In the press

June 16th, 2015
Categories: Economics - General, Environment Tags:
  1. Newtownian
    June 16th, 2015 at 18:33 | #1

    It’s worth remembering the reaction to Bob Brown’s suggestion, back in 2007, that Australia needed to long-term plan to phase out coal exports. Both John Howard and Kevin Rudd ridiculed the idea, arguing on the contrary that “coal is part of Australia’s long-term future”.

    Even the famous Stern Review, which radically changed the terms of debate when it was released by UK climate economist Nicholas Stern in 2006, relied heavily on the existing assumption that carbon capture and storage (CCS) would allow the continued use of fossil fuels, particularly coal. By contrast, the G7 commitment doesn’t even mention CCS, although it is not explicitly ruled out either.

    The second piece is particularly timely given last night’s Four Corners on precisely the same problem. Bob Brown sounds like Al Gore some years before and presumably both are now having the last laugh. But hell even then it was old news given the IPCC had got going in the late 1980s and the UNFCC was drafted in 1992.

    Conversely before Rudd was elected someone queried why if he supported climate change were he and his wife driving big gas guzzling 4WDs. Oops he replied. I must change over to a hybrid Camry. At that moment he confirmed that he and the incoming Labor party had little clue as to what an existential challenge Australia had on its hands.


    On the third piece though it was disappointing that the other household solar, thermal hot water systems was not touched on.

    Perhaps this is partly because many alternative energy advocates are located in Victoria where conditions are less favorable or Rheem is not good at PR. Nevertheless I continue to marvel at the plethora of PV while solar thermal hot water still languishes.

    [For those without solar hot water, some back of envelope sums to illustrate solar hot water benefit scale. Hot water tanks are commonly about 200L and need to be heated to ca 60 C. Starting at 25 C the energy required is 30 MJ or 8.2 kWh using panels with efficiencies of the order of 50-70%. For comparison our north facing roof mounted 1900 W PV system generates between 5 and 12 kWH depending on the season. Nevertheless the Sydney averages about 16 MJ/m2 of solar radiation over a year at the horizontal! so about 3 m2 of panel should achieve this on average. In practice in Sydney its harder going during winter and a boost of our smaller system is needed but savings are as good or better than for PV and of the order given by this calculation.]

  2. Peter Chapman
    June 16th, 2015 at 18:41 | #2

    One person’s capital gain is another person’s housing unaffordability. It is not uncommon in the Australian press to find articles in the news section decrying the loss of affordability, whether for buyers or renters, while the property section in the same issue trumpets about the buoyancy of the market. At the same time, in the current discussion of a price “bubble”, the focus has been almost exclusively on the costs faced by new buyers. There is another, related issue: the unaffordability, and unavailability, of much rental stock, even for people with secure employment. The so-called “key workers” (often taken to mean police, emergency service workers, health workers, teachers, etc.) (but in the end all workers are “key”) are increasingly unable to afford rental property in reasonable distance of their work places. This points up the suggestion that inequality in cities is inefficient, if not “dysfunctional”. We are in fact faced with a looming crisis not just in terms of house purchase prices, but also in terms of the supply of rental stock to low and middle income households, and how this contributes to the economic, political and social functioning of our urban places. This problem has been exacerbated by the long term decline in spending on social housing, and the uncertain and at times faltering attitude of governments at all levels to the nurturing of new affordable housing institutions. Australia lacks not just a coherent policy on housing, whether for purchase or rental, but we also lack a clear and comprehensive policy on urban development, including the setting of priorities for future growth and infrastructure provision. Such a policy might address the need for new greenfield residential development areas, but might also decide that such areas are better located near our many neglected regional centres, rather than on the outskirts of the major capitals.

  3. Ikonoclast
    June 16th, 2015 at 20:32 | #3

    Your article about house prices seems confused to me or maybe its me who is confused and missing a little of your irony.

    “Surely everyone supports more affordable housing. In fact, as Abbott is clearly aware, the opposite is true.”

    So, you are saying everyone supports less affordable housing. That is not literally true of course. Maybe a majority still support less affordable housing (meaning they support ever rising prices and thus rising equity in their house or houses) but a majority is not everybody. I guess this is just rhetorical/ironical exaggeration.

    “The real problem is the price of urban land…”

    Do you think there are no other significant components to house prices? What about negative gearing? What about FHOG. If these feed into house prices do they not feed into the land component? Are they not some of the primary causes in a sense? You mention them, sort of acknowledge them and then sort of dismiss them. I am confused.

    “The core problem is not negative gearing, let alone cashed up foreigners. It is the fact that around 70 of Australian households either own their home, or are paying off a mortgage.”

    This seems a really unfortunate sentence at two levels at least.

    1. It sounds like you mean high home ownership is bad and we would be better off if we were all renters and paying a few (rich) landlords. I know you don’t mean that but it comes off like that a bit.

    2. In 1970, the home ownership rate was 69%, now it is 70%. Therefore the rate in itself provides no explanation of why we had no housing bubble in 1970 and why we have a housing bubble today. The home ownership rate IN ITSELF is not the problem and TELLS US NOTHING about what is going wrong now.

    What is going wrong now is not the home ownership rate per se but a cultural/financial change where people are geared (pun intended) to viewing homes as financial assets and asset inflation as a good thing. Don’t we need to go deeper into analysing this cultural/financial/economic pathology of late stage neo-liberalism (or capitalism) to find out why this is really happening?

    Do you need to re-think or re-express yourself on this article or do I need to improve my irony detection system? Maybe I am being too literal, too humourlessly leftist and missing some of your clever irony?

  4. June 17th, 2015 at 06:37 | #4

    JQ has the G7 declaration ob climate range broadly right. Never mind the too loose timescale, it is quite something that they have like Sybil Fawlty recognized the bleeding obvious.

    A minor quibble on reading the tea-leaves. When I blogged to the same effect, a commenter pointed out that the G7 don’t say “full” decarbonisation. Harper can use this for a while to weasel out from the commitment. I doubt if that will help him in Paris, with 150 delegations screaming “full decarbonisation!”

    The more positive quibble is that the G7 did not say by the end of this century but in the course of this century. The other delegations have carefully left the door open to the earlier deadline we in fact need.

