Showing posts with label Wealth. Show all posts
Showing posts with label Wealth. Show all posts

Wednesday, 21 March 2018

Wealth Inequality in Australia – something to think about



In 2015-16 there were an est. 326,000 to 337,000 households out of 8.9 million households which could be classified as the richest Australian households based on income and/or wealth, according to the Australian Bureau of Statistics.

Wealth in this cohort starts at $10 million and rises, with average weekly incomes starting at a little over $5,000.

The Guardian, 18 March 2018:

The richest 20% of Australians hold about 40% of the national income but nearly 65% of the national wealth, and a majority of the wealth is held by those over 55. And our tax system is designed to help them not only keep it, but to garner more and then give it to their children (who then garner more and then give it to their children, who then ...)

Our retirement system is based around tax-free holdings of wealth – through the family home, which is exempt from capital gains tax, and tax-free income from superannuation.

With those exemptions comes revenue forgone, and the cost of paying for our ageing population is an issue that is hitting us square between the eyes.

The prime earning age for workers is between 25 and 54. Between those ages, you are no longer studying, and not really thinking about retirement. These workers not only power much of our production, but also our tax revenue.

And right now the cohort is shrinking.

Currently just 41% of the population is aged between 25 and 54. The last time it was that low was in 1987, when the first baby boomers were entering their 40s.

Back then, it wasn’t a problem because only 10.5% of the population was aged over 65. But now those 40-year-old baby boomers are retiring and those over 65 account for 15.5% of our population.

That jump is the equivalent of about 1.2 million extra people aged over 65 – people who mostly don’t work (and nor should they be expected to), or pay income tax, but whose pensions and services need to be paid for by the revenue derived from those prime-aged workers.

So what is to be done?

You could – as is the government’s current policy – increase the retirement age to 70 (this policy is still on the Department of Human Services website). That might be fine for someone like me typing away at a desk but not for many others.

You could “crack down on welfare cheats”. The problem is, despite protestations from the government and conservative media, there aren’t many of those.

On Friday, the government announced that it had saved $43.4m – $17.8m in this financial year – from “more than 1,000 wealthy welfare cheats”. That’s from a $46.1bn annual budget for Newstart, DSP and Family Tax Benefit (and the aged pension is another $45.4bn).

Or you could, as the ALP is doing, seek to find extra revenue by cutting out rorts that were designed as electoral sweeteners and favours to the Howard-Costello key demographic.

When this imputation cash rebate was introduced, not many were affected but like any good tax rort, accountants soon caught wind. Add in the 2006 decision to make income from superannuation tax free for those over 60, and suddenly you had a lot of people with a high actual income but very low or zero taxable income taking advantage of it.

Further add in this weird belief that the retirement nest egg must not be touched, and you get a lot of idiotic reporting – such as in the Herald Sun, which had the case study of a woman with an income of $160,000, who we should feel sad for because she will lose her $12,775 rebate. She could, of course, sell some of her shares, but that would actually be using superannuation for its purpose and not as a tax-free inheritance fund.

So it is a smart and needed policy, but also a dangerous one because it affects an area shrouded in confusion and thus very much susceptible to fear-mongering……


Friday, 9 March 2018

Two perspectives on global economic and social inequality


So you thought trade agreements were really about win-win free trade?

John F. Kennedy School of Government Harvard University, Dani Rodrik, excerpts from What Do Trade Agreements Really Do?, February 2018:

As trade agreements have evolved and gone beyond import tariffs and quotas into regulatory rules and harmonization, they have become more difficult to fit into received economic theory. Nevertheless, most economists continue to regard trade agreements such as the Trans Pacific Partnership (TPP) favorably. The default view seems to be that these arrangements get us closer to free trade by reducing transaction costs associated with regulatory differences or explicit protectionism. An alternative perspective is that trade agreements are the result of rent-seeking, self-interested behavior on the part of politically well-connected firms – international banks, pharmaceutical companies, multinational firms. They may result in freer, mutually beneficial trade, through exchange of market access. But they are as likely to produce purely redistributive outcomes under the guise of “freer trade…..

