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Friday, 09 November

13:10

Australian millennials in financial strife despite strong economic growth "IndyWatch Feed Economics.au"

In the third quarter of 2018, the Australian economy grew by 0.9%, stronger than the previous 0.7% forecast. The nations annual growth rate has reached 3.4% which will be music to the ears of the Reserve Bank and Treasury. New treasurer, Josh Frydenberg confirmed that these figures equate to the strongest growth since the height

12:18

Housing finance smashed "IndyWatch Feed Economics.au"

Credit drying up

It's interesting to consider that Labor's negative gearing policy was announced to help homebuyers compete with investors.

Alas for the timing, for there won't be any investors left to compete with the way things are going, with another sharp decline in the flow of new loans in September 2018! 


That's the flow; the stock of investment loans is now 33 per cent of total housing loans by value, which is a lower share than 14 years earlier (and now becoming surprisingly low given the casualisation of the workforce, higher stamp duty hurdle, and higher rates of immigration). 


The troubling news is that the forensic analysis of everything from pet food store to personal trainer expenditure on mortgage applications is making life tough for homebuyers too. 

I'm no alarmist but another 4 per cent drop in the value of lending in September 2018 - and even more for owner-occupiers - is an ugly result, and now unquestionably adding to financial stability risks, rather than reducing them. 

12:12

Sweetness and light "IndyWatch Feed Economics.au"

Better and better and better

The Reserve Bank sees good times ahead...


A brave forecast, as Sir Humphrey Appleby might have observed, wryly...very courageous!

Have a great weekend all :-)

12:03

Collect your free book "IndyWatch Feed Economics.au"

If you haven't already done so, don't forget to collect your free Next Level Wealth book here (or click on the image below). 


Whenever you're ready, submit an application here for a free diagnosis call.

09:39

Charge of the white shoe brigade "IndyWatch Feed Economics.au"

Taxing changes

At last...finally, a bit more clarity on Labor's proposed new tax policies for investment housing.

And, as expected, the proposals are nothing like what they say on the tin, since investors with other investment income will still be able to negatively gear established properties and offset their cashflow losses accordingly.

Worryingly, the Tax Institute seems to think that this brings Australia 'in line with the United Kingdom' - not sure what to say about that, except the UK tax rules for rental profits and losses are very different from this - emerging from the old schedular system - and not at all the same as what Labor has proposed. 


Source: Tax Institute

Paradoxically, the rules that were intended to 'level the playing field' are skewed in favour of sophisticated investors with family trusts and dividend income, at the expense of prospective Mum and Dad investors. 

The law of unintended consequences

The problem with policy that's made up on the fly is that it creates just as many problems as it solves. 

Since the first quarter of 2017 the concerning build-up in the stock of interest-only (IO) debt has been decisively tackled through caps on IO lending and the introduction of a mortgage rate differential, and this has been stunningly effective in encouraging investors to repay principal as well as mortgage interest.

Under the proposed new rules, however, perversely there will be less incentive to pay down debt, when investments can instead be...

08:00

Is the carbon tax idea dead? "IndyWatch Feed Economics.au"

That is the topic of my latest Bloomberg column, here is one bit:

And one striking result from Tuesdays election is that voters in Washington state, a Democratic stronghold, soundly rejected a proposed carbon tax by a margin of 56 to 44 percent. This raises the prospect that the carbon tax may be dead as a policy for the time being, including at the state level. As my Bloomberg Opinion colleague Liam Denning writes: We can debate the magnitude of the vaunted blue wave, but there was definitely no green wave.

Like many economists, I have long supported the idea of a carbon tax, and still do. Government has to tax something. So why not tax those activities which generate social costs, in this case through disruptive climate change? It is a very intuitive argument that has persuaded many economists on both sides of the political spectrum.

But a carbon tax is just not a popular idea with American voters, of either party. It is hard to argue that the Republican Party or the conservative movement has a stranglehold over the politics of Washington state.

Furthermore, this defeat isnt just a one-off. 2009s American Clean Energy and Security Act  a cap-and-trade bill in Congress similar to a carbon tax in its essentials though not all of its exact mechanisms  failed even when Democrats controlled Congress and the presidency. The momentum in Canada, typically considered more left-wing than the U.S., also is running against carbon taxes. In 2014, Australia voted to repeal its carbon-pricing law. Washington state itself rejected an earlier carbon-tax proposal, coupled with a cut in the state sales tax, in 2016.

The broader data are striking. According to a World Bank estimate, 23 countries hav...

07:00

The Weekend Quiz November 10-11, 2018 "IndyWatch Feed Economics.au"

Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

1. Government spending which is not accompanied by a bond sale to the non-government sector immediately adds more to total spending than would be the case if there was a bond sale.



