Quick Shots - 05/May/2016

ZIRP Is Coming

I bet you've been thinking I've been crazy talking about Zero Interest Rate Policy as inevitable in Australia. Well, here's something for you to cogitate upon.

The idea that the official cash rate will eventually hit zero in this cycle is far from a consensus opinion in Australia. Economists are more likely to laugh than seriously entertain the idea. But last week's shock deflation data for the March quarter, which sparked an immediate reaction by the Reserve Bank on Tuesday, adds weight to the concept that Australia is simply coming in late to the inexorable downdraft of lower inflation and rates. 

"There is going to be a very long environment of low, near zero or negative rates, and clearly Australia is converging to that environment," Mr Gallo said from London. 

Source: Algebris 

He pointed to the "extreme overinvestment" in mining and energy sectors that would need to be unwound, weighing on growth. Over the past 25 years, Australia's exports to China had grown from 3 per cent of the total to about 30 per cent, Mr Gallo said, while in more recent years, the housing market had become increasingly dependent on foreign investors, particularly Chinese. 

"If you think about the last 20 to 30 years pre-crisis, Australia was a poster child of the credit boom and the China boom," he said.

There it is. And while that's not conclusive, it's nice to know other people can spot it coming.

There's A New Central Banker

After years of guiding the RBA through the GFC and post-GFC years, Glenn Stevens' term is up. He is being replaced by his deputy Dr. Philip Lowe.

Fifty-five year old Dr Lowe has worked at the bank since 1980 while still a student at the University of New South Wales. He has served as its head of economics, head financial stability, head of domestic markets and assistant governor responsible for the financial system. 

He also served as head of the financial institutions and infrastructure division at the Bank for International Settlements in Switzerland where he authored important research on role of central banks in low-inflation environments. 

Governor Stevens described the appointment as "superb".
"There could be no one better qualified than Phil Lowe to lead the bank through the next seven years," he said. 

"The bank will be in the best hands." 

"Dr Lowe brings a wealth of knowledge and experience to the role of governor, having served as the RBA deputy governor since early 2012, heading up many of the RBA's analytical departments, and publishing on a wide range of issues relevant to the operation of monetary policy over his three decade career with the RBA," Treasurer Scott Morrison said in a statement. 

Shadow treasurer Chris Bowen who worked with him while treasurer in the Gillard government described Dr Lowe as "one of the finest Australian economists of his generation".

I'm sure he'll be the one to take us to ZIRP and if necessary NIRP. 

More On Negative Gearing

Negative Gearing is a problem because it distorts the market. Just how much this happens is always debated with the argumentative finesse of people who regularly compare apples and oranges and some how discover theirs taste better. 

The Guardian had this article which is worth a read. 

In reality it is changes to capital gains tax in 1999 that really set the fire under the housing market by turning negative gearing from a niche activity to one which the treasurer would suggest is a favourite of nurses and teaches and police officers – the archetypal “mum and dad investors”. 

Prior to 1999 capital gains were taxed at a real rate – the nominal return less the inflation rate over the period you owned the investment. The Howard government then changed it to taxing the nominal rate, but only for half the amount. 

At the time there was actually debate over whether or not this would lead to people paying more tax.

Mark Latham – then on the opposition backbench – argued the change was “an open invitation for the tax minimisers, the tax avoiders and the capital speculators to do their worst in the Australian economy”. 

And whatever you might think about Latham’s more recent contributions to public debate, he sure as heck was on the money on this issue.

That's the thing about the old Howard Government and its mantra of small government was that is never saw a tax cut it didn't like. And so with a blind eye to how this would send the wrong incentive, they proceeded to rewrite the Capital Gains Tax.

When I reflect on it, it was around the turn of the century when one of my friends who was an IT boss started looking for an investment property. He'd been advised by his accountant that he was better off selling up his place in Glebe, buying a big house as an investment while renting a small flat. The logic wasn't obvious to me at all, but it was then explained to me that negative gearing would let this arrangement be very profitable. You could well imagine how this was going to lead to a rapid growth in people arranging their lives in a counter intuitive way so as to get this Negative Gearing to deliver profit.

But really the issue is of a tax policy that drastically changed people’s habits towards minimising tax and had the side effect of setting fire to the housing market and leading to a massive spike in the level of housing debt:

Over and above whether negative gearing or the capital gains tax benefit the wealthy (which they do) the issue is whether the tax policy has distorted Australia economy.

