Day to Day Politics: The TRUTH about Negative Gearing
If ever an Australian politician scored an own goal it had to be Scott Morrison this week. Of course he was ably aided and abetted by The Australian Newspaper. The official newsletter of the conservative parties.
From the time Labor introduced its policy on Negative Gearing, Malcolm Turnbull and Scott Morrison have sought to conduct a scare campaign on the issue. Morrison could have had a calm, sensible debate as he indicated he wanted to do when such matters arose but political expediency trumped good governance and hypocrisy won the day.
Frankly, Morrison, a co-founder of Christian Church Hillsong, is telling so many lies about Negative Gearing that as a Treasurer he makes Joe Hockey almost sound saintly. Turnbull, a Catholic, is doing the same.
It doesn’t seem to matter that a central tenet of the Gospel is ‘truth’.
So The Australian on Thursday publishes a report by BIS Shrapnel that Morrison says paints Labor’s policy in bad light.
The report has nothing to do with Labor’s proposition but Morrison arrives like a lone star cowboy in Question Time with two Colt 45 pistols rapidly exhausting both barrels before reloading. He does have a quick tongue.
The Australian withdraws the article from its online site. It often has to. It has no credibility and the BIS won’t disclose who commissioned the report.
Morrison rejects all the wrongs, inconsistencies and outright lies and both he and Turnbull in Question Time robustly, in spite of the reports lack of credibility, continue to say that if adopted, Labor’s policy would cause significant damage to the housing market and to our economy. Yet another Clayton’s crisis.
Grattan Institute chief executive John Daley says the report and its underlying assumptions:
‘did not pass the giggle test’ and were ‘manifestly ridiculous’.
He added:
‘Voters should be asking themselves whether a responsible government would rely on this sort of nonsense in a public policy debate. ‘ Late on Thursday the Prime Minister was still defending the report describing it as ‘thorough analyses’.
Other comments came from Board of Taxation chairman Michael Andrews who told a tax conference in Melbourne that the debate about tax was highly politicised, and regrettable:
‘The Australian Financial Review said that the Government has abandoned plans to make changes to negative gearing. The issue has proved to be divisive and it would be politically risky to proceed with the changes. The Government is now likely to focus on the changes to negative gearing proposed by the Australian Labor Party.’
In other words a scare campaign.
Besides the ridiculous assertion that house prices are going to go through the roof under Labor’s plan. Morrison also contends that:
‘Two thirds of those who use negative gearing have a taxable income of $80,000 or less. Seventy per cent own just one property, and 70 per cent have a net rental loss of less than $10,000.’
ABC Fact Check investigated this claim and found that those with taxable incomes above $80,000 have a proportionately larger share of the net rental losses.
Now the point of all this follows on from my Day to Day Politics yesterday when I posed this question: What resources does the average punter have to access the truth? If we have the time we can do some research? Look up the facts presented by fact checkers. Pay for FOI documents. Who has time for all that?
This scare campaign being waged by Turnbull and Morrison in light of what the PM said about fair, reasoned, transparent and open debate illustrates my point.
The truth is that in the absence of readily identifiable evidence we all use what is generally called ‘the pub test or common sense test.’ In other words we digest all the available information and ask ourselves the question ‘is it plausible?’ Does what I am being told have the ring of truth about it. We make judgements based on our life’s experience. Unless your personal bias clouds the ’Pub test’ your inner conscience dictates your judgement.
Now I’m not wanting to confuse the issue here because I thought I had my general principle of the ‘Pub Test’ sort of philosophically in order. Then a Facebook friend by the name of Phil Rudkin sent me this to ponder:
‘Unfortunately we are all subject to what is known as ‘confirmation bias’. That is, we believe what will confirm our beliefs and disregard that which runs contrary to our beliefs. This is a human failing found in us all. So, a lie that matches what we believe will be used to reinforce that belief. I am very aware of the potential for confirmation bias in myself and always try to seek evidence to support things that I hear from sources as unreliable as politicians but know that I will often fail. Confirmation bias is often confused with common sense and so will cause the pub test to fail.’