The consensus in favor of the general statement supporting free trade is not a surprise. Economists disagree about a lot of things, but the superiority of free trade over protection is not controversial. The principle of comparative advantage and the case for the gains from trade are crown jewels of the economics profession. So the nearly unanimous support for free trade in principle is understandable. But the almost identical level of enthusiasm expressed for the North American Free trade Agreement—that is, for a text that runs into nearly 2,000 pages, negotiated by three governments under pressures from lobbies and special interests, and shaped by a mix of political, economic, and foreign policy objectives—is more curious. The economists must have been aware that trade agreements, like free trade itself, create winners and losers. But how did they weight the gains and losses to reach a judgement that US citizens would be better off “on average”? Did it not matter who gained and lost, whether they were rich or poor to begin with, or whether the gains and losses would be diffuse or concentrated? What if the likely redistribution was large compared to the efficiency gains? What did they assume about the likely compensation for the losers, or did it not matter at all? And would their evaluation be any different if they knew that recent research suggests NAFTA produced minute net efficiency gains for the US economy while severely depressing wages of those groups and communities most directly affected by Mexican competition?

Perhaps the experts viewed distributional questions as secondary in view of the overall gains from trade. After all, opening up to trade is analogous to technological progress. In both cases, the economic pie expands while some groups are left behind. We did not ban automobiles or light bulbs because coachmen and candle makers would lose their jobs. So why restrict trade? As the experts in this survey contemplated whether US citizens would be better off “on average” as a result of NAFTA, it seems plausible that they viewed questions about the practical details or the distributional questions of NAFTA as secondary in view of the overall gains from trade.

This tendency to view trade agreements as an example of efficiency-enhancing policies that may nevertheless leave some people behind would be more justifiable if recent trade agreements were simply about eliminating restrictions on trade such as import tariffs and quotas. In fact, the label “free trade agreements” does not do a very good job of describing what recent proposed agreements like the Trans-Pacific Partnership (TPP), the Trans-Atlantic Trade and Investment Partnership (TTIP), and numerous other regional and bilateral trade agreements actually do. Contemporary trade agreements go much beyond traditional trade restrictions at the border. They cover regulatory standards, health and safety rules, investment, banking and finance, intellectual property, labor, the environment, and many other subjects besides. They reach well beyond national borders and seek deep integration among nations rather than shallow integration, to use Robert Lawrence’s (1996) helpful distinction. 

According to one tabulation, 76 percent of existing preferential trade agreements covered at least some aspect of investment (such as free capital mobility) by 2011; 61 percent covered intellectual property rights protection; and 46 percent covered environmental regulations (Limão 2016)…..

Consider first patents and copyrights (so-called “trade-related intellectual property rights” or TRIPs). TRIPs entered the lexicon of trade during the Uruguay Round of multilateral trade negotiations, which were completed in 1994. The US has pushed for progressively tighter rules (called TRIPs-plus) in subsequent regional and bilateral trade agreements. Typically TRIPs pit advanced countries against developing countries, with the former demanding stronger and lengthier monopoly restrictions for their firms in the latter’s markets. Freer trade is supposed to be win-win, with both parties benefiting. But in TRIPs, the advanced countries’ gains are largely the developing countries’ losses. Consumers in the developing nations pay higher prices for pharmaceuticals and other research-intensive products and the advanced countries’ firms reap higher monopoly rents. One needs to assume an implausibly high elasticity of global innovation to developing countries’ patents to compensate for what is in effect a pure transfer of rents from poor to rich countries. That is why many ardent proponents of free trade were opposed to the incorporation of TRIPs in the Uruguay Round (e.g., Bhagwati et al. 2014). Nonetheless, TRIPs rules have not been dropped, and in fact expand with each new FTA. Thanks to subsequent trade agreements, intellectual property protection has become broader and stronger, and much of the flexibility afforded to individual countries under the original WTO agreement has been eliminated (Sell 2011).