It clearly has and as a result at the very least, the discount to capital gains tax needs to be reduced.

And there you have it. It's going to be a big point of contention in the coming years. There are plenty of people who benefit from it and their lobby is strong. The whole finance, insurance and real estate industrial complex will fight tooth an nail to keep the gravy train running.

The truly sad thing about our government is that it's taken this long for the problem to even be a discussion point, well and truly after things have gotten well out of hand. It really doesn't bode well at all. 

View From The Couch - 25/Apr/2016

Sophie Miserabella Is On The Loose

Ugh. Sometimes politics selects for psychopaths and puts them on a pedestal. Sometimes it simply allows psychopaths to display their symptoms in public as a warning to all. Sometimes politics simply is the playground for psychopaths. And then there is Sophie Mirabella, a.k.a. Miserabella.

"I had a commitment for a $10 million allocation for the Wangaratta Hospital that, if elected, I was going to announce a week after the election," she said. "That is $10 million that Wangaratta hasn't had because [independent] Cathy [McGowan] was elected." 

A confession doesn't need to be intended by the confessor as a confession; confessors often don't realise their words have proved their guilt. 

And taking Mirabella at her word, this confession is something else, admitting to a galling example of a political offence rather than a criminal one, the gangrenous pork barrelling which infects Australian politics, which in this case presumably hurt only the sick people of her former electorate. Beyond Indi, the gangrene floods marginal electorates with taxpayers' money, diverting spending on public services according to the political interests of political parties. 

That Mirabella felt so comfortable saying what she did on national television indicates how routine it is. Yet the preference for spending based on electoral marginality rather than demonstrated need is utterly improper.

The clearest sign that the Liberals have learnt nothing from Mirabella's defeat in the 2013 election where hers was the only seat to go against the trend of voters going towards the LNP Coalition; oblivious to the national trend, they swung hard against La Miserabella. Now the Libs want to trot her out again in the same seat where she was trounced in the hopes that people of Indi have clean-forgotten just what an awful MP she was for their seat, and to sweeten the deal, dangle some pork-barrelling money. If this doesn't sound like an abusive partner, then your electors in Indi have rocks in their heads or are experiencing Stockholm Syndrome.

It's all kind of strange when you consider that the Liberals (presumably) want to win back government. Why in the hell would they want to load up with a liability in this seat? Wouldn't they want a candidate who was strong and presentable than trotting out the same La Miserabella who actively cost them the seat? What has this woman got over the party to let her keep running their good name down like this? It's actually indicative of a party that's really short on talent. Just as it struggled to remove Bronwyn Bishop from her entitlement of the seat of Mackellar, they probably don't have a ready alternative to run in Indi instead of Sophie the Miserable.

Malcolm Turnbull On The Hustings

Here's Malcolm Turnbull out on the hustings saying her won't change Negative Gearing.

Malcolm Turnbull has ventured deep into Sydney suburbia to announce, once and for all, his government will not make any changes to negative gearing or capital gains tax in next week's federal budget. 

From the front garden of a family home in the southern neighbourhood of Penshurst on Sunday, he claimed Labor's policy to limit negative gearing to newly built housing and reduce the capital gains tax discount would drive down home values, drive up rents and discourage investment.

"That's why we won't have a bar of it," Mr Turnbull said.

At least he's consistent - he's taking the side of the investors. In doing so, he's saying he doesn't need the votes of people under 30. Maybe that's a good thing for the Libs who have always courted older stodgier crustier folk. - but you'd thank that was a bit different to actively pissing off the under-30s demographic. Sometimes it seems Malcolm Turnbull is just a different flavour of stupid to that served up under Tony Abbott. For all the people's expectation that he'd be a great Prime Minister, he sold his soul to the rightwing nut jobs of his party and so is incapable of delivering any policy that would help people. There's not a day that goes by that doesn't underline Malcolm's deal with the devil.

It's pretty bleak in Australia. There's never been a more bleak and underwhelming time to be an Australian than the circumstances we find ourselves in today.

What Was Wrong With Tony Abbott?

There are some days where I don't even know where to begin writing here because there's just so much to bitch about. Try this.

