The Economic News Thread

[Wayno]

No need to worry about the state-based royalties. They will remain.

You're not thinking fourth dimensionally. Of course the levy will remain, but will the business? - in light of the 40% tax on profits?

Not profits, but Super Profits apparently. I'm yet to figure what that means and it appears to be the crux of the matter.

Interestingly, the mining-related unions appear happy with the new tax regime, and are saying that smaller/marginal mines will actually flourish, and Australia will experience an overall increase in mining industry jobs.

Maybe that's due to the proposed "infrastructure fund" (being the destination for much of the new tax income) being used to create more shared export capacity (via new roads, ports, etc), thus encouraging more mining capacity, which generates more jobs, which in turn grows the fund, enabling MORE roads/ports, and round we go...

And finally, being picky - it's not really a resource RENT tax now, is it?
(RENT = a system of payment for the temporary use of something owned by someone else)

[Prince George]

And finally, being picky - it's not really a resource RENT tax now, is it?
(RENT = a system of payment for the temporary use of something owned by someone else)

Well, that was one of the ideas floating around for uranium, right - uranium leasing.

For mine, I would have liked to see some action on changing negative gearing.

[Briggzy_03]

Melbourne house prices increasing by 28% in such short time is ridiculous considering how unaffordable it already is to purchase property there. Adelaide is the lowest out of all the mentioned rises, which in my opinion is good for both attracting more people to city while also keeping affordability high for people already living here.

http://www.news.com.au/money/property/australian-capital-city-house-prices-rise-by-20-per-cent-in-year-to-march/story-e6frfmd0-1225861571765

Australian capital city house prices rise by 20 per cent in year to March

AUSTRALIAN capital city house prices have risen by 20 per cent over the year to March, latest government data shows.

The Australian capital city house price index, released today by the Australian Bureau of Statistics shows house prices rose by 4.8 per cent over the quarter alone, putting pressure on the Reserve Bank to further lift interest rates when it meets tomorrow.

However, some economists are cautioning against taking the ABS data at face value.

Westpac economists Andrew Hanlon and Elliot Clarke said in a note the ABS measure was "prone to overstating price swings" when there were shifts in the make-up of market activity.

"Our preferred measure, and the measure watched closely by the RBA, the RP Data–Rismark series reports house prices up 12.7 per cent over the year to the month of March," the economists said.

Today's data shows Melbourne house prices rose nearly 28 per cent, Sydney house prices increased 21 per cent and Darwin prices increased by more than 17 per cent.

All capital cities posted double-digit growth over the year to March.

Brisbane, Adelaide and Perth had more measured growth with 12.1 per cent, 10.8 per cent and 15 per cent growth respectively.

Hobart increased 14.1 per cent and Canberra house prices jumped 20.6 per cent.

The ABS said Sydney and Melbourne were the main contributors to the average price of the eight capital cities.

"The strongest growth in these two cities came from established houses with relatively high prices," the ABS said.

..........

[Wayno]

For mine, I would have liked to see some action on changing negative gearing.

Make it more negative? i wonder how many people actually negatively gear investments (property, shares, etc)?

[SRW]

For mine, I would have liked to see some action on changing negative gearing.

Me too. But I guess we were hoping for far too much given the Government's excessively tippy-toed response.

Melbourne house prices increasing by 28% in such short time is ridiculous considering how unaffordable it already is to purchase property there.

Part of the reason why addressing negative gearing is so crucial.

Make it more negative? i wonder how many people actually negatively gear investments (property, shares, etc)?

I think it's more the cost of negative gearing that matters than the number of people doing it, although I wouldn't think it is an insignificant number at all. I believe it costs the Federal Government about $4 billion per year to subsidise negatively geared property investments.

[Prince George]

Make it more negative? i wonder how many people actually negatively gear investments (property, shares, etc)?

I think it's more the cost of negative gearing that matters than the number of people doing it, although I wouldn't think it is an insignificant number at all. I believe it costs the Federal Government about $4 billion per year to subsidise negatively geared property investments.

It's the combination of negative gearing and (what I understand to be) vagaries of capital gains tax that contribute to our inflated house prices that I was thinking about. First, subsidies in the form of tax incentives offer greater value at the top end of the wage spectrum rather than the bottom - reducing your taxable income is worth more to you when you're earning more than $100k than when you're at $50k (not to mention that the higher wage earner probably has more opportunity to actually engage in it). Second, the CGT discounts offered to individuals and (some) small businesses but not to companies (50% vs nil) encourages smaller investors over larger. Smaller investors tend to purchase an existing house and rent it out, which does not improve the amount of housing supply in the existing areas; much as I distrust property investment trusts and the like, their larger pools of money are more likely to be used to build higher density housing in our cities.

I know I've seen some good articles about this, but I can't find them now. This one is pretty good. The new "National Rental Affordability Scheme" sounds interesting - the idea seems to be to promote schemes for people/business to invest in affordable housing projects - but it seems at the moment that they don't offer the same level of advantages that negative-gearing does. The NRAS could also be a good way to have people in the community have more "skin in the game" when discussions about housing policy and affordability start - suppose that when up-zoning and density increases are on the table, more people have these investments that will benefit from the increase, how would that change the discussion from the usual "medium density - boo hiss"?

[JamesXander]

Property prices are crazy, a crash has to happen.

I agree with negative gearing, it has to go.

I think they also need to look at the issue of multiple home ownership. Investment into property is fuelling prices, making it even further unaffordable. The perception that property is a golden egg needs to go away. The fact that people are buying a house and selling it 6 years later for nearly double the price is crazy.

Foreign investment into property also needs to be reviewed IMO.


I always hear bankers say that its a good thing that most Australians have nearly all their equity in property. I say its crazy.

[Aidan]

Property prices are crazy, a crash has to happen.

Not necessarily. Demand is still increasing, people tend to buy the most expensive house they can afford, and wages are going up. So unless Australia goes into recession, a crash is unlikely.

The most sensible response would be to remove the residential property exemption from land tax, and this was one of the recommendations of the Henry Review. But the government chose to ignore it on the grounds that it's a state issue, and instead concentrated on mining taxes - apparently not noticing that they're also a state issue.

[AtD]

If you kill off investment properties, rents will skyrocket. Supply/demand and all that.

[Will]

If you kill off investment properties, rents will skyrocket. Supply/demand and all that.

That may happen, however would not home ownership become more affordable?

I would rather pay off my own home rather than someone elses.

[AtD]

That may happen, however would not home ownership become more affordable?

I would rather pay off my own home rather than someone elses.

You are right, but there's more food for that thought:
- Those who rent are typically earning lower incomes.
- Less incentive for construction.

[Prince George]

That may happen, however would not home ownership become more affordable?

I would rather pay off my own home rather than someone elses.

You are right, but there's more food for that thought:
- Those who rent are typically earning lower incomes.
- Less incentive for construction.

Investors that are purchasing existing housing stock aren't increasing supply. As I mentioned earlier, this is a criticism that I've seen of our present investment regulations, that they are slanted towards "Mum and Dad" investors, who tend to remove stock from our housing supply.

[AtD]

Investors that are purchasing existing housing stock aren't increasing supply. As I mentioned earlier, this is a criticism that I've seen of our present investment regulations, that they are slanted towards "Mum and Dad" investors, who tend to remove stock from our housing supply.

They don't remove stock from supply...

More food for thought: Most high density housing is investment property. Most low density housing is owner occupied.

[Prince George]

Investors that are purchasing existing housing stock aren't increasing supply. As I mentioned earlier, this is a criticism that I've seen of our present investment regulations, that they are slanted towards "Mum and Dad" investors, who tend to remove stock from our housing supply.

They don't remove stock from supply...

More food for thought: Most high density housing is investment property. Most low density housing is owner occupied.

True on stock, let me rephrase - they raise the price of the existing stock without increasing supply. And the rental house two doors down from us (indeed, practically anything in our neighbourhood) is low density housing and is an investment property. When the price of housing is raised by people making these investments, they make it more difficult for larger investors to increase the density in our existing low-density neighbourhoods. It's a thought that really struck me when I saw those "workingman homes" in Hilton, that it was possible for them to make pro-density changes like the rear access alleys only because they could operate on a whole block at a time, not property-by-property.

[AtD]

When the price of housing is raised by people making these investments, they make it more difficult for larger investors to increase the density in our existing low-density neighbourhoods.

How? Both their costs and their returns would be higher but either way they'd still have the problem of requiring many properties from many owners.