Second, consider restrictions on nations’ ability to manage cross-border capital flows. Starting with its bilateral trade agreements with Singapore and Chile in 2003, the US government has sought and obtained agreements that enforce open capital accounts as a rule. These agreements make it difficult for signatories to manage cross-border capital flows, including in short-term financial instruments. In many recent US trade agreements such restrictions apply even in times of macroeconomic and financial crisis. This has raised eyebrows even at the International Monetary Fund (IMF, Siegel 2013). Paradoxically, capital account liberalization has become a norm in trade agreements just as professional opinion among economists was becoming more skeptical about the wisdom of free capital flows. The frequency and severity of financial crises associated with financial globalization have led many experts to believe that direct restrictions on the capital account have a second-best role to complement prudential regulation and, possibly, provide temporary breathing space during moments of extreme financial stress. The IMF itself, once at the vanguard of the push for capital-account liberalization, has officially revised its stance on capital controls. It now acknowledges a useful role for them where more direct remedies for underlying macroeconomic and financial imbalances are not available. Yet investment and financial services provisions in many FTAs run blithely against this new consensus among economists. A third area where trade agreements include provisions of questionable merit is socalled “investor-state dispute settlement procedures” (ISDS). These provisions have been imported into trade agreements from bilateral investment treaties (BIT). They are an anomaly in that they enable foreign investors, and they alone, to sue host governments in special arbitration tribunals and to seek monetary damages for regulatory, tax, and other policy changes that reduce their profits. Foreign investors (and their governments) see ISDS as protection against expropriation, but in practice arbitration tribunals interpret the protections provided more broadly than under, say, domestic US law (Johnson et al., 2015). Developing countries traditionally have signed on to ISDS in the expectation that it would compensate for their weak legal regimes and help attract direct foreign investment. But ISDS also suffers from its own problems: it operates outside accepted legal regimes, gives arbitrators too much power, does not follow or set precedents, and allows no appeal. Whatever the merits of ISDS for developing nations, it is more difficult to justify its inclusion in trade agreements among advanced countries with well-functioning legal systems (e.g. the prospective Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and European countries).

Read the full paper here.

So you thought globalisation was a good idea?

Harvard Business Review, Lucas Chancel, 40 Years of Data Suggests 3 Myths About Globalization, 2 March 2018:

Globalization has led to a rise in global income inequality, not a reduction
Inequality between individuals across the world is the result of two competing forces: inequality between countries and inequality within countries. For example, strong growth in China and India contributed to significant global income growth, and therefore, decreased inequality between countries. However, inequality within these countries rose sharply. The top 1% income share rose from 7% to 22% in India, and 6% to 14% in China between 1980 and 2016.

Until recently, it has been impossible to know which of these two forces dominates globally, because of lack of data on inequality trends within countries, which many governments do not release publicly or uniformly. The World Inequality Report 2018 addresses this issue, relying on systematic, comparable, and transparent inequality statistics from high-income and emerging countries.

The conclusion is striking. Between 1980 and 2016, inequality between the world’s citizens increased, despite strong growth in emerging markets. Indeed, the share of global income accrued by the richest 1%, grew from 16% in 1980 to 20% by 2016. Meanwhile the income share of the poorest 50% hovered around 9%. The top 1% — individuals earning more than $13,500 per month — globally captured twice as much income growth as the bottom 50% of the world population over this period.

Income doesn’t trickle down

The second belief contests that high growth at the top is necessary to achieve some growth at the bottom of the distribution, in other words that rising inequality is necessary to elevate standards of living among the poorest. However, this idea is at odds with the data. When we compare Europe with the U.S., or China with India, it is clear that countries that experienced a higher rise in inequality were not better at lifting the incomes of their poorest citizens. Indeed, the U.S. is the extreme counterargument to the myth of trickle down: while incomes grew by more than 600% for the top 0.001% of Americans since 1980, the bottom half of the population was actually shut off from economic growth, with a close to zero rise in their yearly income. In Europe, growth among the top 0.001% was five times lower than in the U.S., but the poorest half of the population fared much better, experiencing a 26% growth in their average incomes. Despite having a consistently higher growth rate since 1980, the rise of inequality in China was much more moderate than in India. As a result, China was able to lift the incomes of the poorest half of the population at a rate that was four times faster than in India, enabling greater poverty reduction.

