can get a man with no idea and no policies of merit, get voted in to become Prime Minister of the land. That's some steep bullshit.

I can't really imagine what it's like to be Katherine Murphy or Laura Tingle who have had to work the press gallery in Canberra during the Abbott Government, because some of what they've written lately betrays a quiet disillusion with government, politics and what politics can achieve in this country, given the calibre of people we've voted in. I mean, it's bad enough blogging this stuff. Doing it for work would suck.

That in a roundabout way brings me to this current brouhaha they are having down in Canberra to do with the Racial Discrimination Act part 18C. The Liberal Party claims with the highest possible ground can muster, that 18C interferes with freedom of expression. To recap, this notion exists because conservative commentator Andrew Bolt got himself into a spot of bother over vilifying somebody for not being Aboriginal enough. It's stretching things. This then gave enough impetus for the Coalition government to try and rewrite this little section that says you can't offend and humiliate people, and George Brandis infamously championed the cause of people's right to be a bigot.

If the great crusade for freedom of expression culminates with the right for people to be bigots, then you have to think maybe you took a wrong turn somewhere. Surely you'd think the moment those words left his lips, George Brandis might have thought, "hang on, maybe I'm giving ammunition to the wrong people?" After all, the first thing that sprang into my mind was the line from 'Catch-22':

"Racial prejudice is a terrible thing, Yossarian. It really is. It's a terrible thing to treat a decent, loyal Indian like a nigger, kike, wop, or spic.”

If you're arguing for a special, specific spot to protect plain obnoxious assholes from the Racial Discrimination Act, maybe you're arguing too fine a point to be called 'freedom of speech'. If you want a special exemption from the RDA, and that exemption is to be allowed to offend people and humiliate them by calling them words like nigger, kike, wop/wog or spic, (or abo, boong, chink or gook too!), maybe it doesn't say much about the free press or freedom of expression in this country? After all, what kind of press is going to say, refer to Mr. Obama as a nigger and cite freedom of expression to allow it, and by extension, not to cop to the judgment and opprobrium such a description would earn them?

Maybe it just says more about George Brandis and his own tremendous, irrepressible desire to be a bigot? Is it really a win for freedom of speech if the upshot of changing this act is so that Andrew Bolt can use the bully pulpit of his radio microphone to vilify people without much of a voice in our community? Maybe this is simply too hard asking the party of "ditch-the-witch" to consider. Maybe it's just too hard for them to comprehend.

Think of all the things this government doesn't support, like a bill of rights. Or the things it chooses to censor, treating its own citizens like children. It goes after artists for fear their work might be paedophilia; it censors films that point to the corrupt nature of power, like 'Salo'; you can't argue this wowser government is doing everything it possibly can to protect freedom of expression. How can all this fixation and fuss over 18C be anything but the desire to be bigoted and not to be punished for it? One can't possibly take this bunch on their word about this principle.

So here we are, folks - a Parliament busily arguing the imagined merits of rewriting 18C. Read it and weep.

View From The Couch - 21/Mar/2017

It's Not A Bubble If You Don't Call It That

Day after day, there's this concern about the Property Bubble. Looked through the hosing affordability prism, the bubble looks enormous, but looked through the prism of investments, housing-as- asset still looks safe to the majority of investors piling into the market. If you're hoping to get you quarter acre block and raise your kids in the manner that your parents did, in a neighbour that resembles the one in which you grew up, the likelihood has diminished to unlikely to zero chance doing it on your own.

If you're in the real estate racket, then it's in your interest to talk it down like it's not big deal.
This made me laugh:

Australia's banking regulator says the country's housing market is in an environment of "heightened risk", but he won't say there's a housing bubble. 

Australian Prudential Regulatory Authority chairman Wayne Byres told a Sydney conference that he wouldn't use "the B-word" to describe the housing market. 

"I don't use the B-word. I refuse to use the B-word. It implies a binary, that's too simplistic," Mr Byres said speaking at the Australian Securities and Investments Commission annual forum. 

"We are in an environment of heightened risk. House prices are high and particularly in this one (Sydney) they're rapidly rising," Mr Byres said.
"If everyone is not careful the risks are going to rise," Mr Byres said.