While Mr Abbott stands by his approach to same-sex marriage, climate change, asylum seekers and national security, he admits to failings on economic policy, including his expensive paid parental leave scheme proposal and his decision to abolish the debt ceiling. 

However he largely stands by his deeply unpopular 2014 budget, saying there was a "moral purpose" to returning the budget to surplus because it would have allowed the government to create a better society. But he admits the government misjudged the public mood on spending cuts and he accepts responsibility for failing to properly sell the blueprint. 

Mr Abbott says his decision to only include one woman - Julie Bishop - in his first cabinet was an "avoidable error". He also admits he misjudged how the public would react to his catastrophic decision to award Prince Philip a knighthood. He also regrets his decision to abandon changes to section 18c of the Racial Discrimination Act.

Tony Abbott is trying to analyse his time in office and ends up assessing so many things incorrectly. What was so wrong about Tony Abbott? - we might ask rhetorically for empty effect. It might be that compared to other leaders in the world, he was incredibly lacking in an understanding of the world around him.
Before I start my castigation of the man again, I'm just going to start with this video clip here.



Yes, that's the Prime Minister of Canada right there showing he understands quantum computing and why it's important. Tony Abbott is still trying to deny climate change. You can't exercise leadership when you don't and won't put yourself at the cutting edge of knowledge. In the 21st century, you can't have a national leader who wants to cut budgets for science and deny climate change. Does Tony Abbott need to understand the basics of Quantum computing to be a better politician? Who knows? But if he did, he might view the entire enterprise of science funding in a different light. The absolute vacuity and meaninglessness of even his mea culpa tells everybody plainly that he simply wasn't a human being of any amount of intellectual integrity to be leading the nation and making decisions about science spending. And if he was so unqualified for science, it is indicative of his lack of consideration for other human endeavours that make up a civilisation; Naturally, it draws the equivalent scepticism that he is unqualified to consider questions about engineering or the arts or town planning or farming or mining or animal husbandry or medicine or law. For a man who has a tertiary education, he looks remarkably like somebody who was untouched by its enlightening effects. Stumbling in the dark as a Prime Minister then, he is still stumbling in the dark of his own making.

Be that as it may, the tragedy isn't just his; it was and remains to this day all of our tragedy that he was even in the office of Prime Minister for as long as he was.

View From The Couch - 26/Feb/2016

This Isn't Working

There are days where I think Malcolm Turnbull might be smart, lucky and rich, but maybe - just maybe - he's not very good at this politics thing. It's a weird thing to say about a guy who is immensely popular and managed to become Prime Minister of this country but... there are moments where it looks a lot less certain, a lot less solid. For instance, he now has a coterie of backbenchers who are holding his policy platform to ransom.

It comes as Mr Turnbull and his Finance Minister, Mathias Cormann, continue to discuss the unorthodox move of bringing forward appropriation bills in Parliament to before the May budget in order to keep a double-dissolution election option open without risk of the government running out of money to pay public servants.

Fairfax Media reported earlier that informal discussions had been held about bringing forward budget day, but the latest thinking is believed to favour the early introduction of the appropriations - also called supply bills - which would clear the way for a snap poll to be called either before the budget or immediately after. 

Proponents say there is no legal problem with appropriating funds prior to the budget but admit the move would be tantamount to admitting an early election call was imminent.
The $15 billion figure is a similar amount of money that would have been available to spend after a GST rise to 15 per cent, which would raise about $35 billion, and the payment of compensation to low-income earners. 

The group of Liberal economic dries are, in particular, determined to kill any change by the Coalition - such as a dollar limit on the amount that can be deducted - to negative gearing because in the words of one MP, "why would we attack Mum and Dad investors?"

Which is all very weird. We appear to have a Prime Minister with very little authority over his own party in spite of his high personal polls.

The quick answer to the rhetorical question why the Liberal Party might attack the Mum and Dad investor might be because they're way in over their heads and need to back out before the shit hits the fan. In fact, not doing so is a kind of moral hazard situation that the conservatives and economic dry types hate so much. Making matters worse, negative gearing as it stands is kind of the wrong economic incentive that encourages the very same moral hazard that conservatives hate so much. 