The trickle-down myth may have been debunked, but its ideas are still rooted in a number of current policies. For example, the idea that high income growth for rich individuals is a precondition to create jobs and growth at the bottom continues to be used to justify tax reductions for the richest, as seen in recent tax reform in the U.S. and France. A closer look at the data demands we rethink the rationale and legitimacy of such policies. 

Policy – not trade or technology – is most responsible for inequality

It is often said that rising inequality is inevitable — that it is a natural consequence of trade openness and digitalization that governments are powerless to counter. But the numbers presented above clearly demonstrate the diversity of inequality trajectories experienced by broadly comparable regions over the past decades. The U.S. and Europe, for instance, had similar population size and average income in 1980 — as well as analogous inequality levels. Both regions have also faced similar exposure to international markets and new technologies since, but their inequality trajectories have radically diverged. In the U.S., the bottom 50% income share decreased from 20% to 10% today, whereas in Europe it decreased from 24% to 22%.

Rather than openness to trade or digitalization, it is policy choices and institutional changes that explain divergences in inequality. After the neoliberal policy shift of the early 1980s, Europe resisted the impulse to turn its market economy into a market society more than the US — evidenced by differences on key policy areas concerning inequality. The progressivity of the tax code — how much more the rich pay as a percentage — was seriously undermined in the U.S., but much less so in continental Europe. The U.S. had the highest minimum wage of the world in the 1960s, but it has since decreased by 30%, whereas in France, the minimum wage has risen 300%. 

Access to higher education is costly and highly unequal in the U.S., whereas it is free in several European countries. Indeed, when Bavarian policymakers tried to introduce small university fees in the late 2000s, a referendum invalidated the decision. Health systems also provide universal access to good-quality healthcare in most European countries, while millions of Americans do not have access to healthcare plans.


Tuesday, 13 February 2018

Another how low can they go moment courtesy of the Catholic Church in Australia



The Sydney Morning Herald, 12 February 2018:

The Catholic Church in Australia is worth tens of billions of dollars, making it one of the country’s biggest non-government property owners, and massively wealthier than it has claimed in evidence to major inquiries into child sexual abuse.

A six-month investigation by The Sydney Morning Herald has found that the church misled the Royal Commission into Institutional Responses to Child Sexual Abuse by grossly undervaluing its property treasures in both NSW and Victoria while claiming that increased payments to abuse victims would require cuts to its social programs.
The investigation was based on intricate data from local councils that allowed more than 1860 valuations of church-owned property in Victoria. That showed that across 36 municipalities - including nearly all of metropolitan Melbourne - the church had land and buildings worth almost $7 billion in 2016.

Extrapolated nationally, using conservative assumptions, the church owns property worth more than $30 billion Australia-wide.

This put the Catholic church among the largest non-government property owners, by value, in NSW and Australia, rivalling Westfield’s network of shopping centres and other assets. It dwarfs all other large property owners.

"These figures confirm what we have known; there is huge inequity between the Catholic Church’s wealth and their responses to survivors," said Helen Last, chief executive of the In Good Faith Foundation.

"The 600 survivors registered for our Foundation’s services continue to experience minimal compensation and lack of comprehensive care in relation to their Church abuses. They say their needs are the lowest of church priorities.’’…..

Monetary payments to abuse survivors have averaged just $49,000 under Towards Healing, the national compensation system established by the church in 1996……

The church also has extensive non-property assets including Catholic Church Insurance and its own internal banks - often known as Catholic Development Funds - with nearly $1 billion in assets in Sydney alone.

And it has other investments, including in superannuation, telecommunications and in the stock-market. A Church-owned fund manager has more than $1.4 billion under management.

Thursday, 7 December 2017

Don't laugh, this Nationals MP was serious


David Arthur Gillespie of Wauchope entered the Australian Parliament in 2013 as a National Party Member of the House of Representatives representing the Lyne electorate, with an annual salary many of his constituents can only dream about.

He is quite literally a man of property – aside from his house and farm he owns four commercial and residential investment properties, which appear to be snugly sitting in one or more family trusts along with a portfolio of shares.