2. If the external balance is always in surplus, then the government can safely run a surplus and not impede economic growth.



3. Assume the government increases spending by $100 billion in the each of the next three years from now. Economists estimate the expenditure multiplier to be 1.5 and the impact is immediate and exhausted in each year. They also estimate the tax multiplier to be equal to 1 and the current tax rate is equal to 30 per cent (30 cents in the $). What is the cumulative impact of this fiscal expansion on GDP after three years?


...

01:31

Community comes together at Black Gully Festival "IndyWatch Feed Economics.au"

[ Saturday, 17 Nov; 10:00 am; ] The community will come together at the 8th Black Gully Festival a free and inclusive event celebrating Armidale and our region. Black Gully Festival is truly a community day. It is organised by the community for our community, said Dave Carr, a driving force behind the event.Individuals, groups and organisations from across our region donate [...] full article 

01:30

ACCKP Celebration of Heritage "IndyWatch Feed Economics.au"

[ Saturday, 17 Nov; 12:00 pm; ] The Armidale and Regional Aboriginal Cultural Centre and Keeping Place 30th Anniversary Celebrations 96-104 Kentucky Street Armidale 17th Nov 2018 12.00-12.30pm Ceremony Smoking ceremony by Bruce Cohen Welcome to country by Steve Widders and Rose Lovelock Flag-raising by Lorna Hague and Margaret Walford Didgeridoo by Bevan Quinlin Aboriginal dance by Duval High School 12.30-3.00pm Food stalls Coffee Truck [...] full article 

01:29

Boomerang Bag Bee "IndyWatch Feed Economics.au"

[ Saturday, 11 Aug; 9:00 am; Saturday, 8 Sep; 9:00 am; Saturday, 13 Oct; 9:00 am; Saturday, 10 Nov; 9:00 am; ] Boomerang Bags sewing bees are the second Saturday of the month at the Kent House Community Centre commencing at 9am to 1pm. It would be great to see you all there. Bring your friends and your sewing machine if you have one. There are some non-sewing jobs to do also. Be part of the solution. Armidale Boomerang Bags Facebook [...] full article 

01:28

Armidale Urban Rivercare Sunday Sessions "IndyWatch Feed Economics.au"

[ Sunday, 9 Sep; 9:00 am; Sunday, 14 Oct; 9:00 am; Sunday, 11 Nov; 9:00 am; Sunday, 9 Dec; 9:00 am; ] Commencing Sunday 9 September Armidale Urban Rivercare (AURG) Sunday Sessions will be held on the second Sunday of each month. Location: Somewhere along Dumaresq Creek Join the AURG mailing list for details of each session. What to bring: BYO long sleeved shirt, long pants and sturdy boots. Please also bring gloves, broad brim hat and sunscreen. AURG [...] full article 

01:28

ARMEVENTS Mailing list for whats on in Armidale "IndyWatch Feed Economics.au"

Hello this is Helen Fraser I would like to invite you to subscribe to Armevents. Armevents is a free, subscription-based email list that allows members to send and receive announcements about public events in Armidale. In plain language, that means it is whats on in Armidale! If youd like further information about Armevents before subscribing, you are welcome to [...] full article 

01:22

These two koalas lost their mothers to deforestation "IndyWatch Feed Economics.au"

Hi SLA, I recently met an incredible wildlife carer, Vickii, who shared heart-wrenching stories of injured koalas brought into her care. Like other wildlife carers in NSW she sees firsthand the brutal impact of deforestation on koalas. Its the ugly truth of deforestation that the NSW Government doesnt want you to know about, and thats why we [...] full article 

00:50

Sapphire Community Investment December Roadshow "IndyWatch Feed Economics.au"

[ Thursday, 6 Dec; 5:30 pm; ] Thank you for your patience over the past few months and it was great to see those that attended the Wind Farm Open Day on 21 October. The exciting news is that with construction nearing completion, the community co-investment into Sapphire Wind Farm is about to open. Thursday 6th December Armidale City Bowling Club Drop [...] full article 

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Thursday, 08 November

22:34

Death throes of Coalition Governments "IndyWatch Feed Economics.au"

THE past couple of decades are not unique in Australian political history: the despising of the loathsome politicians and the sudden and late coming around of those loathsome politicians to abandon the positions of their financial backers and appease the majority of thoughtful people in the face of impending electoral defeat.

No doubt some diehard Labor supporters are nervous that the Scott Morrison Government will neutralise the big issues like Nauru, climate change and an anti-corruption commission with a bit of policy sop and then sneak back into office, that he will road-to-Damascus like see the light and be as successful as St Paul in gaining conversions and followers.

Do not fear.

History is against this happening. Any late lip-service to what the people really want on these issues and others like population, health and education will only be death throes that voters will see through.