Now you don’t have to take my word for it but I found a piece headed.
‘Morrison painting a false picture of negative gearing.’
It’s by Rob Burgess. It passed my pub test (revisited) because it cut through the bullshit and presented a clear view of just where and why Turnbull and Gunna Morrison don’t have a leg to stand on. They are telling confirmation bias lies.
My thought for the day.
‘Never confuse what you want with what you need’
One house is enough.
PS. With degrees from the finest learning institutions in the world dripping from the walls of their Ministerial offices, after two and a half years the Abbott/Turnbull government still needs more time to formulate a tax plan.
That’s a fact. You can check it.
Like what we do at The AIMN?
You’ll like it even more knowing that your donation will help us to keep up the good fight.
Chuck in a few bucks and see just how far it goes!
Your contribution to help with the running costs of this site will be gratefully accepted.
You can donate through PayPal or credit card via the button below, or donate via bank transfer: BSB: 062500; A/c no: 10495969
48 comments
Login here Register here-
Terry2 -
Kaye Lee -
John Kelly -
Kaye Lee -
John Lord -
John Lord -
Sally K -
Michael Taylor -
Michael Taylor -
Jennifer Meyer-Smith -
roaminruin -
Sen Nearly Ile -
Jennifer Meyer-Smith -
Sen Nearly Ile -
Carol Taylor -
Tim -
Peter F -
Deanna Jones -
Michael -
David -
Backyard Bob -
@mars.08 -
Backyard Bob -
Kaye Lee -
Steve Laing -
cornlegend -
AnneC -
Faye Cox -
John Lord -
David -
Jennifer Meyer-Smith -
cornlegend -
Backyard Bob -
Sally K -
Jennifer Meyer-Smith -
Wally -
Jennifer Meyer-Smith -
Wally -
Jennifer Meyer-Smith -
cornlegend -
Wally -
Sally K -
Wally -
Jennifer Meyer-Smith -
Wally -
cornlegend -
Wally -
Andrew Ostrom
Return to home pageAs the AFP start investigating the leaking of sensitive defence related information they could do worse than adopting a suggestion noted in the Crikey newsletter.
The idea is to have those who had access to the information complete a Statutory Declaration that they are not responsible for the leak.
A statutory declaration is a document executed under oath and any false statements are accountable with penalties including jail of up to four years (Statutory Declarations Act 1959).
Our Constitution – s.44 (ii) – disallows anybody convicted of a crime, punishable with a jail sentence of one year or longer, from sitting in our parliament.
So, it seems that the AFP, as a starting point, could have statutory declarations executed by the usual suspects, perhaps starting alphabetically : Abbott, Abetz, Andrews and so on……………could save a lot of time .
The TRUTH about negative gearing is that John Howard’s disastrous economic mismanagement has landed us in the position we are in now. Mike Seccombe has written a great article:
As Roger Wilkins explains: “There was previously a quite enlightened policy whereby capital gains were adjusted for inflation and then after adjustment, taxed at the marginal rate of income. For reasons for which there was no good explanation, they decided to go with a 50 per cent [tax] discount on all capital gains after an asset was held for 12 months or more.”
In combination, negative gearing and the capital gains discount encouraged investors to make a loss on their rental property and to focus not on rental returns but on capital gains.
The effect was to drive up house prices and lower rates of home ownership as would-be owner-occupiers were outbid by speculative investors.
https://www.thesaturdaypaper.com.au/news/politics/2016/03/05/inside-john-howards-legacy/14570964002969
He also talks about how Howard directed money away from public schools and hospitals into the private sector. Income inequality skyrocketed. With Howard’s tax cuts, 42 per cent went to the top 10 per cent of income earners. The most affluent 20 per cent of income earners got more than the bottom 80 per cent. Without these income tax cuts, there would be no budget crisis now.
Excellent article John, which should be in the ‘News and Politics’ category. All political statements should pass through a ‘truth scanner’ before being released to the general public.
Ya gotta love Mike Seccombe’s turn of phrase where he calls Turnbull the “putative leader of the government.”