His total parliamentary entitlements expenditure paid by the Department of Finance was $65,512.97 in 2013,  $399,946.31 in 2014, $339,797.06 in 2015 and $381,651 in 2016.

Yet two years ago he caught the greed bug and wanted more, more, more………..

ABC News, 2 December 2017:

The Prime Minister's Department has lost a two-year fight to conceal a minister's bid for thousands of dollars in extra pollie-perks, including charter flights and boat rides.

Former speaker Bronwyn Bishop's taxpayer-funded helicopter ride sparked an inquiry into politicians' entitlements.

Most MPs and senators' submissions were publicly released, but bureaucrats decided to hide Nationals MP David Gillespie's proposal.

After a lengthy freedom of information (FOI) battle, the ABC can reveal Dr Gillespie argued politicians in seats like his should annually be given:

* Nearly $15,000 extra "charter allowance" for charter flights, hire cars, boat rides or taxis
* 14 days more travel allowance for overnight stays within the electorate
* An additional office
* One more full-time employee

Dr Gillespie is the member for Lyne on the New South Wales mid-north coast.

He argued the boost would help meet "the significant logistical challenges that confront all rural MPs in meeting the needs and expectations of their constituents".

"If the additional costs are $10 million, it is a small price to pay to ensure fairness within our democracy is delivered," he wrote in the October 2015 submission.

Dr Gillespie wanted extra expenses for all electorates 10,000 square kilometres or larger.

The Assistant Health Minister's seat is about 16,000 square kilometres in size, and includes towns of Taree and Wauchope.

If implemented today, 24 Coalition MPs would benefit, along with six Labor members and two independents.

Electorates 100,000 square kilometres or larger would have received an even bigger windfall under the blueprint.

But the Government has only partly adopted one of his ideas by funding an extra office in Australia's seven biggest electorates — a group of seats that does not include Lyne.

I’m sure David Gillespie is as pleased with mainstream media outing this attempted cash grab as he was when they reported this……

The Sydney Morning Herald, 1 October 2017:

A Turnbull government minister is facing up to $500,000 in personal legal bills to defend his job against a Labor High Court challenge.

While the government is covering the costs of the seven federal politicians referred to the court over their citizenship status, the eighth MP facing constitutional eligibility questions is not getting the same assistance.

Labor is challenging Assistant Health Minister David Gillespie's right to stay on in Federal Parliament, putting the government's slender majority at risk, because it believes he may have an indirect financial interest in the Commonwealth – grounds for disqualification under section 44(v) of the constitution.

As revealed by Fairfax Media in February, the Nationals MP owns a small suburban shopping complex in Port Macquarie and one of the shops is an outlet of Australia Post – a government-owned corporation.

The Lighthouse Beach Australia Post outlet in Port Macquarie owned by Nationals MP David Gillespie. 
Photo: Peter Daniels

Alley v Gillespie [2017] HCA is scheduled to be heard on Tuesday,12 December 2017 by High Court of Australia.

Friday, 1 December 2017

Australians with lower incomes are dying sooner from potentially preventable diseases than their wealthier counterparts


The Conversation, 28 November 2017:

Australians with lower incomes are dying sooner from potentially preventable diseases than their wealthier counterparts, according to our new report.

Australia’s Health Tracker by Socioeconomic Status, released today, tracks health risk factors, disease and premature death by socioeconomic status. It shows that over the past four years, 49,227 more people on lower incomes have died from chronic diseases – such as diabetes, heart disease and cancer – before the age of 75 than those on higher incomes.

A steady job or being engaged in the community is important to good health. Australia’s unemployment rate is low, but this hides low workforce participation, and a serious problem with underemployment. Casual workers are often not getting enough hours, and more and more Australians are employed on short-term contracts.

There’s a vicious feedback loop – if your health is struggling, it’s harder to build your wealth. If you’re unable to work as much as you want, you can’t build your wealth, so it’s much tougher to improve your health.

Our team tracked health risk factors, disease and premature death by socioeconomic status, which measures people’s access to material and social resources as well as their ability to participate in society. We’ve measured in quintiles – with one fifth of the population in each quintile.

We developed health targets and indicators based on the World Health Organisation’s 2025 targets to improve health around the globe.