Lets first go back 50 years in the US and then go back 50 years in Australia.

Fifty years ago this month, Richard Nixon was elected President. Stephen Ambrose, his biographer, wrote American politics had sunk to depths not reached since the Civil War and Reconstruction. Americas political leaders, Johnson, Humphrey, Nixon and Agnew, and most of the others were just playing with people.

Ambrose wrote: If they had the slightest feeling for the death and destruction that was devouring Vietnam, if they any concern for the lives of American soldiers in Vietnam, if they had the least commitment to a decent respect for the opinion of mankind, if they had the vaguest concern to meet their constitutional obligation to promote domestic tranquillity, if it even occurred to them to strive to provide the conditions that would allow the American people to pursue happiness, they managed to ignore it all in their single-minded pursuit of personal political victory at any cost.

Remind you of Australian politics now?

Now lets look at the behaviour in the past 50 years of Coalition Australian Prime Ministers facing defeat.

The behaviour pattern is the same as that of Scott Morrison and his government right now.

First, to Billy McMahon in 1972.

He finanally called the election for 2 December 1972, three years one month and a few days after...

16:35

Daily Digest 11/8 - Strong Dollar Hits Chinas Foreign-Exchange Reserves, The U.S. Is Going Broke "IndyWatch Feed Economics.au"

Daily Digest 11/8 - Strong Dollar Hits Chinas Foreign-Exchange Reserves, The U.S. Is Going Broke
  • Stock Market Facing a 2019 Crash: 70% Correction Warning
  • The United States Is Going Broke
  • What to Expect From Europes New Bank Cop
  • Starbucks Is Buying the Dip in China, and So Should Investors
  • Merk Research: Fed Chart Book
  • A cryptocurrency millionaire is buying up land in Nevadas desert to build a utopian village run on Ethereum here are the design plans
  • Sorry Tech Billionaires, San Francisco Just Voted for a Tax to Fight the Homelessness Crisis
  • Asymmetrical Warfare and 4GW: How Militia Groups are Americas Domestic Viet Cong
  • CDC director warns that Congos Ebola outbreak may not be containable
  • UBS expects to be sued by US Justice Department over crisis-era mortgage securities
  • Boeing 737 Max 8 safety alert issued after deadly Lion Air crash
  • Strong Dollar Hits Chinas Foreign-Exchange Reserves
  • Zillow sheds a quarter of its market value as rising interest rates weigh on home sales
  • Australia Likely to Block Hong Kong Companys Bid for Gas Pipeline
  • Global Dimming and Its Effect on AgricultureT
  • U.N. Predicts Disaster if Global Warming Not Checked
  • Headline-Grabbing Global Warming Study Suffers From A Major Math Error

Join the conversation

12:39

How soon can you quit your job? (watch) "IndyWatch Feed Economics.au"

Finally some more interesting news out to wrap up the week, with the release of the housing finance figures for September 2018 on Friday morning. 

Industry data suggest that September was quite a soft month for aggregate loan values - albeit a while ago now - and it will be interesting to see if there was any drag on the average mortgage size resulting from changes to lending standards.

Will also be watching the value of investor loans with interest.

In the meantime, here's another video for you to watch!

04:35

Texas Takes Action Against Crypto Company Promising 200% Profit "IndyWatch Feed Economics.au"

Texas Takes Action Against Cryptocurrency Mining Company Promising 200 Percent Profit

The Texas State Securities Board has issued an emergency cease and desist order to an Australia-based cryptocurrency mining company and its affiliates. According to the order, the company represents that investments in its mining contracts are guaranteed to 200% profit.

Also read: Yahoo! Japan Confirms Entrance Into the Crypto Space

Cease and Desist Order

Texas Takes Action Against Cryptocurrency Mining Company Promising 200 Percent ProfitThe Texas State Securities Board on Tuesday issued an emergency cease and desist order to Sydney-based Aws Mining Pty. Ltd. and nine other respondents affiliated with the company. The entities named are Automated Web Services Mining (Aws Mining), Mycoindeal, Aws Elite, and West Texas Oilfield Cloud Miners Club.

Sydney-based Mycoindeal provides wallet services for investments issued by Aws Mining. Aws Elite is a multi-level marketing o...

03:58

Political censorship in Australian research processes towards authoritarianism "IndyWatch Feed Economics.au"

Regular readers will know that I place great value in the disciplines we broadly describe as the Humanities. An understanding of knowledge that history, language, philosophy, geography, politics, sociology, anthropology, music, drama, classical studies and the like is essential if we are to advance societies and avoid the mindless descent into tribalism and authoritarianism. Last month, two things were revealed. First, the Federal Minister for Education vetoed successful grant applications for funding under the Australian Research Council processes, effectively politicising the process. He took exception to the topics. His decision was only revealed months later through interrogations during a Senate Estimates hearing. Second, an Australian university released a research report it had commissioned The Value of the Humanities which sought to articulate the value of the Humanities to students thinking about their education and career options and to businesses faced with hiring choices. It shows the immense value that teaching and research in the Humanities brings to employers, individuals and society in general. It makes the Federal minister look like a fool, although that was not its intent. A fool and one who is deeply insecure about allowing knowledge to proliferate. The latter is the hallmark of an authoritarian regime.