John because I post daily I would clog up that section.
Kaye. He also opened up lending outside of the banks and people borrowed like it was going out of fashion.
Leith van Onselen at Macrobusiness has advocated reform of negative gearing for a long time and his articles are a great source of information about it.
http://www.macrobusiness.com.au/?s=negative+gearing
Personally I have no problem with them in the News and Politics section.
It’s now in News and Politics. ?
Motor-mouth Morrison talks so fast that I’m always worried he’s going to spit out of his mouth. It’s bad enough watching him blatantly aiming to deceive us with saying black is white and vice versa.
Anybody with any semblance of mathematical understanding would realise that Snott’s claim that removing negative gearing tax advantages from the existing housing market because it would reduce supply and demand, is somewhat peculiar considering the supply and demand will be provided by boosting the new home building market.
Anybody would also see through the scare campaign that less rich (and overseas) people preying on the available housing so they can negative gear, will only improve the housing market by allowing first-home buyers back in, as well as other maturer home-seekers.
Morrison is a co-founder of Hillsong? Well, well, well. I knew he was a happy clapper but that is a revelation. Here’s a man who trousers the public coin with no sense of irony or hypocrisy. Here’s a man who re-brands Jesus to market to the greedy and selfish while kicking the disadvantaged in the guts. Here’s a man who thinks the well off can have it all in this life and get a gold pass to the next one. And this nasty piece of work has his hands on the economic levers of our nation. What a farce.
labor would do well to attack morrison on the median wage which shows half the population earns below $52000, ie below the VET fee threshold and well away from bracket creep or negative gearing.
Loved the dripping degrees of the rabbott and empty. The former destroyed my image of oxford scholars as deserving, intelligent students and the latter?????
The speculation that the rabbott is doing a rudd may have substance but neither of those two or empty are a patch on the gillard gov which had no majority in either house but got something like 800 pieces of legislation through both houses.
The coalition boys couldn’t even negotiate the budget through independent senators.
The solution of the boys and the greens?
Change the rules, to make sure only the coalition can control the senate or the balance is with the loonies.
The confusion between want and need is vital cue in education which is a need and schooling which is a want that may or may not become a need.
Truth is relative and I am one of millions who accept humanity cannot be true and one of a few who deny evil is caused by the devil.
The good cardinal summed up the truth and humanity of religion:
“to resign would be an admission of guilt”
Gillard spoke the truth when she said ‘no carbon tax..’ but was too scared to highlight the loony blackmail that forced the lie.
I firmly believe she and the independents could have succeeded, despite rupe and the rabbott, if not for the lemon and his hylobatidae.
The most dangerous confusion for pollies is between rights and privileges.
Those with privileges are prepared to protect themselves by eroding rights.
A good, telling final line SNI.
labor would do well to attack morrison on the median wage which shows half the population earns below $52000, ie below the VET fee threshold and well away from bracket creep or negative gearing.
Loved the dripping degrees of the rabbott and empty. The former destroyed my image of oxford scholars as deserving, intelligent students and the latter?????
The speculation that the rabbott is doing a rudd may have substance but neither of those two or empty are a patch on the gillard gov which had no majority in either house but got something like 800 pieces of legislation through both houses.
The coalition boys couldn’t even negotiate the budget through independent senators.
The solution of the boys and the greens?
Change the rules, to make sure only the coalition can control the senate or the balance is with the loonies.
The confusion between want and need is vital cue in education which is a need and schooling which is a want that may or may not become a need.
Truth is relative and I am one of millions who accept humanity cannot be true and one of a few who deny evil is caused by the devil.
The good cardinal summed up the truth and humanity of religion:
“to resign would be an admission of guilt”
Gillard spoke the truth when she said ‘no carbon tax..’ but was too scared to highlight the loony blackmail that forced the lie.
I firmly believe she and the independents could have succeeded, despite rupe and the rabbott, if not for the lemon and his hylobatidae.
The most dangerous confusion for pollies is between rights and privileges.
Those with privileges are prepared to protect themselves by eroding rights.
ps john, whom do you suggest programmes the truth scanner? Nikki Savva of 2013 or 2016? Empty of 1990s or 2009 or 2016?
Kaye Lee, and then when the poor complained about the inequity, the LNP labelled it “class envy”… And I should imagine that they’ll eventually do the same on the negative gearing issue or indeed any issue which attempts to limit upper class welfare/tax minimisation.
However, the good news is that if they attempt to extract even more money from the less privileged they will be seen for the hypocrites that they are.
They are of course already trying, such as the attempt to drum up resentment against granny who is sitting in her 50 year old inner suburban fibro who really should not be greedily gobbling up the disgustingly lousy pittance of a pension which the government endows her with, but should either sell up and move (god only knows where) or go into debt and live off the proceeds of that.
Confirmation bias aside, we should be focussing on the ludicrous nature of Morrison’s argument. He uses questionable reports to attack Labor’s policy, but when asked to stipulate what changes the LNP would make to negative gearing, his answer is he doesn’t know yet? Now, I enjoy engaging with people to discuss ideas, but if someone was arguing a particular idea was flawed, and then explained that they didn’t know what to do, I would tear them apart… They would probably start crying and say “don’t pick on me”…? Confirmation bias should only be applicable when there are two sides to the argument.
Morrison is a complete fraud. He is a disgrace to our parliament. When someone can’t use an argument in a one-on-one debate, they should be ridiculed when using it in our parliament…
Does anything this mob do pass the ‘Giggle test’?
Thanks, John, for an important article. I have lost patience with Liberal voters most of whom have no excuse for remaining ignorant.
Yes, one house is enough.
The truth lies in explaining HOW it works and its consequences – we can all then be on the same page.
When I first heard the term ‘negative gearing’ I had no idea what it meant and my initial thought was, it had to be something to do with cars and as the auto industry is progressing into areas such as ‘driver-less’ and similar this was a progression to something similar to gear less movement… I know its duh!!
Anyway getting to the point, it is thanks to articles such as this from John and others on AIM and other blogs and Social Media, I have caught up with the play.
There must be countless others who have no real understanding of the subject and will believe the lies Morrison, Turnbull, Corman, Brandis and others from the Tory front bench are pedaling. So exposure to the truth is essential. I will post to Twitter soonest.
Thanks John and all else who have helped make the subject clearer to understand.
Enough for what? I’m a little bit concerned here that in our desire to adopt a political high ground on negative gearing we’re slipping into a paradigm of outright condemnation, or negatively geared moral judgement, about property investment itself.
Are we going to start demonising property investors just for the sake of a political point? Is property investment in no way a meaningful part of our economic tapestry? Are we suggesting it’s a social ill in and of itself?
I’m all for any legislative controls that stop rorts or unfairness of counterproductive governmental largesse, but I’m uncomfortable with where this is heading. It seems unnecessary.
People on lower incomes cop it from all angles.
They spend a greater proportion of their income just on living expenses, so they get clobbered by the GST. Any money they save is probably in a bank account, so they get hit with tax on interest. They don’t have any voluntary superannuation (salary sacrifice) lurks. And they can’t minimise their taxes using negative gearing.
But, that’s all their fault, because they’re foolish and lazy, right?
I’m not sure that’s actually been a problem for low income folk for some time now. Earn taxable income on your bank balance? I wish!
John,
I’m not sure that Morrison is a “co-founder” of Hillsong. He certainly worships at the Shirelive Church and lists the founder of Hillsong, Brian Houston, as a mentor.
The big question is, why does a government so devoted to a free market, so actively promote a mechanism that distorts this? To some extent the “how” is irrelevant. The reality is, as we know, that they are quite happy to subsidise their supporters to the detriment of the rest. Subsidised private schools, subsidised private health, subsidised property investment. What a scam. Thatcherism at its finest. As long as you bribe enough of the electorate to get you into power, screw the rest.
The problem with their party is that it’s all about power, not policy. That is why they have done nothing of value, fiddling while the economy and the environment burns. And the MSM are happy to focus on the little picture.
I actually think that in another system, Malky could have been fairly effective. But once he had sold out his principles to get power in this system, he was gone. From now till his death, we need to constantly remind him that he is nothing but an unprincipled sell out. That will torture him, but he deserves nothing less.
“One house is enough.”
Geez, I feel like I’m getting a decent serve on the AIMN for being the owner of multiple properties .
Victoria Rollinson and now you John .
I actually think that with 33% of the population renters, we are providing a service.
Now I don’t dabble in shares , don’t borrow, don’t negative gear and just continue doing on what my grandfather and father started, 70 odd years ago , that being investing in properties .
I am not in it for short term profits, and I buy for long term {10-20 year plus } as this is what provides incomes for 6 of my family .
I have never had to sell at a loss.
We are continually updating and purchasing new stock and investing in new construction/development .
I have, it seems committed the crime of selling to the Chinese .
One unit development earmarked for rental properties was sold, off the plan to Chinese buyers on average at around 6% over market value
What am I to do? knock them back and get branded a rascist or take the money and develop more?
Because none of our properties have mortgages, we are able to set our rental prices based on purchase price and usually a minimum of 10%+ below the going rental market rate, so they are always in high demand,
Some long term tenants are 30% less than current market rental valuations .
We offer long term tenants incentives, and I believe we do the right thing .
Another thing I find is young people getting into the housing market are unrealistic in their expectations, and buy not to suit their needs, but their wants .
Our landscaper and his schoolteacher wife purchased {with a mortgage of over $5000 a month} a 4br.3b/dble garage, pool in a new estate .
At this stage, they can’t afford kids
John I don’t think you’re correct about ScoMo being a co-founder of Hillsong. You have written previously he belongs to Shirelive church which is linked tp Hillsong but pretty sure he was not involved in founding Hillsong
AnneC is really doesn’t matter if ScoMo is a founder of Hillsong or not. The fact that he claims to be a “Christian” is beyond the realms of belief. Along with most “professed Christian” to whit Bernadi et al
Kaye. I have read somewhere that he is a founding member. Can’t find it but found this. He is an evangelical Christian who worships at a Hillsong-style Pentecostal church in Sydney. One mentor is the founder of Hillsong, Harley Davidson-riding pastor Brian Houston. In Who’s Who Morrison mentions the church as his number-one hobby.
Leigh Sales also attends. Before I saw the light I used to attend an AOG Church.
Well I cannot in my wildest dream see Ms Sales happy clapping. Biased bleating yes.
cornlegend @ 2.15pm,
most of what you say is fair enough. However, I do think there needs to be a ceiling on what foreign buyers can buy, for example, apartment owners in new apartment developments who are happy to keep them empty rather than reduce the rents.
You sound like the type of owner/landlord/seller type that many tenants need to get into the home-owner market by making it accessible to ordinary buyers to buy their own homes.
One policy I would like to see any of the forward-seeing parties adopt is a government backed vendor-finance-like arrangement. Low and moderate income earners are most often cut out of the buying market due to failing to have the upfront 20% deposit. This makes the buying market only open to a reduced population of people with the ready money and the steady income. My question always is: why should these people be denied one of life’s pleasurable securities when they can prove themselves to pay at least as much per week on the rental commitments?
Instead of the total concentration being on the pros and cons of negative gearing, I want Labor and the Greens and other progressives to advocate home ownership for low and moderate paid and even no-paid (OMG!) citizens, so they can live in the security and pleasure of their own roofs over their heads.
Jennifer Meyer-Smith
I am just a little player in this game, and me personally, not very good at it .
I worked outside this field and after my dads passing until my daughter took control property management agents ran the show
My kids run the show . I just “live of the earning of….”
My daughter is forever looking at ways of low cost rental accomodation and methods to ensure we have happy customers .
Happy tenants make happy landlords, so we try to work with tenants .
All our rental properties other than commercial have the rental based on our cost, not the current market rental and as an incentive to ensure a good relationship with tenants, those with us over 2 years with stable payments and a responsible attitude to the property get a 5% refund of annual rental in the 2nd week of December .