The good news is that for many of the indicators, the most advantaged in the community have already reached the targets.

The bad news is that poor health is not just an issue affecting the most vulnerable in our community, it significantly affects the second-lowest quintile as well. Almost ten million Australians with low incomes have much greater risks of developing preventable chronic diseases, and of dying from these earlier than other Australians.


Read the rest of the article here.

Wednesday, 18 October 2017

Australia - where the rich get richer as wealth & income inequality grows (interactive mapping)


The Guardian, 12 October 2017

Australia is among countries with the highest growth in income inequality in the world over the past 30 years, according to the International Monetary Fund.

Vitor Gaspar, the IMF’s director of fiscal affairs, has told an audience at the launch of the IMF’s latest Fiscal Monitor that Australia’s income inequality growth has been similar to the US, South Africa, India, China, Spain and the UK since the 1980s.

Last month the treasurer, Scott Morrison, said that income inequality was not getting worse in Australia.

Morrison told the Business Council of Australia in late September that Treasury and the Reserve Bank had found, in specific analysis of current wage fundamentals, that Australian wages were growing slowly across most industries in the economy, and most regions of the country, so the slow growth was evenly shared.

However, he would not release the Treasury analysis.

Graph showing inequality by country by the IMF. Illustration: IMF

Gaspar said IMF staff had used the Organisation for Economic Co-operation and Development’s income distribution database, Eurostat, and the World Bank’s Povcalnet data, among other sources, to calculate that income inequality had increased in nearly half of the world’s countries in the past three decades, and Australia had experienced a “large increase” in that time.

“Most people around the world live in countries where inequality has increased,” he said.

The IMF’s latest Fiscal Monitor, released overnight, is dedicated to the global growth in income inequality. It warns that while some inequality is inevitable in a market-based economic system as a result of “differences in talent, effort, and luck”, excessive inequality could “erode social cohesion, lead to political polarisation, and ultimately lower economic growth”. 

It also warns that income inequality tends to be “highly correlated” with wealth inequality, inequality of opportunity, and gender inequality……

Earlier this year, the OECD economic survey of Australia in April found “inclusiveness has been eroded” in the past two decades.

“The Gini coefficient has been drifting up and households in upper-income brackets have benefited disproportionally from Australia’s long period of economic growth,” the report said.

“Real incomes for the top quintile of households grew by more than 40% between 2004 and 2014, while those for the lowest quintile only grew by about 25%.”

In July the Reserve Bank governor, Philip Lowe, when asked about his views on inequality at a charity lunch in Sydney, said it had grown “quite a lot” in the 1980s and 1990s and had risen “a little bit” recently, but it was important to make a distinction between income and wealth inequality.

“Wealth inequality has become more pronounced particularly in the last five or six years because there’s been big gains in asset prices,” Lowe said. “So the people who own assets, which are usually wealthy people, have seen their wealth go up.”

He said income inequality had increased slightly in recent years, but wealth inequality was more pronounced because of rising asset prices.

So how do individual regions across Australia fare?

The Guardian on 4 February 2016 published this Australia-wide interactive graphic:



Income Distribution in NSW Northern Rivers Region (based on Australian Taxation Office data for 2012-13)

Byron – top 10%  of individuals lodging personal tax forms held 38.5% of total income – Gini coefficient 0.544

Kyogle – top 10% of individuals lodging personal tax forms held 33.9% of total income – Gini coefficient 0.554

Ballina – top 10% of individuals lodging personal tax forms held 33.2% of income – Gini coefficient 0.495

Tweed – top 10% of individuals lodging personal tax forms held 31.7% of total income – Gini coefficient 0.473

Clarence Valley – top 10%  of individuals lodging personal tax forms held 31.1% of total income – Gini coefficient 0.493

Lismore – top 10% of individuals lodging personal tax forms held 29.7% of total income – Gini coefficient 0.459

Richmond Valley – top 10% of individuals lodging personal tax forms held 28.1% of total income  – Gini coefficient 0.448

*  Some low income earners, eg. those receiving Government pensions/allowances or earning below the tax free threshold may not be present in the data, as they may not be required to lodge personal tax forms. [Australian Bureau of Statistics, Estimates of Personal Income for Small Areas, Total Income, 2012-13]

Sunday, 18 June 2017

Ostentatious shows of wealth a habit the Australian Foreign Minister Julie Bishop obviously finds hard to break


Australian Foreign Minister & Liberal MP for Curtain Julie Bishop’s wardrobe shrieks designer labels, expensive shoes and accessories. Chanel, Armani, Vuitton, Louboutin, Choo, Hand, Aujoulet, Zampatti, Gilbert – all form part of the political mannequin parade.