Mr Byres said APRA was watching the housing market, but he stopped short of saying the authority would bring in new curbs on investment lending.

I guess it's not a Bubble if you don't call it that. That's a bit like saying Tony Abbott isn't a dickhead because he's not called Dick Head, but Tony Abbott.

"What Bubble?" They Asked

Outside of Sydney and Melbourne, real estate pricing has not risen at the same dizzying rates. Of course, Australia's a very big place but GDP growth is concentrated in pockets. That is to say, there are only a few places in Australia worth being. You can go live in Tenterfield Queensland in a shack priced at 20k, which is the middle of nowhere, for instance, but it is days from amenities one expects of civilisation and if you didn't get your NBN connection out there, why, living conditions could approximate the 19th century more than the 21st.

Something like 8% worth of Australia's GDP's economic activity takes place in the precinct surrounding Wynyard and Town Hall stations. Think about that: 1/12.5ths of Australia's economy converges on 2 railway stations (I happen to know this because I talk to people at the UTS TRC). The whole point of Sydney is to service the 2 stations, and to that end, the public transport system has grown into radial spokes around the surrounding land all the way out to the hinterlands. It grew that way through a combination of factors, some of which included lack of vision by the NSW government; the small-ness of scope given to a precinct known as The City of Sydney which covers these two stations, but nowhere near far out enough to urban coordinate planning or transport planning; the fact that the Sydney basin as a whole had no urban planning for a good two decades in the middle of the 20th century; and general class sniping which has persisted from English Colonial times.

Unfortunately the physical need for participants in the economy to converge on the two stations is so immense it has absolutely warped the perception of value in Sydney. The CBDs of Melbourne and Brisbane also present similar problems. Combined, the central districts of the three cities would contribute to a quarter of Australia' GDP, perhaps a third -all of it sitting in a clutch of about 5-6 train stations. That's a lot of economic activity that needs to be serviced by public transport.

In a sense, it is like light. For every doubling of distance away from these hot cores of the Australian economy, the value of the land would lose by a square root. While this is common sense, the way the property prices have been growing is anything but. If Sydney's economic output as a whole is not growing by 18%, it's hard to justify 18% rises in the property - and that's just comparing like with like. If you compare the GDP output of Sydney with world cities, it is hardly worth the prices its property is fetching. I mean, Sydney's a nice-ish place to live, but it's not that nice. People are having themselves on if they're putting it up higher than NYC, London or even Santa Barbara, California.

Except perspective is very hard to come by when you've decided where you are so damn wonderful, and the market is full of these people. Do you wonder why some people think it's all going to end in tears?

Bad Ideas Still Get To Run

There's this argument going around that maybe first time home owners should be able to access their superannuation in order to put a deposit down for a house. Paul Keating thinks this is a terrible idea. Others are in favour.

The succinct summation of why it's a bad idea is here (take it away, Mr. Keating!):

The average superannuation balance of those aged between 25 and 40 hovers around $45,000. Were this to be taken from a saver's account to be employed as a housing deposit, it would effectively destroy that person's ability to compound any future sum into a meaningful retirement supplement. 

More than that, once the preservation rule has been breached, the whole investment system would be compromised as superannuation trustees were required to make provision for short-term withdrawals from an otherwise, fully preserved system. This would be completely disruptive to professional funds management.

If you look at it from a longer time frame, you'd have to say property prices will not keep going up, or even stay above their historic trend forever. it's doubtful it would stay that way over a working life. The insane price rises we're seeing are based on the delusion that these markets never go down. People are forgetting what an economic contraction looks like, what a recession looks like, and how it impacts prices of things.

It's kind of crazy to pull your money out of diversified funds and stick it into one asset. Not one asset class, but one asset. And then you assume that one asset will keep going up enough that you could liquidate it at the time of your retirement to fund your retirement. If you believe that, I have a bridge I want to sell you. 

Quick Shots - 14/Mar/2017

Arrival

This got a lot of good reviews so I was really looking forward to it. I have to say its a bit naff and maybe even condescending. I did have an odd idea as I watched it, that maybe the reason we don't hear from other alien races in space is because no other sentient species wants to traverse to distance to find another sentient race. That maybe earthlings - homo sapiens - is somehow the crazy species in the galaxy that keeps on imagining scenarios of alien encounters that essentially hinge on paranoid violence.

Maybe it's not quite what i thought it would be, while some of it looked like a parallel text to 'Independence Day' without the out and out spectacle of cities getting destroyed. It also seems to owe a debt to 'Close Encounters of the Third Kind'. Clearly this is about the fifth or sixth kind.




Sarajevo

A little perdue piece about the aftermath of the Grand Duke Ferdinand getting assassinated in Sarajevo which of course triggered World War I. An oddly depressing topic, tackled with some amount compassion and intrigue.

Below is the only relevant clip I could find. It gives you a sense of the understated nature of the drama.



The main contention of the film is that the assassination of Franz Ferdinand was a false flag operation perpetrated by the Australian military who were champing at the bit to fight what became World War I. Had they any amount of foresight, they might have avoided such moves at all costs.

The RBA Fears Apartment Price Collapses

Just following on from the previous day's entry about the RBA and its seeming indifference to the property bubble, it turns outfit is a little worried about the apartment glut they think is going to happen in Brisbane and Melbourne.  They think Sydney should be fine, but then, it's not the prices as such that worries them but the systemic impact on the banking sector such a shock would have:

"It is about whether or not they are adequately provisioned, whether their lending standards are adequate, and if there is an oversupply and falling prices, whether they end up under water or wearing larger losses than they expected because they hadn't anticipated this. 

"Have households purchased these apartments in the expectation of rising rents and rising prices, and with a glut may not be able to rent them out and may not be able to get the price they paid for them?"

Although the Prudential Regulation Authority instructed banks to tighten lending standards for investors in 2014 and succeeding in bringing the growth in investor lending down below 10 per cent, "everyone would be aware that more recently investor housing growth has started to speed up again". 

Between October and January, the annual growth in lending to property investors jumped from 9 per cent to 27 per cent. Investors borrowed $13.8 billion in January, more than the $13.6 billion that was lent to owner-occupiers. Of the $13.8 billion, only $1.2 billion was for building new homes. 

"We are watching it because investors can be the first ones to get out if things turn down," she said, warning that a rush for the doors could make a slump "much bigger than it would otherwise be". 

Invited to repeat an assurance by Treasurer Scott Morrison on Monday that rapidly climbing house prices in Sydney and Melbourne were "not the function of any sort of investor credit bubble or anything like this", Ms Bullock declined, saying: "I would not like to speculate on what is a bubble and what is not, personally".

That's a funny response. When you ad this scenario to the stranded housing assets out in WA in the wake of the mining bust, the apartment glut would be a classic case of supply arriving in time to rebalance the market. After all, all the politicians have been saying there's no bubble, merely a shortage in supply. If the system can't handle the arrival of supply, it raises serious questions as to just what the fuck is going on with the price rises.

In any case governments are moving to readjust some policies on the edge to "make housing more affordable" - which is semaphore for deflating the bubble slowly. Nobody seriously disputes that this is necessary; there's even bipartisan support for it in NSW - but of course the vested interests are already howling.

The property industry slammed the move to increase the surcharge as ill-conceived, cynically populist and counter-productive. 

Developer lobby group the Urban Taskforce said it would put the brakes on supply at a time when Sydney was still delivering new homes at below the Department of Planning's target rate of 40,000 a year. 

Chris Johnson from the group said "lifting the surcharge on foreign investors will obviously slow down to some extent that market which provides homes for renters in Sydney. Throttling down supply is not a good move." 

Glenn Byres from the Property Council said foreign investment funded large scale developments and boosted pre-sales. 

"Adding more taxes to foreign investment would actually hurt supply, particular at a time when lending conditions are more stringent on offshore income," he said.

Premier Gladys Berejiklian has repeatedly said that boosting supply was the key government response to the housing affordability crisis.

Steven Mann from the Urban Development Institute of Australia NSW said foreign buyers were an easy target.

"By targeting a group of people that are unable to vote our politicians are showing a predilection to winning votes rather than obtaining the best outcome for the greater good," he said.