We are currentlly working through existing stock ,where possible hooking those properties up to 5kw solar .
This is a benefit to the tenant as well as us.
This is our living, so we need to maintain to condition and maintainance of premises as well as a contented clientele
I can’t change the system which annually is making it more difficult for first home owners , that is for the experts .
We make a living to keep us as far clear of any Government as possible.
We pay fair tax,has no indebtedness to anyone, get no Government assistance, or ever want it and are happy with the way things roll for us
Kaye Lee,
Unless he was an especially entrepreneurial 15 year old.
Cornlegend, do not take the criticism of NGing personally. Being the owner of multiple properties does not put you in any different moral category than most self-funded retirees. Bank share dividends would, I think, form a very significant portion of income of many retirees. The banks make most of their money from residential mortgages so indirectly bank shareholders are all property investors.
As individuals we have to financially survive the system imposed on us and our system of subsidy for land speculation makes winners and losers. Those who benefit from NGing probably think they are winners but many are partially financing the first home ownership of their children. (Most of the young do not have parents wealthy and generous enough to help but who cares about those people anyway?)
Saul Eslake estimates that NGing has added 10% to the price of a home. Only to be expected if demand for something in limited supply is artificially inflated. If a $500000 house price has been inflated by $50000 because of NGing that requires a lot of parental assistance to make up for it!
As over 93% of NG’d funds have gone into existing housing, it has not increased housing supply but has turned would-be home-owners into renters.
In Australia subsidy of land speculation is so market distorting it has resulted in up to 19% of investment properties in Melbourne being held vacant.
https://www.prosper.org.au/2015/12/09/speculative-vacancies-8/
Hear, hear Sally K,
on all the points you make.
cornlegend and BB
You make some very good points and many would consider myself the same but my rental properties are light industrial not residential.
INTIATIVE – have we lost the meaning or from the way LNP treat us have we conceded that it should be locked away for good? Well for all but the very rich anyhow. In a democratic society you cannot deny people the right to achieve whatever goals they set for themselves provided it is legal and it does not interfere or deprive others of their rights.
How much of the reaction to NG changes is based on real expectations of what the changes will do versus tall poppy syndrome? Personally looking at comments on several AimN articles I think it is 20% expectations and 80% tall poppy syndrome, lets attack those who have what we want. It doesn’t matter how hard the people who own multiple property have worked, how much they have sacrificed, how much tax they have paid or how their success has benefitted Australia.
Also makes me wonder why people cannot understand that wishing for lower house prices could have many unforeseen implications and affect people with large mortgages badly. Increasing wages of those on less than $80-100k is the only way to improve housing affordability and also assist those struggling with high repayments, combined with Labors proposed NG changes much of Howards effect on property ownership could be negated. Increasing wages might allow mothers who want to spend time at home with their kids, like they could afford to do before Howard stole half of our lifestyle from under our noses.
Be very careful what you wish for.
Wally,
negative gearing is good for the beneficiaries until the time comes when they may lose the benefits and stand on the other side of the fence. These things happen in a declining job market or other extenuating circumstances.
You and cornlegend are right to say ‘not to throw the baby out with the bathwater’ and penalise ordinary wage earners who choose to use their hard earned cash in investment properties.
My argument is to see ALSO beyond what benefits you and other such comfortably secure people, and consider widening the benefits to others who don’t quite manage to avoid falling between the cracks.
Jennifer Meyer-Smith
“government backed vendor-finance-like arrangement”
This was tried back in the late 1980’s and for most it was an epic fail. From memory the repayments were fixed at a percentage of the primary income and due to the high interest rates at the time the debt increased. A friend who was tied into this arrangement had to repay $20k more than he borrowed 5-6 years after buying the house.
Interest rates are lower nowadays but with the amount needed to be borrowed you need a decent wage to cover the interest payments without even considering reducing the principle. This type of scheme is doomed, when interest rates eventually rise someone would have to wear a loss.