This year’s Midwinter Ball in Canberra was notable because someone managed to put a price tag on the evening gown

A whopping AUD$32,142.97 at the time of writing or, to put it another way, worth an est. 93 per cent of the annual wage before tax of an ordinary Australian full-time worker on minimum wage.

A look at some of those F*ck You gowns down the the years

Midwinter Ball 2013

Midwinter Ball 2014

Midwinter Ball 2015

Midwinter Ball 2016

Midwinter Ball 2017

Monday, 1 May 2017

Looking for all those vacant residential dwelling being deliberately kept out of the Australian housing market


In the 2011 Census there were 2,297,460 rented private dwellings recorded. This was 29.6 per cent of the 7,760,322 private dwellings declared covering an est. 8,420,000 households.


Simple maths shows there was possibly around 534,000 private dwellings for which there were unlikely to be tenants and which were potentially available for sale.

Given these excess dwellings are likely to be unevenly spatially distributed, a number of metropolitan suburbs and regional urban areas would still be experiencing limited availability of housing stock for rent or sale and therefore demand may be unmet.

However, according to BIS Sharpnel; In 2017After a record breaking building boom in most capitals, Australia will have 24,039 extra homes above what are needed and will be oversupplied for the first time in more than a decade, a new report shows.

So why is it so hard to find a place to rent in large metropolitan areas and why is housing for sale so expensive?

It appears there is an artificial drought which can only be explained by the high percentage of investment properties in the housing stock mix which had reached 23 per cent by 2015, comprising one quarter of all house stock and two-thirds of apartment stock.

Domain.com.au released a ball park estimate of all vacant properties on 4 April 2017, based on Prosper Australia  research:

QUEENSLAND

An estimated 59,000 properties are standing empty in Queensland.

NEW SOUTH WALES

There are an estimated 121,000 properties vacant across New South Wales (with up to 90,000 properties standing empty in Sydney suburbs).

VICTORIA

The president of Prosper Australia, Catherine Cashmore, who has collected data on water usage to show there are 80,000 empty homes in Melbourne, said an empty home tax was an intuitively appealing policy that could pave the way for greater reforms.

SOUTH AUSTRALIA

There are an estimated 23,000 properties vacant in South Australia.

WESTERN AUSTRALIA

An estimated 21,000 vacant properties.

NORTHERN TERRITORY

There are an estimated 2,000 vacant properties in the Territory.

AUSTRALIAN CAPITAL TERRIOTORY

An estimated 5,000 vacant properties.

TASMANIA

An estimated 7,000 vacant properties.

The Sydney Morning Herald reported on 28 March 2016:

Vacant properties were among the "perverse outcomes" of tax incentives that encouraged some investors to favour capital growth over rental returns, according to the analysis by the UNSW's City Futures Research Centre.

"Leaving housing empty is both profitable and subsidised by government," researchers Bill Randolph and Laurence Troy said. "This is taxation lunacy and a national scandal."

The ANU Centre for Social Research and Methods analysed Australian Taxation Office data and found at least 4,204 “legislators” who owned investment properties of which more than 13.87 per cent appear to negatively gear their properties.


So it is not hard to see why the Turnbull Government is dragging its heels when faced with the “perverse outcomes” arising from negative gearing and capital gain tax concessions.

Or why a Coalition state government like the NSW Government would decide that the best way to address a perceived housing shortage is to give its political supporters free rein.

