We are increasingly a nation of landlords and renters rather than a nation of homeowners. With 22% of Australians owning 55% of the homes across our capital cities, the landed gentry are on the rise… As a nation, we can only be comfortable with these figures if we have lost sight of the core purpose of home ownership — providing homes.
Property has become a speculators picnic, with homes treated more like share portfolios than as a basic human need. This is how Australia has ended up with some of the worst housing affordability in the developed world and a dramatically falling home ownership rate.
Government-issued cash subsidies for first homeowners, while seemingly helpful, in fact do nothing but help push up house prices for existing homeowners. It’s a program that is good for some homeowners, but not for home ownership…
A series of tax settings – such as limiting negative gearing and replacing state-levied stamp duties with a broad-based land tax – were identified by the recent Henry Tax Review, but are considered politically difficult.
Yet new research by the Australian Housing and Urban Research Institute’s Professor Gavin Wood provides early evidence that the Henry Review’s recommendations would have a positive impact.
“The crisis currently playing out on the world stage is a crisis of growth. Not, as we are regularly told, a crisis caused by too little growth, but by too much of it. Banks grew so big that their collapse would have brought down the entire global economy. To prevent this, they were bailed out with huge tranches of public money, which in turn is precipitating social crises on the streets of western nations. The European Union has grown so big, and so unaccountable, that it threatens to collapse in on itself. Corporations have grown so big that they are overwhelming democracies and building a global plutocracy to serve their own interests. The human economy as a whole has grown so big that it has been able to change the atmospheric composition of the planet and precipitate a mass extinction event.”
This is so true that it’s scary… Whatever “solutions” Governments and central bankers try will fail because they have misdiagnosed the problem (or, perhaps more likely, cannot bring themselves to face the reality).
Stop trying to stimulate growth and start admitting that what we actually had was decades of unsustainable growth! It’s time to take our medicine…
This economic collapse is a ‘crisis of bigness’ The Guardian
“The household savings rate is poorly named. It is in fact the ratio of household income that isn’t spent on consumption items. You cannot conclude from the ratio that people are actually “saving” the money. In fact the data suggests they are paying down debt, which in itself sounds positive but in the absence of an offsetting in-flow from another sector ( government and/or external ) it is actually deflationary when the private sector attempts this en masse. This issue is more apparent when there is already a high-level of household indebtedness and therefore no non-asset based savings buffer. With the government aiming for a surplus budget combined with Australia’s external sector deficit this “tightening of the belt” is actually having an adverse effect on the private sector. We have recently seen this manifesting in a number of areas including sluggish retail trade and house price deflation. The issue with that last point is that a large amount of household wealth is actually tied up in housing, which means that while the private sector is paying down debt in an attempt to secure its finances there is actually a risk that it is making itself poorer by doing so.”
“There is some similarity between the euro crisis and the subprime crisis that caused the crash of 2008. In each case a supposedly riskless asset—collateralized debt obligations (CDOs), based largely on mortgages, in 2008, and European government bonds now—lost some or all of their value.”
George Soros asks Does The Euro Have A Future?
Ummmm… Does a page in history count as having a future?
From 2001 to 2008 we basked in the illusion of wealth creation delivered by 15 per cent per annum credit growth and the wealth effect of asset price inflation. As a nation we over-invested in real estate and corporate executives were deflected into financial engineering rather than building businesses with an efficiency focus. With oligopolistic market shares, negligible global competition in several industries and the ability to pass on cost increases; until recently there has been no sustained pressure for business to innovate, enhance skills, invest in technology nor drive down costs.
…The collapse in credit growth, a significant shift by households to save rather than spend and the high dollar has dramatically elevated the need for efficiency, restructuring and investment in technology. Sadly, but ultimately positively for productivity growth, there will be continuing job losses in the banking, retail and manufacturing industries.”
Well said, Mr Orgill. Well said!
For the American economy – and for many other developed economies – the elephant in the room is the amount of money paid to bankers over the last five years. In the United States, the sum stands at an astounding $2.2 trillion for banks that have filings with the US Securities and Exchange Commission. Extrapolating over the coming decade, the numbers would approach $5 trillion, an amount vastly larger than what both President Barack Obama’s administration and his Republican opponents seem willing to cut from further government deficits.
That $5 trillion dollars is not money invested in building roads, schools, and other long-term projects, but is directly transferred from the American economy to the personal accounts of bank executives and employees. Such transfers represent as cunning a tax on everyone else as one can imagine.”