Wally,
I don’t dispute what happened in the ’80s when interest rates went to 20%. I’m talking about now. I’m also talking about making and implementing a good idea and building precautions against the possible bad outcomes.
Bottom line is that everybody needs a roof over their heads, so your usual immediate dismissal of anything outside of the economic rationalist box, does nothing for the good idea nor the benefits for diverse socio-economic demographics.
Jennifer Meyer-Smith,
I think the problem starts a bit earlier than the home purchase and that is the price of the dirt it’s built on
An example , and I’m old, so for my part I’ll use acres
A large developer wanted to buy some property we have and the offer was just under $100k an acre
A development they have just a few ks away {calderwood-valley} is now being flogged off, land only at an average $250,000 for a 450 sq. metre block.
That makes your eyes water
Jennifer Meyer-Smith
“so your usual immediate dismissal of anything outside of the economic rationalist box”
Believe what you will but I did give your suggestion some thought, it went like this.
5% of $400k = $20k so even with historically low interest rates low income earners (below $35k) could not afford to pay the interest.
Sorry but I look at things from a realistic point and if the figures don’t add up they don’t add up. Years ago when I was not working due to a workplace injury we were struggling financially so I visited the local financial support person at the local hospital. She was a great help but I was surprised when we did not look at trying to work out a budget. When I asked why or should I/we the reply was, “it is pointless working out a budget when we already know your income is not enough for a family to live on”.
That is why I have commented on all of the NG articles recently that we need to increase wages. Kaye Lees most recent article is very interesting. https://theaimn.com/next-election-chance-peoples-revolution/#comments
Wally and Jennifer, the defect of the various schemes to assist FHBs, eg First home Buyers (Vendors) Grants and the vendor finance arrangements you referred to all feed back to increase the price of land. Those buyers first in the queue may benefit but the market will rapidly adjust to the increased demand. These stimulus ideas probably originate from the property lobby and they will break out the champagne and put up prices with the announcements.
When the price of land is high this is a basic cost to business for a site, and contributes to business being internationally uncompetitive. Wages have to be high to avoid widespread mortgage defaults so again business is uncompetitive and local jobs are outsourced to cheaper labour markets overseas. If wages do rise that will feed back into land price too. The land price is the final depository of all increase in productivity.
The problem is that academic economics and our culture over the centuries has a view of property that is disconnected from reality. We make no difference between the buildings on the land and the land itself and assume that land behaves in the marketplace like any man-made product. In reality land is the Earth’s crust, provided by nature, and absolutely essential for life for each one of us. “Location, location, location” is critical as every investor knows and gives monopoly characteristics to each site.
Just imagine if it was physically possible that the air could be parcelled up and sold or rented out. Humans being the way they are, it would certainly have been done. We would accept it as normal and be here discussing the unaffordable cost of breathing!
All this was recognized in the Age of Enlightenment:
Thomas Paine (1737-1809):
Men did not make the earth…. It is the value of the improvements only, and not the earth itself, that is individual property…. Every proprietor owes to the community a ground rent for the land which he holds.
Geonomics is the moral and economic philosophy that provides answers via the taxation system:
https://www.prosper.org.au/?s=geonomics
cornlegend
Spot on but is it the cost to develop the land or the greed of those who subdivide the land that pushes the prices up?
When we had the Board of Works, SECV, Telecom and Gas & Fuel in Victoria they would install the infrastructure to service the blocks and recoup their costs from selling water, electricity, phone and gas. These are essential services and the cost of developing land is further proof that privatisation does not work, adding profit for overseas entities (who avoid paying tax in Australia) onto our utility bills has contributed significantly to the cost of living.
Free enterprise is not free, it costs us plenty.
Actually Wally,
I have also been a multiple property owner. I also admit I benefited from negative gearing when I was entitled. My properties were mostly relocated houses onto quite cheap blocks of land. I paid building contractors to bring the houses up to residential status, so it was a win-win all round.
My tenants paid ordinary rental rates for the type of house and location and that suited them. (None of my properties equated to $400k each, so I understand cornlegend when he says many young people want top shelf property.)