Some background blog posts I have written (among others) include:

1. I feel good knowing there are libraries full of books (October 29, 2010).

2. Education a vehicle for class division (November 23, 2010).

3. Technocrats move over, we need to read some books (June 13, 2012).

4. The humanities is necessary but not sufficient for social transformation (December 18, 2012).

5. We need more artists and fewer entrepreneurs (January 10, 2013).

Research funding scandal

The Australian Research Council (ARC) is the national competitive funding agency which is funded by the Federal government and applications are rigourously peer-reviewed.

The success rate is low and the grants give high status on the recipients as a consequence. Universities love researchers who get these grants because apart from the individual status, the Federal government then adds further funding per dollar awarded.

I have long been a reviewer and have...

01:00

The Aussie economy is built on property "IndyWatch Feed Economics.au"

House prices fall. That line alone used to earn us plenty of derision and hatemail.

But now, everyone is asking themselves how far they will fall.

According to The Age, Macquarie Bank expects property price declines of between 15 and 20% in Sydney and Melbourne.

AMP Capital predicts a 20% fall in the two cities between now and 2020.

Investment bank Morgan Stanley sees a fall of 15% in Australia-wide house prices.

I think all three are wrong. Because falling house prices will trigger catastrophic effects. A 20% decline is just the beginning. The initial shock.

The trouble with a bubble is that it relies on self-sustaining momentum. The expectation of gains at the end of the bubble is based on past gains, not fundamentals. That sucks in the very weakest sort of investor at the end.

Financial ruin is looming

When the worm turns, the marginal seller is a panicked seller.

A seller who relied on gains becomes a seller at all costs when those gains end.

And that gives you the nature of the crash which follows the panic.

Because property is tied to debt, the fear becomes far worse than in other asset classes.

Property owners can lose more than their initial stake in property by going into negative equity.

Not only can retirement dreams and self-managed super funds be sunk, but financial ruin looms for interest-only buyers and anyone who bought recently.

Think about it like this

The people who relied on the ability to sell their property to repay their debt are forced to sell when prices turn.

And the Royal Commission has exposed there may be plenty of those.

People who can only afford their debt on paper the paper submitted to the bank by their mortgage broker.

And those who borrowed interest only-loans too. Which is a huge portion of Australias mortgage market. The ABC reports:

Over the next three years, interest-only loans worth a combined total of about $360 billion will roll over to interest plus principal and that means borrowers will face higher repayments.

The kind of nightmare scenario is where a lot of people need to sell at once, and thats when you see a kind of fire sale mentality, and could see very significant downward pressure on prices, said Professor Richard Holden from the University of New South Wales Business School.

That puts the banks under stress, and their balance sheets under stress, and it could lead to significant financial i...

Wednesday, 07 November

23:49

Peru FTA is first test of Labors new trade policy and should not be ratified says AFTINET "IndyWatch Feed Economics.au"

Media Release 8 November 2018: AFTINET welcomes the Labor Opposition initiative to revisit the Peru-Australia Free Trade Agreement (PAFTA) because it includes foreign investor rights to sue governments (ISDS) which the Shadow Trade Minister has pledged to oppose in all trade agreements, AFTINET Convener Dr Patricia Ranald said today.

Dr Ranald explained that this pledge arose out of the fierce debate on Labors support for the TPP-11, which contains ISDS and other clauses contrary to Labor policy and which Labor has now pledged to ban in foreshadowed legislation. Labor has initiated this second review of PAFTA by the Joint Standing Committee on Treaties (JSCOT), on which the government has a majority and which previously approved the agreement. However the deal has not yet been ratified, and the committee could recommend against ratification.

Dr Ranald is giving evidence at the JSCOT public hearing in Melbourne today.

Dr Ranald said:

 AFTINETs submission  to the JSCOT makes three main points:

  • PAFTA is unnecessary because Peru is a member of the TPP-11, and a second trade deal with the same country would add to the confusing noodle bowl of overlapping bilateral and regional agreements;
  • PAFTAs inclusion of ISDS is unacceptable because ISDS enables global corporations to bypass national courts and sue governments for millions of dollars in unfair international tribunals over health, environment, indigenous rights and other public interest regulation;
  • The...

IndyWatch Australian Economic News Feed Archiver

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