Put more bluntly, the very same Mum and Dad investors are now the most indebted people on the face of this earth. Yes, Australia has the highest per capita private sector debt and the majority of it is locked up in mortgages. The whole point of winding back negative gearing is to take the wrong incentives out of the system, so the same Mum and Dad investors can make a more rational decision, based on a more rational economic policy. 

I'm pretty sure this is not lost on Malcolm Turnbull. It's just that he seems incapable of explaining this to his own side and making them shut the hell up. You'd think a conservative PM could explain traditional conservative economic policy to his own side. Of course, it might be that these backbenchers aren't conservatives at all but simply just "greedy cunts" as Paul Keating would have characterised them. Turnbull is letting these people hold his office to ransom too much. He should be playing hard ball with his side if he wants to get anything serious done. A leader is only good as his willingness to whack his own side to make the deal stick. Even I know that - why doesn't the prime Minister? 

I Hate It When Things Close

Some years ago at the height of the GFC, Starbucks closed a slew of their stores in Australia. They had picked the wrong moment to expand with their stores when all of a sudden, carrying debt became a dirty word. I was walking through Martin Place on the day they announced the mass closures, and I could see they were having a staff meeting about it in their store. It just looked terrible, witnessing all these people losing their jobs in a very public place. I didn't particularly like their offerings, but it was just terrible to see them in that situation. 

Anyway, Dick Smith stores are closing and 3000 people are about to lose their jobs. 

Dick Smith's debts total about $400 million including $140 million to its banks, National Australia Bank and HSBC. 

Dick Smith staff will now have to liquidate the remaining stock, which is understood to have a book value of about $200 million. 

It's the second fire sale in three months for the chain, which launched a desperate pre-Christmas clearance in a bid to prop up sagging sales.

One Dick Smith worker said the sale was likely to kick off as early as Friday.
The store manager said it was an anxious time for staff even though they knew the end was nigh. 

"There was a false sense of community for a while with everyone trying to look on the bright side and then there was the news about a potential buyer from China," he said.
"But we have an update this morning, saying no more customer orders and we thought uh oh!" 

"Then when we got told about a national conference call . . . and we knew that this was probably going to be bad news, not good."

It has to be said, Dick Smith stores were terrible. They didn't offer up a big range of stuff, they didn't offer up a good range of stuff, they weren't price competitive and they never really had up to date stuff. It was kind of the electrical doodad shop you went to when you couldn't get to any other electrical doodad shop. You couldn't decipher what the selling proposition was, when compared to its competitors, let alone if it even had a unique selling proposition at all. You just couldn't understand how it was supposed to operate, let alone compete with JB HiFi. As it turns out, neither could they.

A long time ago, this kind of something-nothing shop sort of blundered on in the market place. Grace Brothers which turned into Myers, was for years operating like this where you could get second tier goods for second tier prices guaranteed to leave you somewhat dissatisfied. Not surprisingly, Myers has been on the ropes for the last decade because it simply has no edge whatsoever in the modern retail marketplace (and never really had anyway). In many ways it's not surprising at all that Dick Smith stores hit the wall. 

Nonetheless I really do feel for the employees in the stores. It's terrible watching a long time going concern close down. Working through the process is even worse. Some of these private equity people that brought about the debt-laden IPO need to be investigated. 

The Meaning Of Bernie In The US Presidential Elections

It's 56 years since John F. Kennedy was elected President. There have been equal years with Republicans and Democrats in the White House since 1960: Nixon with 6; Ford with 2; Reagan with 8, George Bush Snr. with 4; and Dubya with 8 making 28. Kennedy with 3; Johnson with 5; Carter with 4; Clinton with 8 and Obama with 8 including this year also makes 28. It's surprising because it feels like there have been more years under Republicans and crazy ones at that: Nixon, Reagan and Dubya make you want to reach for the American Psychiatric Association's DSM. It was also a long time between Kennedy who was a Northern Democrat and Obama who is from Chicago. 

The years since Kennedy's assassination have been quite depressing from a progressive point of view, up until Barack Obama. If we cast our minds back to the 2008 election, Obama's campaign essentially ambushed and derailed Hillary Clinton's campaign, largely on building from the grassroots, and this in turn delivered the first Northern democrat President since JFK. Which goes to show it hasn't been easy for a Northern Democrat to get up. Just think of Walter Mondale and Michael Dukakis and their terrible campaigns in 1984 and 1988 respectively. And while Bill Clinton's two terms gave some respite, he was decidedly a Southern Democrat who wooed back the Southern vote. Thus the rise of Obama in 2008 signals a new direction for American politics. All of a sudden, the Northern Democrats are a big force, thanks to a progressive grassroots. 

It's enough to make one sort of wonder if Hillary Clinton's problem is that next to Bernie Sanders, she's not Northern Democrat enough. She may even not be Southern Democrat enough. Bernie Sanders is of course, espousing a lot more progressive politics. There was at one time great expectation for Elizabeth Warren running, because she too is more progressive than the Clinton camp. There are strong indications that the younger demographic is radically slanted towards the progressive end of the spectrum. 

The more historic view I take on the Sanders campaign is that it is the first time since Robert F. Kennedy was gunned down in 1968 that a Democrat is running with a very progressive platform. It's the first time in 48 years we're seeing the kind of galvanising force assembling a strong youth vote turn out, in favour of the Progressive cause. Sanders' platform - much more than Obama's platform - inherits the legacy of the1960s activism and builds upon it until it finally reaches the middle of American politics. It's the moment the protest songs and the hippies and the activists and the New Left finally arrive, decades late - but better late than never. 

It's funny because back in 1992, Bill Clinton fooled us all into thinking *he* was that guy. The fact that he wasn't is demonstrated by his presidency, by the things he was not able to achieve in office. It's actually the kind of baggage that really weighs down Hillary Clinton's campaign. 2016 is 24 years beyond 1992. There's a whole generation of kids who grew into adults, not believing in the Clinton name, and they'll be out there not voting for her. Should Sanders get up over Clinton, there are going to be a lot of 'Regressive Left' types who are going to be upset. But then they were upset when Obama got up over Hillary in 2008 and that didn't exactly change anything for them. The Clinton supporters are essentially Baby Boomers who are still fooled by the Clinton name. 

As for Bernie Sanders, in a certain way, the most impressive thing about him is how long he's been fighting for equality. He has been 'on message' since before Generation X was even born. The photos that have emerged from his activism in the early 1960s are heartening. They give us great strength and let us understand that it is possible to fight the power for a lifetime and make it count. If the defining characteristic of leadership is to inspire people into being their best, then certainly Bernie Sanders has that quality in spades.

That's him right there during some sit in in 1962. It could have been you, it could have been me in another time and place; but as it turned out, it was him all along. If people really think the 1960s activism meant something more than just what people did to kill boredom, they really ought to look into Bernie Sanders. 

They Keep Warning Us About This Bubble Now

Rich People Problems

The one consolation for not being in the property market and thus not sitting on skyrocketing valuations or skyrocketing debt commitments, is that when it busts, you won't be hurt as badly as those in debt up to their eyeballs. When the downturn comes and the banks come knocking to foreclose and businesses are forced to close as much as private residences are sold out en masse - the sort of scenario you dread because unemployment will be up, economic growth will be negligible and banks too big to fail will be living up for government largesse at the public purse, - the non-owning, non-mortgaged will be the relatively lucky ones to escape the downside of all this risk building up.

Even so, it's kind of scary just how much private debt has been racked up in Australia. A lot of that is in mortgages, rather than credit cards. The build up is so epic, the RBA was in denial about it for the last decade until the last 12months or so where they've started to bleat about the private sector debt, and more recently, specifically the "overheated property market".

And so we come to this entry today:

While our society lacks a meaningful and open debate on the toxic and rising levels of household debt, new home buyers in Sydney and Melbourne are entering the market and taking upon the most illogical sums of debt, courtesy of our over-leveraged banking system. 

Based on median multiples, new home buyers in Sydney will spend the better part of 6.54 years savings (using 30 per cent of their income) for a 20 per cent deposit to buy a median-priced home. 

When it comes to servicing the first 12 months of a 25-year/80 per cent LVR mortgage, it will cost roughly 65 per cent to 70 per cent of household income to service that debt at current record-low mortgage rates. Melbourne is not too far behind. 

So what have our leading economists, regulators, public executives and politicians done to stop this debt-induced folly? Nothing. In fact, they have bent over backwards to inflate prices via stimulants such as housing grants and allowing retirees to tap into their life savings. 

These powerful stimulants have been implemented, not to improve home ownership rates, but to boost prices for the benefit of existing owners, bankers' profits and government balance sheets.

Now, just on the point of 'existing owners', the SMH also had this entry right here about politicians who own investment properties, and there fore are beneficiaries of negative gearing. 

Mr Daley said if the government was unwilling to remove the capital gains tax discount it should get rid of negative gearing altogether. 

"The most important argument against negative gearing is that it drives up house pricesbecause it increases the after-tax returns to housing investors, and so prices are higher than they would be otherwise," Mr Daley argued last week. 

Mr David, Mr Egan and Mr Soos last year warned that, with such high rates of property ownership among Australia's senators and ministers, it was "difficult to believe that politicians will address the real causes of housing unaffordability, despite the recommendations from government reports".

It's hard to see the vested interest, collectively acting against itself.

All of this is not new, there are no new wrinkles. The property market has been artificially inflated to pay for the retirement of the Baby Boomers. They're in power, they are invested, but at this point in history, they're not selling up and so the price stays up. They then go and get loans against their assets and invest in property even more, using favourable tax concessions. Given the shortage in relevant housing being built, you can see prices spiral ever upwards. Worse still, there's money coming in from China - some of which used to go to Canada until they shut the doors - and they're bidding up prices just to get in because the very point for them, is to get in.
Thus the ground is laid for one-way bets. 

With all these complicating factors loading the system so it only goes one way, we can only ask when it will pop, and how bad would it be when it pops. The latter demands that we know more about the circumstance of the former's condition. If you had to guess it would be 'soon', but this 'soon' has been going on for a few years now and not even the GFC killed it, thanks in part to Kevin Rudd's big spend and China's amazing 7+% p.a. GDP growth (scepticism of that figure aside).

If China tanks overnight, one can't be surprised if these prices fall back down to global norms. So until things head back down towards normal, people are going to keep asking, "will it pop? when will it pop?"

Miscalculating Inflation

For quite some time we've seen the debate about how CPI is calculated. The most glaring problem with CPI is that whinnied up against Cost of Living, it under-reports inflation. This is because the CPI system changes the basket of goods and substitutes things based on the assumption that if you can't afford something, you'll substitute it with something else similar. The strange discrepancy can in part be explained by the fact that cost of living has been following the same goods for the twenty-odd years it has been diverging with CPI.

If you looked at cost of living, it is clear that there is a significant amount of inflation going on with staple foods and accommodation. There is of course severe deflation as well, as the global glut for manufactured goods has commodified just about every possible manufactured item. If you parse through the changes, you can make out this horrifying fact that the less elastic a good or service is, the more it has inflated, while the more elastic it is, the more it has deflated. Or put more simply, the stuff that's undergoing steep inflation are things we need like food and shelter. The things that are deflating are things like mp3 players and tennis racquets and electric guitars. CPI says you've never hd it soggy with your mp3 players, tennis racquets and electric guitars being cheap, so you should be happy. Cost of living says inflation is killing you.

And so you wonder how far out this trend can last before something simply breaks. Indeed, the Arab spring that brought down North African military juntas can be sheeted home to the point at which the staple foods trebled, rents doubled and those regimes tried to buy out the difference and failed. The fact that the AK-47 became so cheap was ironically part of that equation.

But let's get back to the first world. The RBA has set interest rates according to the CPI, and has done so ever since it became independent. Back in the 1980s when stagflation was the big enemy, the US Federal Reserve Bank  chief Paul Volcker opted to fight the rampant inflation by raising rates; And so interest rates went up quite high in the mid to late 1980s in America as well as over here. Yet since those days, if they have been under-reporting inflation through CPI, then it means the successive FRB and RBA regimes have been setting the interest rates too low. If the private debt we've racked up in the last 20years is anything to go by, we've simply bought the economic growth we've had on the back of mounting debts.

When you think about it, the people who benefit the most from all this under-reporting of inflation are bankers themselves. They stand to make a mint, the more people borrow money. Going back to that article before:

So what have our leading economists, regulators, public executives and politicians done to stop this debt-induced folly? Nothing. In fact, they have bent over backwards to inflate prices via stimulants such as housing grants and allowing retirees to tap into their life savings. 

These powerful stimulants have been implemented, not to improve home ownership rates, but to boost prices for the benefit of existing owners, bankers' profits and government balance sheets.

Which just about sums it up. The point is, the bubble is built not on one thing, but many things, including miscounting things that ought to be counted consistently and properly.

No Land Tax, He Says

There's a party contesting the NSW election on one platform - no Land Tax. It's one of those rearguard actions by people with vested interests. Ken Henry's tax review under Kevin Rudd pointed out that Stamp Duty should be thrown out in favour of a Land Tax. The logic of this is quite simple - if you owned a house and never moved or sold it, you'd never pay the Stamp duty and this is the only tax that goes to he State Government coffers based on Land. It would be more efficient and representative of the demographic if they put in a Land Tax instead uncollected something from everybody who owns land instead.

It would go some way towards fair valuations of property, and it would encourage the Baby Boomers to cash out. Given the percentage of people who who own outright and are in mortgages outnumber the renters two to one, you can see there would be a great appeal in putting in a Land Tax, and therefore a great incentive in the electorate to resist it. If you count the fact that the political class is overly landed, there probably is no chance it happens anyway. 

It may even be redundant having a single issue party around not introducing a Land Tax, when you consider that it would paint all the other politicians as those who might be in favour. The numbers simply belie the sense of crisis that this bunch of elected officials would be interested in doing anything so fair or rational as implementing a Land Tax. 

Being An Aussie Blues

"I Fixed It!" - No You Didn't

Christopher Pyne declared he'd fixed the deregulation bill to get it through the senate. He was most chuffed about it and put in this performance, which earned him much derision and ridicule (as it should).

"I fixed it", he declared, visibly quite proud of himself.

...only to have his bill defeated in the Senate.

The Senate has rejected the Abbott government's proposed higher education changes - including the deregulation of university fees - for the second time within three months.
The government's bill, which would have allowed universities to set their own undergraduate fees, was defeated by 34 votes to 30 on Tuesday night. 

The government fell three votes short of the six crossbench votes it needed to pass the changes. 

Senators Bob Day, David Leyonhjelm and John Madigan voted in favour of the bill while senators Ricky Muir, Glenn Lazarus, Nick Xenophon, Zhenya Wang and Jacqui Lambie voted against it.

So much for that one. What can you say?

Off The Cuff Gratuitous Offence To Ireland

Maybe the Irish are sensitive about being Irish. But what can a people do being born in a certain place with a certain heritage? There are much worse things in the world, like being born intemperate like our Prime Minister.

Taoiseach Enda Kenny has told an Irish newspaper he had watched Mr Abbott's video and rejected the perception that Ireland was synonymous with alcohol. 

 (I confess, I don't know how to pronounce Taoiseach)

Mr Abbott prompted criticism last week for the video message, in which he awkwardly describes St Patrick's Day as the one day when "it's good to be green".

He proclaims Ireland's most famous day "a great day for the Irish, and the English, the Vietnamese, the Cambodians and everyone who cares to come to a party".
Mr Abbott signs off his message with an apology that "I can't be there to share a Guinness or two or maybe even three". 

Mr Kenny said he had heard Mr Abbott's comments and he didn't agree with them.
"I've heard the Prime Minister's comments. He made them. I don't agree with that," he was reported as saying in the Irish Independent. 

"I think that it is perfectly in order for so many Irish people in Australia to have an enjoyable celebration of St Patrick's Day and St Patrick's week, and to do so in a thoroughly responsible fashion. 

"There has been a long-term view of a stage Irish perception. I reject that. I think it's really important that we understand that we have a national day that can be celebrated worldwide, St Patrick's Day."

I think the word got out that Tony Abbott is now a free-to-all punching bag. Much as I hold Tony Abbott in low esteem, I don't think he was that offensive. Needless to point out that the Irish diaspora is huge. St Patrick's Day is all over the anglophone world. Nobody thinks it's exclusively a day for alcohol consumption, or that it is a day of alcohol consumption because it's an Irish holiday. I don't really get the objection. Is Mr. Kenny really that interested in responsible drinking in Australia? I can't imagine it.

I think Mr. Kenny is one of those people looking to take deep offence in the most innocuous of comments. Well sir, here's a bit of advice to you Mr. Kenny: leave the kicking of Tony Abbott to us Australians and stay the fuck out of things you don't understand.

WTE Joe Hockey Lives Up To His WTE Status

Worst Treasurer Ever Joe Hockey ran into serious flack on television. He was asked why he hadn't abolished Negative Gearing and reclaimed it would force up rents. That was a red rag to the bull - and a bull arms with facts at that:

It was absolutely true that rents went up fast in Sydney, "which might have been there wasn't a lot of housing being built in Sydney in the couple of years previously". 

"But look beyond Sydney and rents were dead - barely moved in Brisbane, didn't go up very far in Melbourne, didn't go up very far in Adelaide. They did go up very fast in Perth which makes you suspect very strongly that the race memory we have of abolish negative gearing, that rents will go up, is a race memory built on Sydney." 

Daley said rents shouldn't go up because "by definition what happens at the auction is that the investor doesn't win the auction but someone who wants to live in the house does. Net impact, there is one less renter and there is one less rental property. Net impact on the rental market, zero."

Yep. but even more damning than the Negative Gearing bit was this section:

Then Daley took on Hockey's claim that he was delivering the biggest infrastructure program in Australian history. 

"It certainly hasn't gone up," he said. "It's probably tailed off, at least in as a percentage of GDP." 

Hockey said Daley was wrong. "For a start we put $1.5 billion into WestConnex in Sydney," he said. 

Daley reminded him that the project predated the Abbott government. He said not a single new project approved in Hockey's first budget had received a green light from Infrastructure Australia. 

Hockey deflected the accusation by saying Melbourne's East West Link had at least been subject to a cost benefit analysis by the Victorian government. He was reminded that the former Victorian government refused to release it in part because the numbers didn't stack up. 

When Hockey said the tax discussion paper wouldn't consider tax increases, Daley said that was exactly what was needed. 

"We as a society have essentially decided to spend quite a lot more money on health. It's good news, it's keeping people alive for a lot longer. The bad news is someone's got to pay for it. We've agreed as a society to have an national disability insurance scheme scheme, that's terrific but somebody's got to pay for it." 

"So far we've had relatively little discussion about the fact that taxes will probably have to go up, and of course no politician wants to talk about that."

And Joe Hockey promptly stopped talking about it. Didn't mention having to raise taxes at all.
It must be great fun to be made to look like a complete dill in front of all those people in TeeVee-land. Of course, this being Q&A, it probably rated at best 8%. I sure as heck didn't watch it.

Vested Interests In Negative Gearing

Why Negative Gearing Won't Get Repealed

Something that is not exactly on people's minds is just what kind of assets our politicians own, and how that might influence how they vote. Turns out only 13 of the 226 MPs in the Federal parliament do not own properties. Of those who do own property, many of them own multiple properties and the best way to describe it is that it is their favorite investment vehicle. This would likely be because of negative gearing, which is a wonderful thing if you have investment properties but is one of those policies which is contributing to the property bubble in Australia - yes, the one everybody has a vested interest in denying and of course we're starting to see why.

The article goes on to tell you how deeply invested our federal MPs are in the property market and so draws the conclusion that they are such beneficiaries of negative gearing that they are highly unlikely to vote for an end to negative gearing. one would imagine that there would be a corresponding number of people invested in property working for the Treasury and the Reserve Bank. Add in the banking bosses who are also likely to be in the same boat and you have  picture of people who like having high prices and would like to keep the prices high and not have to cash it in.

It's funny because in the American 'House of Cards' Kevin Spacey's Frank Underwood tells us that a man who chooses money over power is a man who chooses a flimsy MacMansion over a solid house built of stone and made to last. It appears that in Australia the sole purpose of power is to gain more wealth. It's hardly exciting that real life pollies in Australia think with about as much imagination as your local slum lord, but evidently that is what we have got going. Our politicians favour real estate as an investment vehicle over equities or bonds, venture capital projects or for that matter manufacturing and services. If you combine it with the fact that figures such as Clive Palmer are heavily invested in mining, there is a prosaic materialist tenor to all of this that bodes ill for culture and the arts as well as science and technology.

It's pretty hopeless. Especially when you consider that the point of capitalism is to bring capital to bear to produce things. Producing houses is one thing, but that's not what they're doing. They're literally rent-seeking on their investment properties while minimising their tax obligations. Does that sound like the sort of group of people who might have a view to the future industries of this country?