I’m not saying I want what those young people want. I’m saying let people have their own roofs over their heads if they so choose.
The scenarios I cite are viable for ordinary Aussies but I’m saying they could be extended to other ordinary Aussies with vision, energy but not the ready $$ that are the falling blocks at the moment for any potential home buyer.
Sally K,
I shall digest what your words of wisdom are and get back to you tomorrow.
Sweet dreams, Believers!
Sally K
“Wages have to be high to avoid widespread mortgage defaults so again business is uncompetitive and local jobs are outsourced to cheaper labour markets overseas.”
How much of this problem is caused by wages and how much is caused by ridiculously high salaries demanded by executives?
Another way to look at the problem is to answer, are Australian products too expensive or are wages too low to afford Australian products?
Before John Howard buggered our corner of the world we could afford to buy local products and families could live on 1 wages, within a short period of time stay at home mothers became a mere memory of the good old days. If people invest their own money they deserve an appropriate return but how can anyone, particularly someone who sits on their bum in an office be worth a million dollars or more a year?
If we reduced the salaries of the 5% who earn 50% of the money by 75% and used the savings to increase wages of the other 95% with the savings we would have a booming economy and the government would have enough revenue to provide all of the services and infrastructure we need.
Wally, I’m with you on the pay increases
On 26th February 1856, James Galloway convinced a meeting of employers and employees to begin implementing the 8 hour day and The Stonemasons’ Society did it
The Commonwealth Court of Conciliation and Arbitration ruled in favour of the 5 day 40 hour week in 1947, to commence 1st January 1948
I can think exactly what was said in the ruling but it was along the lines of “because of mechanisation and innovation and advances in science ,machinery, etc, the worker should gain some benefit.
I dont know what happened, not only from the actions 160 years ago, but of the Arbitration Commission decision some 69 years ago, but the best we have done is limped along to 35 and 38 hour weeks with bugger all benefit , as outlined by the Commission being passed on to the worker.
I think the worker is owed a big return, in spades.
The workers benefit from the mechanisation and technology advances have never materialised
cornlegend
“I dont know what happened, not only from the actions 160 years ago, but of the Arbitration Commission decision some 69 years ago, but the best we have done is limped along to 35 and 38 hour weeks with bugger all benefit”
MacDonald’s economics has had a major influence. Sell them shit cooked by kids on two bob an hour for top dollar. Fast food industry has had a huge influence on reductions in penalty rates and award provisions. I find it hard to believe that people are expected to work for 4 hours before they are entitled to a break, that is close to slavery.
A little off topic but the closing of our auto makers is going to impede introduction of technology to other industries so we will fall further behind other countries. The LNP quest to reduce the wages of Australian workers is going to backfire, the high executive salaries cannot be sustained without a well paid productive workforce to consume product, regardless of where that product is manufactured.
Every western country faces the same problem/s and the smart ones subsidise auto manufacturers and other heavy industries. The flow on is more jobs, more tax revenue and an economy that can be sustained well into the future despite troubles in the global economy. There are exception to this but a strong domestic market is the only way to protect the economy from global issues like the GFC.
“Frankly, Morrison, a ‘co-founder’ of Christian Church Hillsong, is telling so many lies…”
If you’re going to talk about lies and also mention ABC fact check then you may want to ensure that you are yourself are exercising the utmost journalist integrity. (Doing your researching and providing factual information.)
Scott Morrison is not a co-founder of Hillsong church, in fact a member of Hillsong church. He belongs to a church called ‘Shirelive’ in the the Sutherland Shire. It is true that he has appeared at the Hillsong Conference which is a conference that is run for all churches in Australia.
It is true that Hillsong is mostly a conservative church but I can assure you that people like Tony Abbott and Scott Morrison have been boo’d on multiple occasions. The Church has started to learn from this and kept politics and Church separate.
https://en.wikipedia.org/wiki/Shirelive_Church
There’s enough shoddy journalism and propaganda out there. Seek the truth and leave the personal bias at the door. You’re compromising the integrity of this media platform. One that for the most part I respect.