NSW Treasury calculations released in a call for papers after the 2016 budget showed that the government's own modelling predicted foreign buyers would be discouraged from the NSW market by the 4 per cent foreign investor levy.
Treasury estimated a modest decrease of about $30 million a year in its stamp duty collection from foreign buyers for 2016-17 after the levy was imposed.

Labor pointed to this as evidence that increasing the surcharge would improve housing affordability. 

So, there's that. All those people want the Bubble tontine for as long as possible, but they don't seem to have an exit clause for themselves so naturally you have to question their judgment if not sanity. The RBA and State governments as well as the opposition is moving to rein in the Bubble. Screaming against it only makes you look out of step. 

More On That Vested Interest Thing, Part 1008

The mining lobby went pretty hard against Kevin Rudd because of the Mining Rent Resources Tax. Julia Gillard took the opportunity presented by the fall in his polls to assume the Prime Ministership, and wound back the tax so it hardly hurt the mining companies. By the time Tony Abbott became Prime Minister, it became a target for repeal, much like the ETS, and so the mining lobby got away with murder. I know, that's not nice language to describe it but their campaigns killed the tax, which deprived money for the Australian government that would have been spent on health and education amongst other things, so it stands to reason that in some chain of events, the austerity of the Abbott Government would have killed somebody, and that blood belongs on the mining lobby's hands. It's not hyperbole, it's logic.

So, naturally, it's interesting to see the mining lobby went after WA National Party leader who said there should be a mining tax.

West Australian Nationals leader Brendon Grylls has conceded defeat in his seat of Pilbara, following a $2 million campaign against him by the mining industry angry at his iron ore tax proposal. 

Mr Grylls said he had contacted Labor's candidate Kevin Michel to congratulate him on his victory. 

The ABC's election computer no longer lists Pilbara as a seat in doubt, putting Mr Michel more than 500 votes ahead and declaring the seat for him. 

"It's quite clear that I can't catch up in preferences now," Mr Grylls said.
"The Nationals remain strong in the West Australian parliament and just like I replaced a leader, I'll be replaced and they'll get on with the job.

Just in case you're wondering just how much our democracy is being fucked with by lobbies, and how our government can't get its proverbial shit together to enact sensible laws  like having an ETS, or having a mining tax, there it is in black and white.

Politicians might be dumb, but they know enough that political necessity forces solutions. Sometimes they are against their own side of politics. After all a great leader can only be measured by their willingness to whack their own to make deals stick. It's eminently understandable why Mr. Grylls might want to propose an iron ore tax, given the parlous state of WA's affairs. Therefore, it's interesting to see the mining lobby is entirely happy to whack their own - and by extension we can see who wears the pants in conservative politics. It's the vested interests, all the time, all the way. The actual politicians are just sock puppets.

News That's Fit To Punt - 13/Mar/2017

Mining Bust Out West

Jeez, that election in Western Australia looked like a real rout. It's funny how the state votes in the conservatives during the years of the boom and somehow trusts them to do the right thing with it, and then when the boom turns into a bust they discover the conservatives have squandered it. It seems to be like a collective insanity that takes hold of the state. During the mining boom years, the rest of Australia had to listen to utter idiocy coming out of the WA Government thanks to the fact the recent mining boom turned  WA into a net contributor to the GST regime rather than a net recipient. Then they cried poor about it , and got very little sympathy - as they should - and now that the state finances are in ruin, the people finally vote in the ALP. When you consider that at one point the WA LNP were mouthing off about seceding from the rest of Australia, it's certainly laughable that they will be a net recipient to the GST regime once more.

I guess one shouldn't laugh at the misfortune of others, but this one was pretty predictable.

Mining booms often turn to busts. Most Australians know this, except it seems, the outgoing administration of the nation's resource-rich west. 

Western Australia's now former premier Colin Barnett bungled the bonanza, splurging windfall cash during the good times only to find the cupboard bare in the bad ones. The upshot is the state's budget deficit and debt have spiralled, the AAA rating is gone and people are fleeing, the latter at least has the advantage of containing an unemployment rate that's already the nation's highest. 

"There's an element of Dutch disease there, and the government certainly mismanaged the boom, but it also reflects the sheer size of the mining sector in WA so when it collapses it drags everything down," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney. 

"WA didn't seem to learn any of the lessons from Australia's past mistakes during commodity cycles and now the state is effectively in recession." 

(edit)
Western Australia's Treasury was projecting the revenue windfall from mining would still be continuing in 2018-19, despite commodity prices peaking in the third quarter of 2011 and mining investment not too long after. 

As a result, the government has been trying to cut outlays in a weakening economy and there's even been talk of tax increases as gross debt is on course to surpass 20 per cent of gross state product in coming years.

It's pretty laughable when you have a long memory. So much for the notion that WA somehow had organised things differently to all the other mining boom and bust cycles in the past. Tire's a lesson in there for the fossil fuels industries too.
There's a lot more to be said bout all this, so I'll come back to this below.

100 Days Of Tesla

We live in times such that a tech billionaire tweets something and it turns into a head-to-head discussion with the Premier of SA and PM of Australia. It's weird but all of a sudden people want this project to happen - which would be nice of South Australia but also, - which would be the proper part of the renewables tech business getting a crack at the Australian electrical grid.

Tesla's Elon Musk may have put large scale battery storage on the national agenda with his offer last week to solve South Australia's power crisis for free if he did not deliver a large system with 100 days of signing a contract, but both the Prime Minister and South Australia's Premier are looking for more detail before taking him up on the offer. 

Mr Turnbull and Mr Musk spoke for an hour early Sunday afternoon, with the Prime Minister yet to form a view on the merits of power storage systems in solving South Australia's power supply woes. 

"They had an in-depth discussion on the value of storage and the future of the electricity system," a spokesman for the Prime Minister's Office said. 

Their discussion was not political in tone, but rather a discussion between two people "picking each other's brains" over the options for energy storage in Australia, one source familiar with the discussion said.

Elon Musk for his part has resumed campaigning for a shot on Twitter. You'd look an idiot if you turned him down now, wouldn't you? Of course these are people in government in Australia are people who don't mind looking like an idiot, so you have to subtract your optimism. Or is that curb your enthusiasm. In any case, the offer is there. Now begins the process of looking the gift horse in the mouth.

Time To Start Collecting Canned Food?

This link is from Pleiades.

While economists love trade, it has extremely political ramifications. And it is politics that in Every’s view is driving the world back to a 19th century style trade world. A world where after a period of free trade, high tariffs were set up and where trade became a conflict involving domination of one country over another.

And the problem is that economic conflict can quickly become real conflict.

It was a scary prospect – not only would raising trade barriers reduce our standard of living – but if the path of the next 10 years follows the path of the late 1800s and early 1900s then the world gets very dangerous very quickly.

The biggest difficulty for those selling the idea of free trade is that a soon as you start talking about things such as “comparative advantage” people quickly switch off. It’s much easier to understand trade in what is known as a mercantilist sense – the “domination” point of view, where the aim is to export more than you import.

That is certainly the view of Donald Trump and his trade advisor, Peter Navarro, who has recently argued that because GDP is made up of consumption, government spending, investment and net exports (exports minus imports) reducing the US trade deficit is a good way to grow the US economy.

The problem with that view is that in the US – as in Australia – the size of net exports pales in comparison to consumption, investment and government spending.

Clearly, if the benefits of trade are not doled out to the public but instead, accrues to a small percentage, as has happened in the last 30years, the public becomes less enamoured of free trade; and so we must wonder if we've hit that point where the public has decided it won't back free trade any more. It would explain the shift toward  parochial kind of anti-tradepolitics as seen in the Brexit debate/debacle as well as the rise of Trump-ism (devoid of any coherent ideological framework, it does seem to to be a cry against free trade).

A Scary Passage From Crikey

Also from Pleiades was Crikey's entry about the WA election, which I think deserves a long quote.

They have to do something. They should have done something before. When the red dust settles and the tallying’s done, the verdict on the mining boom in WA will be a harsh one. No Norwegian-style social fund was established — Norway now has a trillion dollars under management from North Sea oil and gas, and the whole country could retire — and much of the money that did come in served principally to inflate prices to, well, Norwegian levels. FIFO was imposed on people who wanted settled jobs, and no government stepped in to oblige the companies to give their workers more options. Men and women of modest skills and earning capacities were suddenly pulling in huge wages, with little advice as to how to invest it. Many bought houses in regional FIFO towns at prices approaching capital city levels — and then saw them halve in value as the boom died away. Meanwhile, the towns that became FIFO bases — from Singleton in NSW’s Hunter Valley to Kalgoorlie to Bunbury — were drained of the communal stability that makes life possible. “How can you organise a footy team? How can you even get a picnic going,” a woman had said to me in Singleton, two years ago, “when you never know who’s going to be here? The shops are empty, the town’s bled dry.” Two days ago, someone said the same thing, near word for word, in Kalgoorlie. In both towns, and many others, the miner’s mansions have “for sale” signs in front of them, directed at a market that isn’t there. 

Some didn’t even make it to the bad-investment stage. A lot of people were drawn to FIFO by the idea that it would allow them to make big bank, on the simple principle that once you’re in camp, there’s nothing to spend your money on. But that scheme misses the effect of 14-day, 21-day, 28-day stints of 12-hour shifts on the human psyche. Beyond a certain point of such punishing, inhuman labour, it is all but impossible for most people not to blow their money in the first days off, especially if they’re young. Everyone who’s done night shifts, continuous shifts, back-to-backs knows this. The money spends itself, burns its way out of your pocket. Potlatch, the old tribal custom of wanton destruction, takes over. You stride into a bar and fuck it, you’re not going to drink beer, or Red Label, you’re going to drink Chivas! A double! Chivas for everyone! For some people who just came to do a couple of years in the mines and party up, that’s probably no great tragedy. Others have worked years at grinding, dirty, dangerous work and have nothing to show, a fact that must be part-cause of the suicides, depression, domestic violence and addiction that has broken through FIFO communities like a long wave. 

Given a free kick by 4 billion years of geology, and a chance to reinvest, Western Australia appears to have created a situation in which Wake in Fright and The Unknown Industrial Prisoner serve not as dystopian warnings, but as HR manuals. Now a state that has spent a decade chipping bits of itself off and floating it northward for silly-money prices cannot pay for its most basic services, pay down its debt, and is proposing taxes that should have been being levied since the 1990s and scrambling to fill the gap with infrastructure projects it can’t afford to start. Services cut include those to Aboriginal people, which in turn has produced unwilling population movements, pressure on centralised and reduced services, and a resultant and distinct fraying of white-black community relations in a range of towns, a fall away from such detente and mutual understanding as has been achieved in recent years. What looks like a racial political issue, is, in reality, a product of the state’s fiscal crisis, and its panicked efforts to plug the gap.

That's pretty bleak reading. It turned out they needed a mining tax but realised it after they campaigned hard to get rid of it. Oops. What do you do with this kind of collective hubris and stupidity? It doesn't end well:

The gap has been plugged, instead, with meth, a drug that has boomed out of control in WA, simply because it has become so cheap, easily made from base chemicals, in suburban labs springing up in every city and town. Those looking to explain its reach in WA by its occult power to turn people into speedfreak zombies are ironbarking up the wrong tree — meth hit the big time when it became cheaper than dope. Its popularity is a product not of addled obliviousness, but of the judicious application of rational choice theory by substance abusers, looking to maximise their investment. It’d make the Institute of Public Affairs proud.

All that, in overlapping bits and pieces is the conversations you get into across the state — with everyone. Miners, ex-miners, civic boosters, NGO officers, emergency services, journos, snappers. In WA, everyone’s become an amateur political sociologist, hot on the trail of where it all went wrong, and what the solution might be.
Whatever happens on Saturday, the state’s dilemma concentrates the mind wonderfully. Kalgoorlie stands as a metonym for Western Australia; Western Australia for Australia itself. We are all aware that we have not stored away for the lean years, and the fat years come to an end. The prospect, delicious for pundits, less for the public, is that either major party will fall short of a majority, and have to cobble together government in both houses of Parliament. Looked at clear-eyed, this often delivers good government, but the public rarely thinks so, and the golden west exemplifies the decay of political legitimacy and effectiveness in Australia, and if that occurs here, it may not be too long before the state is back at the polls once more. 

What WA needs is the Unflux, the many nations in one — a party with a realistic and integrated program to deal with the reality of resources-led states, not the fantasies they offer. As goes the state, so goes the nation.

Everybody's got 20-20 hindsight it appears. Right now, it's hard not to think of all those mortgages underwater in Western Australia and what that's doing to the banks' bottom line.  It all went crazy out there with the low interest rates and the seemingly low inflation as 'measured'y the RBA. If the reality was in fact significant inflation, then clearly Western Australia was not served well at all by the RBA's policies in the last decade. You can start to see the whole thing start to unravel. You have to wonder just how long will it be before it hits the East Coast?

So Which Is It?

The Banks Say There's No Bubble

This is getting to be like a game.
The banks believe, or at least want us to believe that there is no bubble going on in the Australian property market.

Testifying at the parliamentary inquiry into banking this week, the chief executives of National Australia Bank, Westpac and Commonwealth Bank all said that while they are worried about elements of the housing market, prices aren't over-inflated.

"I would draw the distinction between a speculative bubble in prices and prices beyond what fundamentals would justify," Westpac's Brian Hartzer told the parliamentary committee on Wednesday. A bubble isn't occurring in Sydney or Melbourne, where house prices have risen the most, he said.

"There are increasing risks, but I still believe the answer is no," National Australia Bank's Andrew Thorburn said when asked if houses in Sydney and Melbourne are overpriced.
Commonwealth Bank, which is the nation's largest mortgage lender, is seeing "lending at levels we are comfortable with" across Australia, Chief Executive Officer Ian Narev told the committee when he testified on Tuesday.

Funnily enough that reminds me of the scene in 'The Big Short' where a market bull tells Steve Carrell's character that he's going to buy more shares in a bank that is about to get smashed. If history is any guide, it's going to look perfectly fine until the moment it isn't.

John Hewson Says The Risks Are Greater Than The GFC

Former Opposition Leader and famous driver of Ferraris as well as a note economics academic John Hewson thinks there is a problem. He closes his column like this:

However, our whole system is at risk of a significant drop in house prices as, indeed, was the US/global financial system in the run up to the global financial crisis, where the mountain of debt was built on a US sub-prime housing loan, which was simply a punt on house prices not falling. 

Our banks are, today, heavily exposed, having become essentially building societies that also issue credit cards. These exposures are over and above their considerable climate exposures – not just to mortgages on coastal properties, and to fossil fuels, but more broadly. 

The risks being run actually dwarf those of the GFC. If it goes bad, the government will be called on to intervene.

I imagine John Hewson's kids have grown up and suddenly he's had to have a closer look at this housing affordability for his kids. That must have led him to believe there is a problem brewing. Certainly the OECD's warning wouldn't be falling on deaf ears with him. 

What The OECD Thinks Of All This

The OECD were pretty rosy aboutAustralia except this property bubble thing. 

The survey says in real terms house prices have climbed to 250 per cent their level in the 1990s, with much of the increase taking place in the past few years, "straining affordability, especially for first-time buyers in Sydney". 

"A continued rise of the market, fuelled by both investor and owner-occupier demand, may end in a significant downward correction that spreads to the rest of the economy," it warns. 

(edit)

Sydney house prices climbed another 4.5 per cent in the three months to February to be up 18.4 per cent over the year. Melbourne prices climbed 5.5 per cent to be up 13.1 per cent. Australia's ratio of household debt to GDP has climbed to 123 per cent, an all-time high and the third-highest in the world. 

The OECD report argues that it is mainly local investors and owner-occupiers, rather than foreign buyers, that are pushing prices high. It says the markets are vulnerable to a sudden rush for the doors should prices start to falter and investors believe capital gains are no longer to be certain.

I was talking to an old friend who said to me he had $400k to put towards a house. He could get a loan for $400k. If his spouse does the same, it comes roughly to about $1.6m which is the price of a house in Sydney, with nothing left over. There's no money for innovation or investing in other things. 

It's astronomical money for a house in Sydney when you consider what you can get for that money in other parts of the world. As we were driving around the inner city, he pointed to arrow of tiny workers' cottages and said they were all going for well over a million. He's probably right because he's been looking. I told him "it's not really sustainable, given how low wages growth are and how more and more people are getting forced out of full time employment." 

"So it has to all end in tears, right?" he asked. 

The rational part of my thinking says absolutely. But then I've been writing that for like a decade now and it keeps going on, so maybe those banks are right. And yetI can't help but think of 'The Big Short' and just how much people must be stretched to take out million dollar mortgages. The economy's growth is sluggish because any amount of discretionary spending goes towards paying off the mortgage, so effectively the low interest rate thing doesn't help the consumer one bit. It only helps baks that get to make out the silly-money loans. 

Quick Shots - 06/Mar/2017

Vikings Season 4

This series keeps delivering on its product. The cinematography and production design remain top notch. It doesn't quite feel like the sagas because the emotional lives of these characters are so much more intense and seem to have more in common with bikie gangs than say, Njal or Guunnar from 'Njal's Saga'. All the same, the violence is great, and the battle scenes glorious. The action cues really pump and the stakes are always abstract as well as practical. The writing is pretty snappy and in many ways the cast are hiding their stride playing these characters. In some ways I think this series appeals to me more than even 'Game of Thrones'.

Some of the events the series is based upon is beginning to overlap with events sourced for 'The Last Kingdom' which is Netflix's own series about medieval England around the time of the Viking invasions. 'Vikings' is inevitably aiming at showing us the Great Heathen Army, while 'The Last Kingdom' is working towards the reign of King Alfred in defiance of the Vikings who settled in England. It's all so interesting viewing if you're into medieval history.

The thing is, when i was studying medieval history back in high school, I never really got just how much blood guts gore, violence and sex there was in all of this. I wish I'd known - I'm sure I would have paid more attention.

Bullshit For Everybody

Trump is spreading the love. Okay no he's no, he's spreading evermore bullshit, possibly in avid to distract the world from probing further into his Russian connection. His current flavour of bullshit is that President Obama was wire-tapping him in Trump Tower, which sounds as preposterous as... oh I don't know, Area 51 housing alien corpses.

Of course, if President Obama had used the powers of his office to do so, there would be a trail of paperwork to make it so, and of course there isn't; the FBI have said they've done no such thing, and you'd think that would be the end of it, but no. The Donald is pushing for an inquiry, which is a bit like asking for people to officially sniff his butt to see if his bullshit indeed stinks.

There are days where I wonder where the world is going.  Today I know I don't have to wonder at all,  it's obvious it's going straight to hell in a hand basket full of deplorables.

The Vested Interests Of Politicians

The government likes to talk out housing affordability but isn't willing to actually do anything that might make a difference. Yes, that's right, they won't because all the gyrations of the RBA combined with shoring up the banks during the GFC (and including the debt-monster Macquarie Bank in that set) had everything to do with shoring up asset prices, and in most instances, those asset prices were homes. Why on Earth then would the government feel an incentive to knock down housing prices when the incentives are pointed in the other direction?

Here's an article that lays it all out.

The federal government's problem with making housing more affordable is that it becomes, by definition, cheaper. And that's not something that the federal government wants to see happen for some very understandable reasons. 

Back in the Howard era Australians were encouraged to invest in housing as a form of wealth creation, partially as a way of addressing rental strain and mainly as a way to ensure people had assets and therefore didn't go selfishly claiming pensions later on. That's when the negative gearing and capital gains exemptions were introduced that made buying property such a sweet deal. 

So now there are a lot of Australians who have put their retirement eggs in the basket marked "leveraging the hell out of my mortgage to buy more investment properties" for the last couple of decades and who will be therefore disadvantaged if the value of housing drops. 

And then there's pure self interest at work too, since between a third and half of all our representatives have investment properties - the PM himself owns seven properties, for example. How keen would you say that our parliamentary representatives are to make their portfolios drop in value, especially for something as stupid as the greater good? 

Also, as well we know thanks to the efforts of the NSW Independent Commission Against Corruption, the NSW Liberals are so beloved by property developers that the party went to some effort to find a way of accepting donations from them despite those donations being completely illegal. If they suddenly become the party that makes property less lucrative, there'd be no donations to justify the creation of opaque entities like the Free Enterprise Foundation.

Yes, they are part of the vested interests do with the Property Bubble. No, they won't be doing what needs to be done so that too will be left to the market.