Sky News, 9 January 2017:

The NSW government will be able to fast-track developments under a massive shake-up of the state's planning system aimed at tackling Sydney's chronic housing shortage.
Councils will determine fewer development applications under the proposed changes but will be responsible for devising more planning strategies with local communities.
Other proposals include providing incentives for developers if they consult with neighbours and the community before lodging development applications and simplifying building regulations.

It defies belief that the NSW Coalition Government would believe that just building more private housing for investors to warehouse for financial gain is a solution to rising house prices and limited availability.


Realestate.com.au calculates that it requires at least one person in a marriage/
partnership, presumably without children, to be in full-time employment - and earning more in wages each week than half the current workforce - for the couple to have any hope of saving for a deposit within a reasonable time period:


So if our multimillionaire prime minister, Malcolm Bligh Turnbull, and his parliamentary fellow travellers won’t act to ease housing affordability by removing taxation loopholes which allow the greedy to manipulate the housing market to their advantage, then it is up to voters to apply a cattle prod to their privileged haunches – and vote them out in 2018-19.

And if state governments won’t move to penalise investors who deliberately leave residential dwellings vacant for a trouble-free capital gain as well as a tax deduction, then voters with an eye to the future of their children and grandchildren might consider letting them know how they feel about the situation.

Thursday, 27 April 2017

Ninety-six per cent of Australian federal parliamentarians own a property


ABC News, 20 April 2017:

There's no housing affordability crisis in the ranks of Federal Parliament's members and senators.

The politicians charged with tackling the thorny issue of spiralling house prices are among the nation's most aggressive property investors, an analysis by the ABC has revealed.

The 226 individuals own 524 properties between them and about half of them own investment properties.

That means many of our politicians have a very personal interest in any changes to negative gearing and the capital gains tax discount……

Ninety-six per cent of parliamentarians own a property. Only 10 out of our 224 elected officials aren't in the game.

Compare that to the rest of Australia, where home ownership is expected to dip below 50 per cent sometime this year.

Register of Members’ Interests for 45th Australian Parliament.

Although a number of investment properties are listed in the members’ register this does not necessarily mean that additional property is not owned as part of superannuation schemes (other than that operated by the Commonwealth of Australia) or included in the assets of a private corporation in which a member has a significant shareholding.

Wednesday, 22 February 2017

A university education and a highly paid job the road to home ownership in Australia for the masses?


The Turnbull Government’s tin ear was on full display in The Sydney Morning  Herald on 21 February 2017:

The Coalition MP tasked with tackling Australia's housing affordability problems has said a "highly paid job" is the "first step" to owning a home.

The federal Victorian MP Michael Sukkar, who is the Assistant Minister to the Treasurer and has been charged with finding solutions to the country's housing affordability woes, also pointed to his own experience in purchasing two properties by the age of 35 as an example to struggling homebuyers. 

"We're also enabling young people to get highly paid jobs which is the first step to buying a house, it's not the only answer but it's the first step," Mr Sukkar told Sky News on Monday night.

"I want to see young people like me, leave university, I was a terrible university student but I left university because the economy was so good, I got a great start and I was able to forge a career," he said.

The Liberal MP for Deakin since September 2013 and Assistant Minister to the Treasurer, 35 year-old Michael Sven Sukkar LLB, BComm (Deakin), LLM (Melb), who apparently walked straight into well-paying employment at PricewaterhouseCoopers after leaving university and eleven years later owns his own home in Blackburn and a residence in Canberra after selling a second investment property in Fitzroy.

Conveniently the Australian taxpayer is assisting Mr. Sukkar with the mortgage on the possibly negatively geared Canberra property by supplying him with $273.00 for every night he stays in his own residence while parliament is sitting – an est. $11,466 for the 2017 calendar year alone.

Even at a stretch, married to a professionally qualified wife with a business partnership in a multinational firm, Michael Sukkar’s economic progress though life is hardly typical of a couple seeking to buy their first home.

However, typically of a member of the Liberal Party he assumes almost everyone can be fortunate enough to have small business owners as parents, a good education and a well-paying job before securing a parliamentary seat with an excellent superannuation plan.

According to They Vote For You during his almost three and a half years in the Australian Parliament Michael Sukkar has voted for:


And voted against: