2018 AFR Rich List: A sad indictment of Australia’s rampant neoliberalism

 John Passant   29

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(Image via torbakhopper/Flickr.)

The latest AFR Rich List charts Australia’s wealthiest and illustrates why we have one of the fastest growing inequality rates in the world, writes John Passant.

IT’S A BIT RICH, isn’t it?

Well, it’s more than a bit rich — it’s a lot rich.

Every year the Australian Financial Review’s (AFR) ‘Rich List’ tells us about the extraordinary wealth of the “top” 200 people in Australia. It gives us valuable information about Australian capitalism and trends over time in wealth allocation between the capitalist and working classes.

In 1989, there was one billionaire. In 2002, it reached ten. There were 29 in 2010. Today, it is 76. In 2017, the wealth of the richest 200 grew by about $50 billion or 21% to $282.7 billion. This 21% growth is ten times the growth of wages.

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FinancialReview : Billionaire Anthony Pratt is the richest person in Australia, topping our 2018 Rich List with record personal wealth of $12.9 billion. See the full top 10 here: http://bit.ly/2IDdhO6  pic.twitter.com/mDbal3EeOA

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This graph from the AFR shows the growth in wealth of the top 200 since the list began in 1989. It has grown more than tenfold in 2017 dollar terms:

(Screenshot via AFR, Friday, 25 May 2018)

By contrast, between 1989 and 2016 average weekly wages have grown threefold, or thereabouts, over the same period of time.

(Source: Trading Economics)

Now, I know that wages are not wealth. However, their growth can be an indicator of the ability of workers to accumulate a little bit of wealth.

For most workers, their major asset will be their home, if they own one. House prices have grown markedly since 1989. The consequence of this for an earlier generation of working-class homeowners is increased notional wealth, but for the next generation, it is an inability for a large number to enter the housing market. Current market price “flattening” indicates the older generation may be in for a shock when, or if, housing prices fall.

Not only that but the ‘slower growth in wages’, as the Australian Bureau of Statistics defines the current and ongoing falling real wages period, coupled with cuts in social welfare, means that

‘…the household saving ratio was at its lowest point (4.6%) in nine years in 2016-17.’

So, people are saving less and housing prices in some major cities are beyond working people.

The key to understanding the neoliberal era we entered in 1983 with the election of the HawkeLabor Government and its philosophy of class collaboration has been a massive shift in wealth from labour to capital.

The following graphs from the Australian Bureau of Statistics give a good sense of what has been happening:

The profits share of total factor income has risen over the period 1984 to 2017 from 22% to 27%.

The wages share has fallen from 57% to 53%.

Saul Eslake in The Conversation has helpfully put the trends since 1960 into one graph for us to see the long-term results:

Eslake’s graph shows that the decline in labour’s share began at the very time the Hawke Government came to power and implemented, with the collaboration of trade union bureaucracy, the “what’s good for the bosses is good for employees” Accord.

The mantra about growing the pie is really about growing the pie for the bosses, at workers’ expense. And don’t listen to the crowd who parrot the line that increasing productivity will increase wages, let alone wage share.

As Greg Jericho and Gareth Hutchens point out:

‘Since the GFC, productivity has grown well ahead of real wages.’

Their graph shows it clearly:

(Source: The Guardian)

This process of wealth transfer from labour to capital involves other aspects too, such as attacks on social welfare, public health and education spending, and other areas of social reproduction. One point of social welfare cuts is to put downward pressure on wages to supposedly increase profits. However, falling or stagnating pay for workers doesn’t improve consumer activity. As the unemployed become more desperate trying to survive on welfare allowances more than $150 below the poverty line, the philosophy is that this will see them accept lower wages to get a job.

It is the same trickledown nonsense with the company tax cuts. More pie in the form of less tax for them, however, does not lead to more pie for us. So, too, the Turnbull Government’s big tax cut plans for people earning over $200,000.

In selling its ‘2018 Rich List’ edition, AFR’s editorial proclaimed: ‘Australia is a land of opportunity for all who strive.’

This, too, is nonsense. It suggests those who are unemployed choose not to work.

Hard work won’t solve the unemployment issue. There are about seven unemployed workers for each job advertised. According to the Australian Unemployed Workers Union, if we include the underemployed and hidden unemployed, the figure is more like 17 to one.

AUWU@AusUnemployment

always worth looking past the government’s chest-beating about job creation, & checking out the actual ABS unemployment figures

Centre for Future Work@CntrFutureWork

Pretty soft jobs report from #ABS today: full-time employment down, offset by more part-time jobs. Participation rate down. Unemployment rate trending up (fairly unique among major OECD economies, in a context of strengthening global growth). #RunningOutOfSteam

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Around 3 million Australians live in poverty, including over 731,000 kids. As for pensioners, one-third live below the poverty line. Homelessness has increased by over 14% between 2011 and 2016. There are now over 116,000 people who are homeless.

Workers’ wages are going backwards. The hard work of 10 million workers merely ends up making profits for the bosses. The rich get richer and the poor and workers are getting poorer. This is current Government policy to ensure “adequate” profits for business. The growth of wealth of the Rich List 200 by $50 billion (21%) last year, is but one example of the ever-increasing inequalitythat is Australia. According to the IMF, Australia has one of the fastest growing inequality rates in the world.

What else can the ‘Rich List’ tell us? Of the 200, there were just 19 women on the list. The average age is 66. Some things stay the same. However, the ‘List’ is becoming more global.

As the AFR says:

‘A quarter of the list’s 76 billionaires now live abroad, up from one out of 37 a decade ago.’

Rough calculations suggest over a third of those on the list, including Packer, two Rineharts (Gina and Bianca) and the soon to be super-rich Lowy children, inherited their wealth.

The top five industries for the ‘Rich List‘, according to George Tchetvertakov in Small Caps, were: ‘property (51 people), retail (22), investment (20), resources (18) and financial services (16).’

This suggests a society overly dependent on property development.

With all this extreme wealth in a society of gross inequality, poverty and flatlining wages, what can be done?

Below is one last graph which I think sums up how we got to this rotten state of affairs and suggests a way to address it.

To put it another way, as Jim Stanford at the Centre for Future Work Centre says:

‘The relative frequency of industrial action (measured by days lost in disputes per 1,000 workers employed) declined 97% from the 1970s to the present decade.’

Changing the rules won’t change that. Breaking the bosses’ rules will.

It is time for workers to reclaim their unions, and to strike for big wage increases and a fair and just society. That and that alone will wipe the smile off the faces of the rich-listers, and begin the process of redistributing the wealth back to those who create it — workers.

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Australia has a new record number of billionaires with eight new names added to the country’s very rich list last year.

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Read more by John Passant on his website En Passant or follow him on Twitter @JohnPassantSigned copies of John’s first book of poetry, Songs for the Band Unformed (Ginninderra Press 2016), are available for purchase from the IA store HERE.

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Financial Review Rich List 2017 and Twiggy Forrest’s ‘philanthropy’ https://independentaustralia.net/business/business-display/financial-review-rich-list-2017-and-philanthropy,10344#.WS5IlF-od7g.twitter  @IndependentAus

Financial Review Rich List 2017 and Twiggy Forrest’s ‘philanthropy’

The 2017 Rich List is out and no amount of “philanthropy” can disguise Australia’s disproportionate wealth divisions.

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SOURCE:  https://independentaustralia.net/politics/politics-display/2018-afr-rich-list-a-sad-indictment-of-australias-rampant-neoliberalism,11545

2018 AFR Rich List: Who are Australia’s richest people?

Members of the Rich List (from left): Harry Triguboff (#2), Judith Neilson (#36) Anthony Pratt (#1) and Frank Lowy (#5).
Members of the Rich List (from left): Harry Triguboff (#2), Judith Neilson (#36) Anthony Pratt (#1) and Frank Lowy (#5).

The rich like to envelop their wealth in discretion and the odd secret or two. But they also appreciate accuracy. Hence the commissioning by some Rich Listers of investment banks and advisory firms to draw up valuations of their assets, that then get forwarded to our researchers for vetting. Some provide detailed profit and loss statements, property and debt holdings and lists of assets. Many private company owners know the exact profit multiples of their sharemarket-listed peers that will be used to calculate the value of their wealth.

And the task of calculating the net worth of our Rich Listers keeps getting bigger: it is an unprecedented era for wealth in Australia. This year’s Rich List features a record 76 billionaires, adding 16 from last year’s edition alone. The list is topped for the second consecutive year by paper manufacturing and recycling tycoon Anthony Pratt, whose fortune is surging in large part thanks to Pratt Industries’ rapid growth in the United States.

Pratt’s offshore wealth encapsulates a slow but steady change in the Rich List – its internationalisation. Ten years ago, when we celebrated 25 years of what was then the BRW Rich List, just one of Australia’s 34 billionaires lived overseas (Shi Zhengrong, the Chinese-born and Shanghai-based solar power entrepreneur). Today, in 2018, about one-quarter of our billionaires live offshore. They include Hong Kong-based property mogul Hui Wing Mau, whose $9.09 billion fortune moves him into fourth spot and Delhi-based car parts manufacturer Vivek Sehgal, whose $5.88 billion wealth and recently acquired Australian citizenship puts him in ninth spot.

These billionaires might be based overseas, but their wealth is washing up on our shores. Hui paid $70 million in October to buy Harold Mitchell’s 45,000 head of cattle and 1.4 million rural hectares in Western Australia. Huang Bingwen, founder of Shanghai-listed Shantou Dongfeng Printing and 43 on the list, paid $21.5 million in November for the Buckley’s Bar site at Sydney’s Circular Quay. Sehgal’s Motherson Sumi Systems business has operations in Melbourne, Adelaide and Bendigo and he owns property in Melbourne.

Home-grown billionaires

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As for our home-grown billionaires, those whose wealth is surging also have an international bent. They either export overseas – mining magnates Gina Rinehart and Andrew Forrest, as well as toy manufacturer Manny Stul – or a considerable portion of their business empires are abroad. Solomon Lew’s Smiggle chain is across the UK and Asia. Nigel Austin’s Cotton On has pushed into Asia, Europe and the US.

The biggest mover on the list upwards is Clive Palmer, whose wealth has swelled from $344 million to $2.84 billion thanks to a win in his long-running legal battle with Citic over iron ore royalties. Palmer received a $344 million payment this year, and his valuation in the future is based on annual royalties of more than $200 million. Atlassian founders Mike Cannon-Brookes and Scott Farquhar have gained the most in dollar terms. In 2017 they were each worth $2.51 billion. The rise in Atlassian’s share price means they are each worth $5.16 billion now. Among the first-time billionaires are Computershare founder Chris Morris, who also owns Queensland tourism assets, and Paul Little, the Toll Holdings founder turned Melbourne property developer.

Among the debutants is Justin Hemmes, whose Sydney property and pubs empire Merivale has grown from the fashion and property empire built by his late father John. Will Vicars is a notable addition from the Sydney funds management scene, having made his fortune as chief investment officer of Caledonia Investments.

Ruslan Kogan returns to the list after a three-year absence, thanks to the surging share price of his kogan.com. The online retail and services group has been one of the best performers on the ASX in the past 12 months. At 35 years of age he’s the youngest new name on the list.

$387 million cut-off

Kogan’s addition has helped Melbourne equal Sydney as having the same number of Rich List members (57 each). Property accounts for 51 names on the list. Retail is the second biggest category (22), investment (21) and financial services at 16.

The record cut-off of $387 million means some notable names are absent from this year’s list, including movie star Nicole Kidman, media advertising powerhouse Harold Mitchell and George Koukis, the founder of fintech Temenos. It’s not a case of wealth in decline, more so that others have become a lot richer.

Also missing this year are the late Ron Walker, Mary Fairfax and Neville Pask, while Ashley Williams, Walker’s business partner in property development company Evolve, and Joy Chambers-Grundy, widow of the late Reg Grundy, have been temporarily removed subject to future wealth calculations.

One thing that hasn’t changed is the average age of our Rich Listers, 66, the same as last year. Six people are aged in their 90s and there are 20 octogenarians. Succession planning has always been a key issue for our wealthiest people. The sale by the Lowy family of its stake in Westfield could be a harbinger of more Rich Listers taking their money off the table.

The Financial Review Rich List 2018 is published in the June issue of AFR Magazine, out on Friday, May 25.

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SOURCE:  https://www.afr.com/brand/afr-magazine/rich-list-overview-20180413-h0yqo5

Immigration to drive 100% of Australia’s future 18m population growth

 

COMMUNITY ACTION ALLIANCE FOR NSW (CAAN) …

LEFT to ourselves with family planning, and mortality Australia’s population is projected to be 25.1 Million people in 2066 … remaining the same as our current population!

17.5 Million less than with net overseas migration (NOM)

As the graphs reveal 100% of future population growth will come from migration, and indirectly as they have children and later grandchildren

WE only have to look to the BRW RICH LIST for 2018 to figure who is driving this high immigration … 

AUSTRALIA is a wealthy EXPORT NATION but with high population growth the wealth is diluted with the cost of infrastructure demands!

 

Immigration to drive 100% of Australia’s future 18m population growth

By Leith van Onselen

 

Too often, commentators on the population debate understate the role played by immigration in driving Australia’s population growth.

These commentators usually claim that net overseas migration (NOM) accounts for around 60% of Australia’s population increase, whereas “natural increase” (births minus deaths) accounts for around 40%.

While this statement is true when looking at a given year, its is fundamentally wrong when examining population increase over a prolonged period.

This is because “natural increase” includes children of migrants.

And if these migrants hadn’t arrived in the first place, they wouldn’t have children and later grandchildren. Hence, Australia’s population base would barely increase without NOM.

The ABS’ latest population projections were released last week. The medium (Panel B) projections from the ABS show the total population and NOM per year out to 2066. Note the huge step-up in both NOM and population growth from the historical average:

Next, Australia’s population projections are shown under medium NOM versus zero NOM, with all other variables (i.e. fertility and mortality) assumed at their medium level:

*Under zero NOM, Australia’s population is projected to be 25.1 million people in 2066. This is exactly the same as Australia’s current population and 17.5 million less than with medium NOM.

*What this proves is that 100% of Australia’s projected future population growth will come from immigration – both directly as migrants jump off the plane and indirectly as migrants have children and later grandchildren.

*This is why the Productivity Commission’s 2016 Migrant Intake Australia Report explicitly said that “Australia’s immigration policy is its de facto population policy”. Because without positive NOM, Australia’s population would not increase.

The data for Melbourne and Sydney is equally telling. Assuming medium fertility, mortality and interstate migrant flows, Melbourne’s population would only increase by around 600,000 by 2066 and would grow by 4.5 million less people than under the ABS’ medium NOM projection:

The situation is even more stark in Sydney, where its population would actually fall by 400,000 under zero NOM (due to continued assumed losses of population interstate), and would grow by 5.1 million less than the median NOM projection:

*In addition to showing that NOM is the sole driver of Australia’s population growth, this data also illustrates that Sydney’s and Melbourne’s infrastructure and housing problems trace back directly to the mass immigration ‘Big Australia’ policy.

It took Australia more than 200 years to reach 17.5 million people serviced by adequate infrastructure and a functional political economy.

Now we are planning to increase the population by the same number in less than 50 years and expect that living standards will keep pace, as well as the political system not break.

This is true national lunacy.

 

Sydney has worse congestion than other similar-sized cities.

SYDNEY AT A STANDSTILL;  Sydney has worse congestion than other similar sized cities. Photo:  SMH

 

unconventionaleconomist@hotmail.com

 

SOURCE:  https://www.macrobusiness.com.au/2018/11/immigration-to-drive-100-of-australias-future-18m-population-growth/

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One quarter of Asian Australians say they have felt discrimination in housing.

Six in ten Asian-born Australians experience racism in accessing housing, survey finds

NSW Labor rejects $2b footy stadiums pork

NSW Labor leader Michael Daley speaks to the media outside Allianz Stadium on Monday.

NSW Labor rejects $2b footy stadiums pork

By Leith van Onselen

I’ve noted previously how the NSW State Government has hit ‘peak stupid’ in deciding to spend $2 billion to demolish and rebuild the Olympic Stadium and the Sydney Football Stadium, both of which are underutilised and whose redevelopment would deliver zero net economic benefits for the state, according to analysis by hired gun KPMG.

To make matters even worse, the stadiums rebuild is to be funded by proceeds from selling-off the lease the state’s monopoly land titles registry – a move that will very likely see end-users being gouged by the new monopoly owners, with the NSW State Government also losing a reliable income stream.

Today, the NSW Labor leader, Michael Daley, flat out rejected spending a cent of taxpayer dollars rebuilding these stadiums, instead pledging to spend the proceeds on social infrastructure like schools and hospitals. From The SMH:

“I’m saying very clearly to the SCG Trust today: do not sign contracts for the demolition of this stadium. Do not demolish this stadium. If you do, you will not get a single cent of free public money from me if I am elected premier in March of next year,” Mr Daley said…

The people of NSW have a very clear choice now: if you want billions of dollars spent knocking down and rebuilding perfectly good stadiums, vote for the Liberals and Nationals,” he said.

“If you want billions of dollars put into schools and hospitals, vote for me.”

This is good policy from Labor.

When I first discussed the stadium fiasco, I labelled it a textbook example of the broken window fallacy in economics: akin to digging holes just to fill them up again. While the projects might create jobs and increase GDP directly, they will cost taxpayers a huge sum, won’t boost productivity, and will do nothing to raise living standards.

With Sydney suffering from chronic congestion and infrastructure bottlenecks, hosing $2 billion on dud projects like this makes as much sense as punching yourself in the face.

unconventionaleconomist@hotmail.com

 

SOURCE:  https://www.macrobusiness.com.au/2018/11/nsw-labor-rejects-2b-footy-stadiums-pork/

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NSW land registry is everything that’s wrong with privatisation

By Leith van Onselen

The Age’s Editorial has penned a stringing rebuke of the NSW State Government’s privatisation of the Land Registry:

The government stands ready to sell to the highest bidder a highly profitable public asset that performs a vital, efficient and reliable service. The rationale it has provided to date is that the private sector is better placed to invest in technology and deliver faster processing times, new services and a better experience for business customers.

But what about the risks? Land and Property Information records who owns what and how land is divided up. It issues the certificate of title for each piece of real estate sold in the state, underpinning $130 billion worth of transactions every year. Everyone in the state who buys, sells or owns real estate relies on its integrity. It works so well that other countries including Vietnam, Thailand and Russia have modelled their systems on it. It is a reliable monopoly that contributes $190 million a year to the state’s coffers, of which nearly 70 per cent – $130 million – is profit.

To privatise an asset of such importance and calibre, you need not just a watertight case but an unimpeachable, transparent process. There is a perception that there has been some unnecessary haste to the transaction. The government has refused to release the scoping study, finalised in 2015, including the business case and cost-benefit analysis. It could announce as soon as this week which of the four bidders has won the right to operate the LPI for the next 35 years. When that happens the public will be none the wiser as to the actual value of the asset that has been sold on their behalf, nor whether the money raised – earmarked for an upgrade of ANZ Stadium and rebuilding Parramatta Stadium – justified the sale. There seems little doubt that a smoothly functioning land titles registry is of more benefit to more people than a couple of football grounds…

A prudent and fully transparent process would see the government, led by Premier Gladys Berejiklian, allow more time for the concerns above to be addressed.

To do otherwise is to risk a permanent and ongoing stain on its record for responsible management of the state’s finances.

Last month, Australia’s best investigative journalist, Michael West, also penned a stinging rebuke of the sale on his site, warning that it totally defies logic and opens up a whole can of risks:

Almost inexplicably, the NSW government continues to pursue its plan to privatise the state’s land titles registry.

We say “almost” because this deal is explicable only in that it will raise a projected $1 billion to $2 billion. It is a one-off transaction to finance the upgrade of two football stadiums.

It utterly defies logic.

Privatising a government monopoly, an essential service with zero competition, defies logic full-stop. In this case: besides the loss of jobs, besides the loss of a reliable $130 million a year dropping into state coffers, besides the loss of security over critical information – perhaps to an offshore private equity group – and besides the spectre of rising litigation costs, there is the matter of tax.

It is reasonable that voters demand of their elected officials to know where their assets may end up and who might own them. Will the profits of the NSW Land & Property Information Office (LPI) end up in a tax haven in an entity controlled by a financier of weapons? The notorious Carlyle Group is one touted bidder…

The secrecy shrouding the auction of the LPI means the actual corporate entities lurking behind each bidding syndicate remain a mystery…

Margaret Hole, a former president of the NSW Law Society, has previously raised several important issues with this sale, namely:

  • The land registry is a natural monopoly and critical infrastructure upon which the security of business and commerce are based.
  • There has been no independent assessment of the sale, and whether the expected sale price is suitable compensation for forgoing the annual revenue.
  • The successful operator is likely to require home buyers to pay title insurance, as occurs in the US, and thereby gouge users. Title insurance on the purchase of a $1.4m property is currently about $990. Last year 213,000 land transfers were lodged in NSW, which means that conservatively $210 million in insurance premiums can be raised by the operators holding the concession, or tens-of-billions of dollars over the 35-year term of the lease.
  • NSW home buyers will bear the cost of this impost.
  • Similar privatisation proposals have been rejected in a number of other jurisdictions around the world.

The Public Service Association has also slammed the sale, noting:

  • The State Government currently guarantees that the registered owners recorded in the NSW land titles system are the true owners of their land.
  • The State Guarantee is backed by Torrens Assurance Fund and provides compensation for any loss suffered as a result of fraud or error in registration.
  • If the service is privatised, the guarantee is lost and disputes over ownership of land or fraud are in the hands of a private company.
  • Currently, the State Government Torrens Assurance Fund circumvents the need for land owners to self-insure and contributes to containing costs of land transactions within NSW. At the moment, this is a once-only payment that covers your interests in a property for the life of your ownership.
  • If the State Government no longer guarantees titles, consumers may need to take out title insurance, in addition to their home and contents insurance, every year.
  • This could mean a hike in price for all of us, or a fall in standards because of cost-cutting measures.

In late 2014, the Productivity Commission’s (PC) released a report on the provision of public infrastructure, which explicitly warned that the Coalition’s financial incentives to the states to sell-off public assets (“asset recycling”) “could act to encourage privatisation in circumstances that are not fully justified and encourage the selection of new projects that do not have demonstrable net benefits”.

Since that time, we have witnessed the states flog-off essential infrastructure and other public assets without giving due regard to longer-term consequences, and without ensuring that adequate regulatory frameworks are put in place first.

This procession of dubious asset sales has gotten so bad that ACCC head and longtime supporter of privatisation, Rod Sims, recently called for a moratorium on further privatisations because of the damage that they are doing to consumers and the economy:

“I’ve been a very strong advocate of privatisation for probably 30 years. I believe it enhances economic efficiency [but] I’m now almost at the point of opposing privatisation because it’s been done to boost proceeds, it’s been done to boost asset sales, and I think it’s severely damaging our economy…

“It is increasing prices – let’s call it out… I want them to stop and think about the fact that when they’re privatising these things without effective regulation you are going to have increases in prices, and just think about the effects of that on the economy.

Stop and think. And don’t be surprised that your electorates think that privatisations increase prices. Of course they shouldn’t [increase prices] but the history tells you differently”.

The first rule of any asset privatisation should be that it boosts competition within the relevant market, and at a minimum does not lessen competition. But as Rod Sims has noted, most recent privatisations have broken this golden rule, placing achieving a heavy sale price (or fees) above the interests of users.

Australians deserve better than brain dead privatisations like the NSW Land Registry, which utterly defies both economics and common sense.

unconventionaleconomist@hotmail.com

SOURCE:  https://www.macrobusiness.com.au/2017/04/nsw-land-registry-everything-thats-wrong-privatisation/

 

 

REIWA: Labor’s negative gearing policy will lower rents

By Leith van Onselen

While Treasurer Josh Frydenberg desperately tries to scare voters into believing that Labor’s negative gearing policy would simultaneously smash house prices and force up rents, the Real Estate Institute of Western Australia (REIWA) has admitted that Labor’s policy would actually make rents more affordable:

REIWA analysis shows the upward trajectory of the Perth rental market should continue through 2019, with stable population growth and slowing new-building construction levels the key drivers for this improvement.

Mr Collins said the Perth rental market had lead the way in 2018, with stable median rents, healthy leasing activity levels, declining listings and a plummeting vacancy rate.

“With population growth in WA expected to remain stable and new dwelling commencements slowing, available rental stock should continue to decline. This should see competition amongst tenants increase, putting further downward pressure on the vacancy rate, which recently dropped below four per cent for the first time in four years,” Mr Collins said…

“We’re at 19 months and counting of stable median rent prices in Perth. If listings continue to decline and leasing volumes remain healthy, we should see the overall median rent price increase in 2019 for the first time since September 2014,” Mr Collins said.

While REIWA’s 2019 outlook for the Perth rental market is positive, any changes to negative gearing could pose a risk for both the rental sector and wider property market.

“In the short term, the improvements we’ve observed in the rental market could see investors returning to the market, however if changes to negative gearing are legislated, this will likely dampen investor activity and have a detrimental effect on the wider WA property market just as it is starting to find its feet,” Mr Collins said.

“As the next Federal Election nears, REIWA will continue its efforts to ensure politicians do not meddle with negative gearing to ensure a healthy and sustainable rental market into the future.”

This, of course, is the stated intent of Labor’s policy, which will permit negative gearing for newly constructed dwellings, thereby lifting rental supply.

It’s also exactly the same approach as the Coalition’s policy restricting foreign investment to newly constructed dwellings, which is aimed at boosting dwelling supply, economic activity and jobs, as explained by the chair of the foreign investment inquiry, Liberal MP Kelly O’Dwyer:

“Currently the framework seeks to channel foreign investment in residential real estate into new dwellings in order to increase the housing stock for Australians to build, buy or rent. Foreign investment is encouraged in new dwellings whether they be apartments, units or homes because in addition to creating more supply, it also creates more jobs for the building and construction sector – all of which helps to grow our economy”.

Stop lying, Josh Frydenberg.

unconventionaleconomist@hotmail.com

 

“Only a fool would stuff Australian housing with endless lines of people”

NSW Treasury: Cut immigration and lower house prices

Via the AFR:

Immigration cuts planned by the Morrison and NSW governments will weaken house prices, according to analysis by the state government and economists.

Housing Prices and Migration Flows, a NSW Treasury document obtained by The Australian Financial Review, shows Sydney and national house prices would be lower than the forecast trajectory due to fewer migrants.

Under one scenario modelled, a temporary reduction in annual net overseas migration to Australia of 64,000 over five years would cause national house prices to be 7.8 per cent lower and NSW house prices to be 6.8 per cent weaker than a business-as-usual “baseline”.

In trend terms that is right. But it is a little more complex.

In Australia’s supply constrained market adding such demand does not just lift prices, it lifts volatility.

Supply constrained markets overshoot to the upside and the down more easily because so do lagged supply responses.

Such a situation can be explained using basic supply and demand analysis, as shown in Figure 1.

 

Q0 and P0 represent the initial equilibrium situation in the housing market. Initial demand is provided by D0, whereas supply is shown as either SR (restricted) or SU(unrestricted), depending on whether land supply constraints exist.

Following an increase in demand, such as a surge of investors following changes to tax rules (e.g. Australia’s CGT reduction in 1999), the demand curve shifts outwards from D0 to D1.

When land supply is restricted, house prices rise sharply from P0 to PR. By contrast, when supply is unrestricted, prices rise more gradually from P0 to PU.

The situation works the same way in reverse. For example, if there was a sharp fall in demand following a contraction in credit availability or a sharp decrease in Australia’s Terms of Trade, causing demand to fall from D1 to D0, then prices fall much further when land supply is constrained.

The key point of this analysis is to show that declines in demand can bring sharply falling house prices even when supply is constrained and housing shortages exist.

Australia has not seen such booms and busts only owing to compulsive policy interference in 2003, 2009, 2012 and, soon enough, 2019. But as those tools are exhausted, the busts will get worse.

And, of course, there is also the longer balance sheet cycle to worry about.

When debt saturation reaches some critical point that means deleveraging takes over during one such bust, destroying the market for generations.

 

While Tony Abbott claimed that cutting immigration was the solution to lowering housing costs in Australia, this report proves him wrong

Only a fool would stuff Australian housing with endless lines of people.

 

SOURCE:  https://www.macrobusiness.com.au/2018/11/nsw-treasury-cut-immigration-lower-house-prices/

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Lower migration will reduce house prices, NSW warned

The Grattan Institute estimates a 30,000 annual cut in net migration for a decade would lower national house prices by ...
The Grattan Institute estimates a 30,000 annual cut in net migration for a decade would lower national house prices by about 3 per cent. iStock

 

 

Immigration cuts planned by the Morrison and NSW governments will weaken house prices, according to analysis by the state government and economists.

Housing Prices and Migration Flows, a NSW Treasury document obtained by The Australian Financial Review, shows Sydney and national house prices would be lower than the forecast trajectory due to fewer migrants.

Under one scenario modelled, a temporary reduction in annual net overseas migration to Australia of 64,000 over five years would cause national house prices to be 7.8 per cent lower and NSW house prices to be 6.8 per cent weaker than a business-as-usual “baseline”.

“Even a temporary NOM [net overseas migration] reduction could significantly alleviate price pressures,” says the state government document written last year.

The Morrison government has flagged plans to cut the annual permanent net overseas migration cap to 160,000, from 190,000.

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NSW Premier Gladys Berejiklian has called for the state’s annual 90,000 migration intake to be slashed in half to 45,000.

The Grattan Institute estimates a 30,000 annual cut in net migration for a decade would lower national house prices by about 3 per cent.

“Fewer migrants mean there are less people looking for housing so the price falls,” Grattan chief executive John Daley said.

Negative gearing

He said the estimated house price falls from fewer migrants were larger than modest price declines Grattan forecasts from Labor’s plans to curtail negative gearing and capital gains tax breaks.

The Coalition government and property industry have warned against Labor’s proposed property tax changes, with the government arguing they will “smash” house prices and now is the wrong time in the property market cycle to reduce tax incentives.

National house prices have fallen about 5 per cent from their peak, due to the banking regulator tightening investor lending rules, less demand for property loans and waning confidence in the previously hot housing market.

A NSW Treasury spokesman said it routinely modelled a range of different economic scenarios.

“Since this report was presented over a year ago, there has been a softening in the national housing market due to a range of factors such as the introduction of macroprudential restrictions, the tightening of bank lending, softening demand, out of cycle mortgage rate increases and a decline in foreign investment activity.”

A new report by Citigroup economist Paul Brennan notes that there are economic risks from slower population growth.

“A key driver of underlying housing demand has been strong population growth led by immigration,” Mr Brennan said in the report.

Citi tips national house prices to fall 10-15 per cent, peak to trough, with declines in Sydney and Melbourne larger because of the bigger gains in those markets over the previous five years.

If net overseas migration was cut by more than 30,000, the house price declines are expected to be larger.

“Our forecasts for household demand factor in the slowing in immigration already under way, but a larger decline such as a halving in immigration to Sydney and Melbourne over the next few years would extend the period of weak house prices in these cities by taking it longer for growth in the dwelling stock to adjust to the lower population growth,” Citi noted.

The number of permanent visas granted in the last financial year fell by 21,000 to 162,400, about the level the Morrison government is aiming to lower the cap to.

Temporary visas

Grattan’s Mr Daley cautioned that cutting permanent migration would not necessarily lower overall immigration.

“It all depends on what you do about the temporary visas,” he said.

There are at least 1.6 million people in Australia on temporary visas and it is possible people who would usually seek permanent visas may try to shift to temporary visas.

The number of temporary work visas granted rose by 12,000 in the last financial year and the number of students visas granted jumped by 35,000, according to Capital Economics.

“What matters for the housing market and congestion on roads and trains isn’t the number of permanent residents but overall net migration,” Capital Economics senior economist Marcel Thieliant said.

“And any further reduction in the inflow of permanent migrants need not necessarily lower overall net migration unless the government also starts to restrain temporary migration.

“Our best guess is that net migration will only weaken slightly to around 200,000 over the next couple of years.”

SOURCE:  https://www.afr.com/real-estate/residential/lower-migration-will-reduce-house-prices-nsw-warned-20181126-h18cpq?fbclid=IwAR2QglsZmM_sy20ORsrtrr1xzyNYjVh0Hjhopr5aOZlcR1RYSGRXzhlo5pY

 

SYDNEY METRO $1.37bn Chatswood to Bankstown Contract Awarded

Sydney Metro $1.37bn Chatswood to Bankstown Contract Awarded

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The NSW Government has selected CPB Contractors and UGL to deliver the line-wide works package for the Sydney Metro City & Southwest project, Australia’s biggest public transport project.

The contract of $1.37 billion will be an unincorporated joint venture of the two CIMIC Group companies and includes major rail systems in the new twin 15km Sydney Metro tunnels from Chatswood to Sydenham.

Contractors will also expand the existing Sydney Metro Trains Facility at Rouse Hill to accommodate 37 new trains.

The new Sydney Metro Trains Facility South at Marrickville will also be part of the contract, as well as tunnel ventilation, mechanical and electrical system work for seven underground stations, and 11 new substations to power the Metro from Chatswood to Bankstown.

Related: Sydney Central Station’s $955m Urban Transformation

Sydney Metro

31km of underground railway track to be laid in the twin railway tunnels from Chatswood to Sydenham.
This is the seventh Sydney Metro City & Southwest contract to be awarded with the budget ranging between $11.5 billion to $12.5 billion.“The project combines the proven rail-sector expertise within our construction company CPB Contractors and our asset solutions provider UGL to deliver an end-to-end result, covering design, construction and commissioning of the project,” CIMIC Group chief executive Michael Wright said.

CPB Contractors is currently delivering contracts on Sydney Metro City & Southwest and Sydney Metro Northwest, WestConnex M4E and New M5.

UGL’s work includes tunnel fit-outs for the Sydney Metro Northwest and Epping to Chatswood projects.

Works are due to commence this year between Chatswood and Bankstown.

A total of 66km of railway across the Sydney Metro City & Southwest project is scheduled to be delivered by 2024.