  5. rog
    June 17th, 2015 at 07:53 | #5

    Lowy poll on coal, nukes and solar

    43% of the adult population surveyed said solar ‘will be our primary source of electricity 10 years from now

  6. Uncle Milton
    June 17th, 2015 at 09:08 | #6

    Surely everyone supports more affordable housing. In fact, as Abbott is clearly aware, the opposite is true.

    Or, as John Howard put it, he had yet to meet anyone who complained when the value of their house went up.

    why young people are finding it impossible to buy a home,

    Is this true? Or is is true that young people find it impossible, given their budget, to buy the kind of home they want in the area they want?

  7. Troy Prideaux
    June 17th, 2015 at 09:33 | #7

    @Uncle Milton
    Well, I suppose like most things, it depends on what statistics you believe and how solid the assumptions are…

  8. Julie Thomas
    June 17th, 2015 at 09:50 | #8

    @Uncle Milton

    John Howard didn’t get out enough to meet those people.

    There is nothing in increased house prices for someone like me. I don’t want to sell, I don’t want to move. The increased value only makes the rates and other charges higher.

    And increasing house prices mean that stupid investors buy ugly run down houses and rent them to people who resent making some one else ‘wealthy’ by paying them rent.

    These desperate mum and dad investors don’t have the capital to improve the property so they get desperate tenants who pay more for their power because the houses are not insulated. There are no fences so kids can’t play freely in the yard and pets are not welcome and pets are not allowed. Not a life that Australians ever bargained for I’d say.

    I am not the only one in town who is realising that if our house prices had stayed low we would have people moving into town who bought their houses and lived in them and would therefore be more committed to the community/society and we would have more of the social capital we used to have in these country towns.

    And Uncle Milton why do you think that young people are aspiring to buy in the area they ‘want’? Are they just stupid?

  9. Uncle Milton
    June 17th, 2015 at 11:08 | #9

    @Julie Thomas

    I don’t buy this notion that tenants don’t bring social capital to their community. It reeks of something that John Hewson said when he was opposition leader, which is that you can tell which houses are owner-occupied are which are rented in a street because tenanted houses have shabby front lawns. He copped a lot of grief for that piece of pure snobbery and rightly so.

    In many countries in the world, including most of Europe, being a life-long tenant is a perfectly good way to live. The money people don’t spend on buying a house they spend on buying other assets, like stocks and bonds. If the tax system in Australia gave fewer freebies to home owners we might see more people choosing not buy houses and happily rent instead. (And yes, there would need to be longer leases that currently exist, but that is chicken and egg.)

  10. Julie Thomas
    June 17th, 2015 at 12:37 | #10

    @Uncle Milton

    You have missed my point. Of course some tenants can and do bring social capital to their community.

    My point was that tenants who are being ripped off by stupid greedy mum and dad investors and/or entrepreneurs who buy investment properties that are not decent rental properties do not make any social capital. The idea that we should all climb the ladder even at the expense of people who are less able and more unlucky has created a great deal of bitter and twisted people who justifiably feel ripped off.

    Tennants of private landlords in Australia do not have the same rights that they do in countries where renting is part of their tradition; our tradition is to own your own block with a yard for the kids.

    And tenants do not contribute social capital in the same way as people who are committed to the community on a long term basis do.

    Also, of course there are many other reasons why social capital has disappeared from small towns like my own.

    The old people who are the only ones left on the local Hall committee can’t understand why no-one will come to the meetings or go on the committee to save the hall that is falling down because council doesn’t have the money or the inclination to fix it up.

    They are old right wing voters and I’m telling it like I see it from now on so when asked recently, didn’t I care about the hall and the community? I told them to remember that their woman Thatcher said there was no society and that they should privatise the hall because they voted for small government.

    You, like John Howard, need to get out more and talk to people who don’t live like you do.

    Hewson was not good at speaking to the media; they set him up with the cake question didn’t they? And you are right that he was wrong about renters being necessarily untidy.

    But it is true about renters you know; they are more likely to be untidy (and depressed anxious suffering from health problems lonely and lacking family connections) but who cares about those things; They made their choices eh?

    The unconscious bias and motivated thinking that Hewson demonstrated then, is one of those prejudices that is based on reality as experienced by people who live beside them, but the reasons ‘they’ are that way is not because that is the best they can be.

  11. Hermit
    June 17th, 2015 at 14:40 | #11

    I wonder if the poll results for predicted solar dominance are a coded message ‘please don’t cut our feed in tariffs’. Those who can remember just five years ago may remember what seemed like euphoria over outback geothermal. That’s not the NZ volcanic type but where hot granite is blanketed by an over layer of sandstone. Predictions included providing a third of Australia’s electricity. When Marn Ferguson was resources minister (before becoming a gas lobbyist) he helped out with some large cheques. As of 2015 it has come to nothing in Australia. The website for one of the leading players is

  12. Robertito
    June 17th, 2015 at 16:33 | #12

    Solid stuff, JQ. There were a couple of things in that climate article that I’d forgotten about – clean coal and Bob Brown saying that we needed to end coal exports. I know what happened to Bob Brown, but what happened to clean coal? It seems to have dropped off the agenda.

  13. June 17th, 2015 at 19:32 | #13

    What feed-in tariffs, Hermit? About half of Australians now get no set feed-in tariff for new rooftop solar and can only get what their electricity retailer will offer, and are quite low for almost everyone else. The inability to realistically cut feed-in tariffs much further is why I expect the quantity of point of use PV installed in Australia annually to increase. With a decline of over 8% a year in the cost of PV modules predicted for the next three years, the value of rooftop solar as an investment seems certain to improve.

  14. Ikonoclast
    June 17th, 2015 at 19:37 | #14

    “There is nothing in increased house prices for someone like me.” – Julie Thomas.

    I agree. Indeed, I would argue high house prices are bad for most people in this country (about 90%) if they only realised it. Here’s why.

    Anyone renting is disadvantaged by high rents and low accommodation availability.

    Anyone owning one good home with a reasonable mortgage by today’s standards does not benefit in any way from high house prices. Indeed, they suffer disadvantages.

    If they sell their house, by choice or necessity, to buy another comparable house elsewhere, high house prices simply mean they have to shell out more in agent’s fees and stamp duty. They would actually go further backwards financially when moving than if house prices were more modest.

    If the house prices reduced even considerably in value (price crash) but the owners retained positive equity and ability to service the loan then nothing essentially has changed for them. They would still just live there as before and get the same owner-amenity out of the house (which is what home ownership is actually about).

    A housing crash that reduced house prices significantly would actually help young adults in jobs for example. They could then enter the housing market after a few years of saving and start buying their own homes if they wished. But at current prices this cohort of young adults now will probably never own a home before say age 40. Instead they will have to rent and make landlords rich and stay poorer themselves.

    I do not accept that we need an over-heated housing market to keep an economy running. That is just nonsense. Indeed, it is slowly but surely distorting and wrecking our economy.

    So I say a pox on the over-inflated housing market. It is clearly bad for most ordinary people. It only advantages about the top 10 percentile. Anyone else who thinks it is a good thing is completely deluded. It is a deliberately engineered and rigged mechanism to transfer more wealth to the already rich.

    I hope the housing market either crashes or eases back soon to more historically sustainable levels. Indeed, sooner or later it will have to. The current imbalance of house prices to average earnings is completely unsustainable economically. Inflated asset prices cannot indefinitely exceed truer prices which are in line with and supported by fundamentals.

  15. Ikonoclast
    June 17th, 2015 at 19:47 | #15

    @Ronald Brak

    Yep and if the grid gougers make it not worth being on and feeding into their grid, people will go off-grid and feed their own batteries. I have solar panels and solar hot water now and I would certainly say on current developments I am 50% likely to go off-grid by 2025. A decade ain’t that long in history’s march.

  16. June 17th, 2015 at 20:38 | #16

    The US DoE continues to plug away at EGS geothermal. The Americans resisted a premature dash for commercialisation. With laser drilling (Foro Energy) and degradable chemical blockers allowing better control of reservoir creation (Altarock), they continue to make slow progress. I don’t know what if anything is happening in Europe. It would be as big a mistake to write off the technology as it was to hype it a few years ago.

  17. June 17th, 2015 at 23:16 | #17

    @Uncle Milton

    In one street I lived in you could tell the owner occupied properties, because they had overgrown gardens. Us poor old tenants, faced with 3 monthly property inspections had to keep the garden under control, while the owner occupiers didn’t.

    Used to piss me off no end.

  18. Ikonoclast
    June 18th, 2015 at 06:04 | #18

    @John Brookes

    In one street I lived in you couldn’t tell the rental properties from the owner-occupied properties because all gardens and lawns were reasonably well maintained. One renter on one side of me did keep a car wreck in his front yard for twelve months though. Used to piss me off no end. Eventually, I bet him $50 he couldn’t get rid of it in a month. It worked, though my wallet was $50 lighter of course.

    Then the next renters there used to grow pot in the back yard (I didn’t care about this), have parties and throw beer bottles in my yard, smash beer bottles on their own driveway and then let their toddler play there early the next morning while they were still all out to it, and had an older soon who OD’ed with one his mates and the ambulance came to carry out two comatose bodies etc. etc.

    On the other hand, there was that teenager down the road in his mum’s house (not renters I think) who used to blow up letter-boxes with home-made bombs until one blew up in his garage and nearly burnt his mum’s house down. Walking home from the train station that day I saw the fire-brigade and an unmarked car with two detectives there.

    Anecdotal evidence. 🙂

  19. Moz of Yarramulla
    June 18th, 2015 at 09:22 | #19

    I’ve just made the transition from renting to owning… I’m 45. Once we were both earning above-average wages it only took about five years to save a deposit and buy a slightly-cheaper-than-average Sydney house, only about 45 minutes from my partner’s work in the CBD. We could have paid a bit less and got a house on a main road closer in, but not by a lot (ie, Canterbury instead of Lakemba saving 5 minutes).

    The whole “lifestyle choice” argument about living near where you work is at best a furphy. If people value their time at all, they often find it’s cheaper to pay rent closer in, especially if there’s public transport. The motorists cop it coming and going. Driving costs more, takes longer and you have to pay attention while you’re doing it, so it’s effectively work. That pushes out your work day.

    We have also put up a tokem PV array, and we’re getting 5c/kWh feed in. So any idea that we’re trying to protect that generous FiT is delusional. When we can afford it we will rip off the weird shape tiled roof and replace it with a simple straight line peak so we can bump the PV to ~10kW, but that’s $30k we just don’t have right now. With 10kW we could go off grid, and save the $1/day connection charge. There’s a whole argument about the economics of that, but for me it’s as much giving the finger to the power companies as the cash.

  20. Moz of Yarramulla
    June 18th, 2015 at 09:31 | #20


    We lived in a “nice street” in the People’s Republic of Moreland for a while, as one of the few renters there. We definitely had a messy front garden, because we grew vegetables rather than lawn. But the problem people in the street were the children of homeowners, they were the ones racing cars up and down, egging houses of people they didn’t like (the Muslim family, the guy who chased them down to pay for his car after they ran into it, and so on). We had a couple of “mysterious” incidents of vandalism, one after our security camera let us track the pile of vomit and empty premix bottle back to the house a few doors down and we asked them to clean it up… camera vanished a few days later. I’m not saying it was definitely the “nice kid”, but it’s an interesting coincidence.

    Housing costs is one of those discussions where it’s easy to feed numbers in, but most people don’t care. They have their ideas, and reality is unwelcome. It’s kind of annoying when people tell me that I’m wrong about my situation, despite having just done a bunch of research and bought a house. But it happens quite often. Nearly as often as motorists tell me their delusions about how roads work, in fact.

  21. Ikonoclast
    June 18th, 2015 at 11:02 | #21

    @Moz of Yarramulla

    People are welcome to buy or not buy houses of course… if they have the money or can borrow it. But our housing market is over-heated compared to fundamentals. The main fundamentals are annual household income which is needed to service the loan or in the case of a property rented out, the rental income needed to service any loan and provide a return on capital.

    And when asset inflation replaces real economic production as a major driver then I think an economy is in trouble.

  22. Luke Elford
    June 18th, 2015 at 11:42 | #22

    @Julie Thomas

    A finding that renters have more health problems is hardly surprising, since they have lower incomes and less wealth (one-sixth the wealth of home owners, according to the Henry Tax Review). But it tells us nothing about the effects of renting, nor does it provide justification for paternalistic policies that save people from supposedly deleterious decisions to rent and make alternative investments. Moreover, even controlling for differences in incomes is inadequate, because it fails to take into account the imputed rent homeowners gain through homeownership.

    Do studies finding poorer health outcomes for renters control for the imputed rents homeowners get from homeownership (I’m assuming they control for income)? Do they perhaps instead control for wealth? If they do not, they do not tell us anything useful about the possible impacts of renting per se.

  23. Luke Elford
    June 18th, 2015 at 11:47 | #23

    @Peter Chapman

    So, your solution to the difficulty that workers have in finding affordable accommodation close to their jobs is for the government to encourage housing development to occur nowhere near those jobs? Decentralisation policies—a perennial favourite of homeowners in the state capitals—that discourage development close to high-paying jobs and good services—where people actually want to live—are the last thing that people seeking housing, either to own or rent, need.

  24. Julie Thomas
    June 18th, 2015 at 11:50 | #24

    @Luke Elford

    Get a life Luke and stop picking on me.

    It’s all anecdotal evidence. That should have been clear from the lack of any academic rigour in my comment but of course you think you can emulate J-D. Not likely.

    If anecdata doesn’t ‘tell’ you anything about reality stick to your reality in which there are ‘paternalistic policies that save people from supposedly deleterious decisions etc etc burble on”

  25. Luke Elford
    June 18th, 2015 at 12:48 | #25

    @Julie Thomas

    Okay, I’m happy to stop engaging with you. I’m sorry that you feel that I am picking on you; I note that you initiated debate between us last time.

    For the record, I wasn’t trying to be smart—I honestly thought you were basing your comments on studies, because you’re generally knowledgeable about this stuff and you refer to studies in comments on other threads.

  26. Donald Oats
    June 18th, 2015 at 13:16 | #26

    @Uncle Milton
    It’s true.

    The main difficulty is to do with being close enough to where the jobs are, as has always been the case. With the transformation of manufacturing to high end, highly skilled work, and the loss of major manufacturers from the country, the capacity to provide jobs regionally has been eroded. The population growth, driven by a high immigration rate, has caused several pernicious effects to manifest: more people seeking the same quality of housing, and the developers responding by providing lower quality, or higher density, apartment and high rise accommodation.

    The second difficulty is that house prices, over time, absorbed the dual-income household, coming from a society which traditionally was single-income household. This means that what was once affordable for a single income, now requires dual income to be affordable.

    The third difficulty is that our population is heavily concentrated in the capital cities and their catchment areas. We could do with more cities, each with fewer people.

    The fourth difficulty is that monetary policy keeps pushing in the opposite direction to that needed to keep house prices from blowing out; I presume that this sad situation is in part because our fiscal policy settings are rudderless, and so it falls upon the RBA interest rate lever to do the heavy lifting in our economy. As Glenn Stevens recently said, monetary policy has little effect now, not that that will stop them from continuing to cut rates.

    The fifth difficulty is the great shift from houses being a home to houses being an exploitable asset with neat tax benefits to put icing on the cake: investors are crowding the market in an unprecedented manner.

    The sixth difficulty is that with the advent of mass higher education, a significant proportion of people who are in the first home buyer category are carrying a HECs debt or something similar.

    The statistics for first home buyers shows a relentless decline over the past two decades. This is reflecting the afore-mentioned difficulties, all of which have increased over time.

  27. Ernestine Gross
    June 18th, 2015 at 13:27 | #27

    Spot on, Ikonoclast @19.

    Inflation measures have lost meaning in the post-Keynesian area with ‘deregulated’ global financial markets. Relative money prices is what matters. (Price is the generic term, including wages, salaries, rents payed to landlords, etc, etc). The link to wealth is again a price, namely the transactions ‘values’ of assets owned by an ‘individual’, both physical and financial securities. So the basic relationship of interest is ‘quantity of object k, owned by individual i multiplied by price of object k at time t’ . The relevant measure becomes the wealth distribution includes skills (‘human capital’).

    The hourly wage part of household income has grown much slower, if at all, for many people compared to the price of real estate (and rents) in Sydney (the ‘market’ I know best by means of tracking it almost daily). The financial market magnifies this divergence in wealth in several ways. Firstly, the maximum savings rate (deposit rate) wage earners can get at present is about 3% p.a. Real estate prices have increased during the past year everywhere much more than 3% p.a, in some places by up to 40% (median) at areas about 10km north west of the CBD. There is clearly no way a wage earner can save for a deposit and ‘win’. Second, existing home owners and high wealth or high income individuals can borrow at a discount. Third, it is a fallacy to say foreign investors are ‘insignificant’, using past data on their market share. This is so because people can observe who buys properties in local market segments (eg Eastwood, new appartments in the CBD) and at what prices. This alone can set off price expectations about the state of the market. More fuel. Some people also observe that units bought by foreign investors remain vacant (here goes the strength of the argument that their ‘investment’ increases rental supply. The problem is further magnified by taxation rules. Considering negative gearing, capital gains tax concessions for investors, and superannuation rules, it is price expectations which influence decisions. In the absence of oversupply (as distinct from a ‘tight’ market or a ‘sellers market’ in the jargon of real estate agents), further ‘investors’ are drawn into the local market. Most of these decisions by individuals are individually rational, even though the outcome is a ‘crisis’ in the making. Those tax paying working people who are disadvantaged ‘in the market’, due to their low wages and lack of real estate ownership are subsidising domestic tax advantaged ‘investors’ (some of the foreign money is going into real estate – multimillion dollar mansions – with which the renters and potential buyers are not competing directly.) Is anybody surprised ‘the young’ are angry? I am not.

    I have yet to find the reason for the claim that land taxes on owner occupied houses (investors pay it anyway) is a ‘more efficient tax’ than, say stamp duties. Firstly, land taxes, levied on ‘unimproved’ land is paid by investors. If such land taxes are to replace the time smoothed path of stamp duties (state revenue objective), then the difference is merely the time profile of payments. The abolishion of stamp duties would make it easier for ‘investors’ to use the real estate market as a closer substitute for financial securities markets because they could roll over their ‘funds’ faster. (stamp duties are a little akin to a Tobin tax in the sense that they affect the speed of transactions.) A possibly very small segment of the curren owner-occupiers may be forced to sell (if they don’t want to carry the difficult to evaluate risk of reverse mortgages). Who would be first in the rank of buyers, given that the wealth distribution I’ve talked about before, is unaffected? Those who can negative gear at concessional capital gains tax – no? Furthermore, stamp duties are not the only transaction costs. There are also real estate agents fees. Strange, isn’t it, that the ‘market’ part of the transactions fees is not being talked about. There are removal costs, etc, etc. Reverse mortages just mean that the banking sector would have a new type of security to issue. More wealth transfers from private individuals to the financial sector.

    I had a look at the tax review papers and discovered a segment on land taxes. Here is the link:

    I was surprised to find, as theoretical justification for the ‘efficiency of land tax’, cross-diagrams. These two-dimensional comparative static pictures had annoyed me even during my undergraduate days. Think about it. The premise is that ‘land’ is finite and immovable, is a fixed supply. This is a reasonable assumption for the world, ignoring the efforts of the Dutch, Singapore and Sydney Airport to reclaim land and ignoring the potential loss of land due to rising sea levels. But there is no shortage of ‘unimproved land’ in Australia. Who is supposed to pay land tax for the Nullabor or state forests? Are the Aborinines in Arnhem land supposed to pay land tax even though they have no demand for paved foot path? By contrast, the application of the idea of finite land is reasonable for Singapore because a physically fit person can walk from one end of the island to the other. This is an important requirement if the ‘efficiency property’ of land tax – allocating land to its ‘optimal’ usage requires that ‘the poor’ can participate in the reallocation process (ie those who can’t afford a car or a private jet…..). Now, what would be ‘the opportunity cost’ for Australians to walk from one end of the country to the other in order to gain employment and affordable rental or other housing?? What would be the ‘opportunity cost’ for people in Greater Sydney to walk from one end of the area to the other, considering the area is a little over 12,000 square km (a bit over 700 sq km for Singapore)? It seems to me, either the notion of a sovereign nation state has to be given up or the physical differences between countries have to be taken seriously by people drawing cross diagrams. This is not all. Consider the representation of ‘demand’, a straight line with a slope. Whose demand schedule is it in the first diagam? Is the minimum wealth condition, about which I wrote repeatedly on this blog, fulfilled? We don’t know. The second diagram perports to represent a differen ‘price’ for land, given a land tax. The idea that the price will decline to this lower price is an assumption not a conclusion because the diagrams correspond to two economies, which are identical except for 1 variable, ‘land tax’ (comparative static of possibly an economy with two individuals – who knows). Obviously, if other taxes such as negative gearing are introduced, all that may change in an actual economy is who owns what rather than at what price. Price expectations and private money generation through the banking sector and hence the dynamics which drive so-called bubbles, aren’t representable at all. The slope of the so-called demand function can be drawn arbitrarily subject to the condition that a sequence of the so-called demand curves approach the supply curve asymptotically. The impression conveyed by the picture visually supports the strength of the argument. I conclude one cannot conclude anything from cross-diagrams.

    Indeed, I do not agree with JQ’s smh article.

  28. Donald Oats
    June 18th, 2015 at 13:40 | #28

    As people have observed, some European countries have life-long renting as the majority option. It doesn’t necessarily follow that this will work in Australia though.

    My rental experience is that I’ve rented for my entire adult life, bar a few years at uni where I stayed at a residential college, not that that is any different to renting, at the end of the day. I moved so many times it makes my head hurt trying to remember all the places I’ve rented. I’ve had to sell possessions to make the moves on many occasions as well, which is costly. I’ve paid in the thousands for removalists to do the shift interstate—twice, following the job(s).

    Often the reason for renting isn’t to enjoy the better amenities of being near/in the CBD of a capital city, but simply to be close enough to the workplace to be able to survive the commute. Sydney is about the one time when I lucked into an apartment in a great spot, only to observe a property boom which raced ahead of my ability to save the deposit. The apartment was the best price I could get at the time, a fluke, but even so it was a big chunk of money.

    One time, I had to move because someone in the landlord’s family was kicked out of their rental property, and so…I had to lose mine. That put three people out, as it was a share house.

    Another time, it was due to an unbearable and intransigent neighbour who shared an internal wall with my unit. Moving was the only prospect of a good night’s sleep. (The neighbour was a little old retired lady, who loved to hear her radio, poorly tuned, anywhere in the townhouse—including the garden! She wasn’t hard of hearing at all, but for months I thought that was the reason.)

    I once had to go interstate for a job, and allowed a family to use my townhouse for the few months I was away. My possessions were trashed, especially the kitchen equipment. That cost me.

    Yet another time, I had to find an apartment in the middle of an extremely competitive rental market, meaning there were so many people looking to rent, it all came down to luck. So, I required at minimum a two bedroom apartment unfurnished, and ended up having to settle for a one-bedroom apartment, fully furnished; my furniture had to go into storage, at cost to myself. The fully furnished aspect of the accommodation meant it was at a premium price, so I got skinned on that too—but I was desperate for somewhere to live. Six months later, I had to move again, because they sold it to an interstate investor…

    Using myself as the anecdote, renting as part of job chasing really sucks. The one benefit is if you are fortunate enough to land in a nice area.

  29. Troy Prideaux
    June 18th, 2015 at 13:51 | #29

    Ernestine Gross :
    . Third, it is a fallacy to say foreign investors are ‘insignificant’, using past data on their market share. This is so because people can observe who buys properties in local market segments (eg Eastwood, new appartments in the CBD) and at what prices. This alone can set off price expectations about the state of the market. More fuel. Some people also observe that units bought by foreign investors remain vacant (here goes the strength of the argument that their ‘investment’ increases rental supply. The problem is further magnified by taxation rules. Considering negative gearing, capital gains tax concessions for investors, and superannuation rules, it is price expectations which influence decisions. In the absence of oversupply (as distinct from a ‘tight’ market or a ‘sellers market’ in the jargon of real estate agents), … {snip}

    I’m currently selling our unit and during yesterday’s photo session I asked our estate agent how many houses in the area were being purchased by Chinese. His reply was of the ones his company were selling, it would be in the range of 60-70% range. Now, that’s not representative of Australia or even Melbourne, but it’s what’s happening in my area of Mt Waverley (and probably Glen Waverley too) and the prices in these areas are going completely nuts! So, from my personal perspective, it’s definitely not insignificant.

  30. Ernestine Gross
    June 18th, 2015 at 14:01 | #30

    @Troy Prideaux

    It is helpful here to distinguish between absentee landlords (‘investors’) and local citizens or residents of particular ethnic origins. (I know Sydney people of chinese ethnicity who complain about the influx of ‘hot money’ just as much as 4th generation Australians of English decent.)

    Another indicator of ‘hot money’ of whatever source (eg speculative, highly leveraged included) is to observe the fluctuation in real estate prices in particular areas.

  31. Ernestine Gross
    June 18th, 2015 at 14:08 | #31

    More on the Sydney housing market.

    At UNSW there is a multidisciplinary research group, ‘City futures’. It has a blog which contains references to various studies, detailed discussions of the nature of the problem, and excerpts from papers. I found a paper by Yudy Yates (a former colleague from Sydney) et al particularly useful regarding the distribution of rental values over time.

    The web-site is:

  32. Troy Prideaux
    June 18th, 2015 at 14:09 | #32

    @Ernestine Gross
    That level of detail is obviously very difficult to gather but my general comment was in relation to housing affordability or more specifically *land* affordability in these areas.

  33. Aardvark
    June 18th, 2015 at 14:50 | #33

    Interesting piece on the housing. I think the focus on the affordability is misplaced. The market should structurally adjust over time, even if that means geographical relocation of commerce and industry). The real issue would appear to be the distortionary impacts of differential taxation on different classes of purchasers. That is each class has a different exposure to capital gains, offsets against PAYGO taxes and land taxes. I guess the question is whether an owner occupier is forced to bid a higher price than necessary if the property investor has signficantly lower post tax cost of funds (noting post tax funding costs effect property investors across marginal tax rates). Lets recognise property as an asset and apply an appropriate level of tax neutrality and let the market sort out affordability.

  34. Troy Prideaux
    June 18th, 2015 at 15:44 | #34

    I personally don’t see that as the central issue, but I’m probably wrong. The way I see property investment in general (excluding all the dodgy stuff) If you’re a property investor you’re either after a capital gain in which case you’re primarily after *land* in an area that’ll grow in value. You want to negative gear which will likely promote an interest-only finance arrangement (as it’s the interest you can claim against) and the rental return is probably of little interest to you. In this type of investing you’re primarily competing against owner-occupiers that are probably looking for their 1st home.
    Then there are the rental return investors that would probably prefer to pay any loan off ASAP to provide another income stream or retirement income. Apartments are very attractive for this form of investment as the rental return is nearly always much higher albeit often with significant running costs (body corp etc). These investors are unlikely to compete with owner-occupiers, but they’re also more unlikely to negatively gear as it doesn’t really suit this type of investing.
    As for owner-occupiers, there’s no tax break and they’re also less likely to want interest-only financing as the idea is to eventually own the property so the chances are they have less access to finance both because of a likelihood of less collateral behind them (for 1st home buyers) and the principal loan commitment which further restricts the amount you can borrow. The one advantage the owner-occupier has strictly in terms of winning the bidding is they don’t have to make money from the commitment – after all, it’s their home, but it comes down to affordability.

  35. J-D
    June 18th, 2015 at 15:47 | #35

    @Julie Thomas

    ‘It’s all anecdotal evidence. That should have been clear from the lack of any academic rigour in my comment but of course you think you can emulate J-D. Not likely.’

    I’m the gold standard now, am I?

  36. Donald Oats
    June 18th, 2015 at 16:59 | #36

    @Troy Prideaux
    In Adelaide, the tertiary student, especially from overseas, are significant in the CBD area as renters, and I suspect they might cop a higher rent due to timing issues, i.e. they need a place to live starting at just before the first semester, causing a bit of a log-jam at that time of year. I imagine an investor might see value in an interest-only loan for apartments in the city area, but once you get to the outer suburbs, I’m not as confident that would be a sensible arrangement.

    Other cities like Melbourne and Sydney are substantially bigger than Adelaide, so tertiary students mightn’t make any noticeable difference in those rental markets.

    If, by some crazy event interest rates were to rise, the interest-only investor could get clipped quite badly, as rents can only rise so fast. I’ve never heard of an interest rate rise of less than 25 basis points (in Australia), and if a 25 point rise were to happen now, it would be a substantial increase in relative terms. Given Glenn Stevens’ comments recently, the most likely rate movement, if any, is down.

  37. Ernestine Gross
    June 18th, 2015 at 17:15 | #37


    Owner-occupiers, other than those who inherrited a home without debt, paid or are paying for their real estate with after tax income. All maintenance, rates, improvements, stamp duty, real estate fees, interest are paid from after tax income. No depreciation charges can be claimed.

    An easy solution to achieving equal tax treatment is to have ‘investors’ treated as multiple home owners who acquire the real estate with after tax income, pay stamp duty, maintenance, rates, real estate fees, interest etc from their after tax income, no land taxes. Rental income would be taxable on the same terms as net interest earned on deposits. (Banks allow offsets of interest payments against earnings on deposit accounts in which rents can be deposited.) This would cut out a lot of red tape.

    The term ‘investor’ is merely a conventional label. Ultimately there are only people.

    I assume this is what you have in mind.

  38. June 18th, 2015 at 21:41 | #38

    JQ: please do not put links to unrelated articles in the same post. It makes the thread discussion hopelessly confused. One topic, one post.

  39. June 18th, 2015 at 21:59 | #39

    As someone who has owned and rented, I reckon that renting, at least in Australia, sucks. The rental inspections. The forced moves. They really are the pits.

    The benefits of renting are that you don’t need a deposit, and you can afford to live somewhere that you couldn’t afford to buy. But in the long term, the lack of control over your own life becomes the bigger factor.

    I would consider allowing negative gearing on properties where the renter was given greater security and control than they have now. (Of course, last time I checked, it wasn’t my decision to make.)

    Among my favourite rental stories was that of Norman Lindsay, who with his arty friends used to rent in the extremely depressed Melbourne(?) market. They would take out a lease, and stay there without paying rent until they were thrown out.

  40. June 18th, 2015 at 22:00 | #40

    @James Wimberley

    Now you’ve made it worse James! You’ve added the “only one subject per thread” debate…

  41. Donald Oats
    June 18th, 2015 at 23:37 | #41

    Somewhere in Australia, there is a windbag blowing…

    Windfarm Commissioner call for Expressions of Interest coming to you soon.

  42. Collin Street
    June 19th, 2015 at 07:06 | #42

    > you can afford to live somewhere that you couldn’t afford to buy

    You can’t, though: the price you pay in rent pays — or is supposed to pay — the full cost of running the property, if the owner is doing it properly, and then some. The only difference is that the owner had “capital”, had collected a fraction of the money up-front, and levels of availability of “capital” are controled by the state.

    Rent is, you know, rent. It’s money-for-nothing, or most of it is. The jobs that landlords do that aren’t “inserting themselves between you and housing for no benefit to anyone except themselves” are pretty thin. Not 100% zero, there’s a place for rental housing, but not large and not anything to hang an economy on.

  43. Julie Thomas
    June 19th, 2015 at 07:34 | #43

    @James Wimberley

    Only some of us are hopelessly confused by complexity.

    And J-D you can be the gold-standard if you are so motivated to think that way.

  44. Julie Thomas
    June 19th, 2015 at 07:45 | #44

    @John Brookes

    My favourite rental story is about the indigenous family who had to sell their property because they had not paid rates for over 10 years and the new owner of the property rented it back to to them and then they – or the matriarch who kept everything together – refused to pay rent because the house was not up to scratch.

    It was very funny to see the outrage among the good bourgeois people in town.

    They were good neighbours if one approached them in the right way though. There was a dreadfully ugly statue – a large fibreglass animal – that council put up in the park next door to their house and clearly it would be a target for vandalism but the other neighbour was a pub and the owner of the pub asked them very nicely if they would make sure the ‘animal’ was not damaged.

    They agreed and nothing every happened to it until those pub owners sold and the new owners were entrepreneurs who didn’t know how to get along with poor people and then the horse was always losing a leg or gaining bits that it hadn’t had originally being a gelding.

    People who pontificate about how the poor don’t have budgeting skills really need to meet and get to know how poor people think; they are so not stupid.

  45. June 19th, 2015 at 07:54 | #45

    @John Brookes
    I expect to be banned. Sigh.

  46. Julie Thomas
    June 19th, 2015 at 08:13 | #46

    @James Wimberley

    I’m always expecting that when I indulge in silly exchanges with J-D. 🙂

  47. Ikonoclast
    June 19th, 2015 at 08:53 | #47

    @Ernestine Gross

    I read your long post with great interest. I agree on all points but must admit that (a) I had not reached my conclusions as rigorously as you did and (b) I hadn’t really thought through the land tax argument as you have. At first reading, I think you have a valid point about the land tax (if I understand you correctly). A land tax is not a solution, it doesn’t really solve anything.

    My interest lies at the more fundamental level of asking “Why does the system behave like this?” Of course, one also has to ask “Why does the system behave differently from this too, as it has in the past?” I could be thinking of 1970 or 1950 or 1930 for example.

    Then one has to ask “What is this system?” , “Has there really been one system from 1930 (or even from 1830) to the present?”

    In relation to this last question, it is clear that Piketty, for example, implicitly answers this question in the affirmative for the countries he examines. There has been one system since (say) 1830. Piketty compares certain data over at least that time span (IIRC). Without descending to political economy labels, or ascending to grand narrative explanations, there has been one system with income and wealth outcomes which can be compared as Piketty compares them.

    To come back to my essential question, “Why does the system behave as it does?” One feature is booms and busts over time. Another feature is a constant tendency to concentration of wealth unless certain other features come into play, these being for example inflation events, wars or labour demands won politically (by ballot or revolution for example). Reading Piketty is enough to enable us to come to these conclusions.

    Explanations for “why the system behaves as it does” can include (very possibly in overlapping or reinforcing fashion);

    (a) It is an intended consequence of design;
    (b) It is an unintended consequence of design;
    (c) It is a systemic feature of the design (this goes deeper than points “a” and “b” but this will require more explanation.)
    (d) It is or can be caused by exogenous factors (natural disasters, resource shortages, even limits to growth).

    The first two points are interesting in themselves. While we intentionally “design” our political economy, we do it in both a quasi-coordinated fashion and a competitive fashion. Competition occurs both at personal interest levels and sectional interest levels (vested interests). The system that results is not the master plan of one person or even of one set of vested interests. It does involve trade-offs and various sectional interests getting part, not all, of what they want.

    Although as Piketty has now shown (again but in a different way), the system has a bias. It naturally (or systemically) tends to a concentration of wealth unless it is “steered” away by, as I noted, events or phases like inflations, wars or sectional (class) demands.

    This focus on systemic bias (or tendency) has relatively recently become a feature of my (amateur) complex system thinking with regard to the economy. Piketty’s work has demonstrated this bias in the system and measured it. He has done so in a non-ideological (i.e. empirical) manner.

    The question really becomes this. Do we accept the systemic bias or tendency in this extant system and seek to enhance and exploit it (capitalist interests) or seek to ameliorate and re-direct it (social-democratic interests)? Or do we conclude that the current system ultimately has a serious fundamental design flaw (a systemic flaw intrinsic to the whole design) and thus go on to design and transition to a new system?

    Piketty has demonstrated the tendency of wealth to concentrate when r>g in THIS extant political-economic (and complex) system. Remember, it is a system-specific rule. Also, the world currently is having great trouble with the g (growth) component of the equation. Global growth has been on a slowing trend since the 1960s, a tendency to so-called “secular” or long run stagnation. This is notwithstanding China’s growth or even the BIC’s growth. We have to leave out R for Russia currently.

    Is the fifty year long problem of a long run tendency to stagnation an endogenous systemic problem or is it being caused by the exogenous factor of limits to growth? It would seem to be the former because we are only hitting the latter about now (if we have even hit it yet). Nevertheless the latter factor seems very likely soon to exacerbate our long run stagnation problems. I see financialisation of the economy and factors like the housing bubble now as systemically-conditioned responses to the difficulties caused by a long run tendency to stagnation in the real economy. If the pie isn’t getting much bigger anymore, the incentives to redistribute the existing pie, in one direction or the other, get higher; both for the rich who want more and for the poor who want some.

  48. J-D
    June 19th, 2015 at 08:56 | #48

    @Julie Thomas

    I wasn’t even participating in this discussion; it was entirely your idea to bring me into it, you shameless flatterer you.

  49. Troy Prideaux
    June 19th, 2015 at 09:41 | #49

    Yes, I also read and have reread a few times Ernestine’s post (the longer one) and it does have some good points.
    I’ve been thinking about the tax issue overnight. I’d imagine the housing market would be primarily structured around a supply and demand type market mechanism. However, if most (the majority) of the housing or land is transitioning from owner-occupied to investment based even in certain cities, then the supply and demand mechanism might be distorted somewhat by the requirement of investors to make a profit from the exercise. That is, for the exercise to be worthwhile, the investor will likely look at the obvious costs associated with the purchase and will likely want to make a profit (at least to CPI) from that cost. It’s quite likely (in my mind) many investors won’t factor in many of the associated deductions to these calculations and the calculation (in their mind) could likely look like:
    Required selling price = Cost Price + Stamp Duty + Legal Costs + Agent Costs + CPI increase

    Ok, there’s a lot of assumptions there, but you can see how there’s the potential for a significant disparity to (just) CPI growth from housing transactions due to the associated (perceived) costs from the exercise and the requirement to make a profit. So, in a sellers market (which we’re currently in) I can imagine investors holding back from selling until they’ve made their clear profit from the exercise which you’d imagine would push prices higher if on a large enough percentage. Of course, it’s totally unsustainable.
    Anyway… just some thoughts…

  50. Ivor
    June 19th, 2015 at 12:17 | #50

    You cannot tax land. You can only tax the income from land or sale of land.

    N.B. People can only pay taxes out of income.

  51. Moz of Yarramulla
    June 19th, 2015 at 12:48 | #51

    Ivor :
    You cannot tax land. You can only tax the income from land or sale of land.
    N.B. People can only pay taxes out of income.

    Those two points are unrelated, and the first is false. Many property owners pay rates, which is exactly a tax on land.

    We could also tax changes in the value of land. That, like a pay as you go capital gains tax would force some people to sell assets in order to pay the tax, just as rates already force people to do. My family has seen one landholding shrink from ~100 acres to ~1.5 hectares over about a century as the income from farming failed to meet the demands of an increasingly urban council. When my great-grandparents retired they sold most of the remaining land to the council for conversion to housing (some was donated as a park).

  52. Moz of Yarramulla
    June 19th, 2015 at 12:50 | #52

    @Moz of Yarramulla
    (sorry: and technically the second is correct, but only in the sense that by selling land my grandparents converted an asset into income)

  53. Ivor
    June 19th, 2015 at 13:03 | #53

    @Moz of Yarramulla

    I distinguish between rates and land tax.

    rates also cause injustice but generally pensioners and low income people get rates adjustment according to income.

    So in effect – with this adjustment – rates are a form of income tax.

    Forcing people to sell land to pay tax does not interest me and does not help democracy particularly when the land does not earn an income.

    I think you should be agreeing with me?

  54. Donald Oats
    June 19th, 2015 at 16:35 | #54

    The new Windfarm Commissioner will be Bjorn Lomborg: you read it here first!

  55. David Irving (no relation)
    June 19th, 2015 at 17:25 | #55

    @Donald Oats
    Maybe, or they could give the gig to Freedom Boy. After all, he’s already a commissioner and he could fit this in between his other duties for far less than Lomborg would cost us.

    I mean, it’d be a part-time job just preventing windfarm construction.

  56. Ikonoclast
    June 19th, 2015 at 19:47 | #56

    Well, to be consistent every form of energy must need a commissioner to take complaints. I await announcements on the;

    Coal Commissioner;
    Oil Commissioner;
    Natural Gas Commissioner;
    Wood burner Commissioner;
    Solar pV Commissioner;
    Solar Thermal Commissioner;
    Solar Updraft Commissioner;
    Hydro-power Commissioner;
    Geothermal Commissioner;
    Tidal Power Commissioner; and
    Nuclear Power Commissioner.

    Have I forgotten any?

    Wait hang on;
    The animal muscle power Commissioner; and
    The human muscle power Commissioner.

  57. Ernestine Gross
    June 19th, 2015 at 20:23 | #57

    @Troy Prideaux

    ‘Supply and demand mechanism’. Call it a ‘price system’ and I’d agree. In this case it is not only the residential housing market (partitioned as finely as desired for specific questions) but also the commercial real estate market, commodity markets, security markets, consumer goods markets, employment ‘markets’, …… anything that is traded under specified contracts. So, at any one time, many prices are relevant. Have you noticed that in the US share markets recorded substantially higher price rises than the Aussie equivalent after the onset of the GFC? Could it just be that the main support for the Aussie financial securities markets come from superannuation funds while a lot of domestic non-institutional private wealth went into the housing market, subsidised by negative gearing and reduced capital gains tax as well as superannuation rules, particularly interesting for self-managed super funds? Prior to the GFC, the USA is said to have had an ‘oversupply’ of houses (there was no obvious short term capital gain to be made) while Sydney is said to have excess-demand. The usage of these terms don’t correspond to the theoretical notions. What oversupply in the USA, given that some people lived or are living in cars, in caravans, on the street? What excess demand for housing in Sydney, given the observable amount of real estate for sale each week and the important empirical observation that the market share of investors has grown? In both cases, the evidence is strongly consistent with the ‘minimum wealth condition’ being strongly violate – only some people have choices. In words ascribed to Keynes – which I believe I had read many years ago – ‘the wrong people have the money’)

    The following article contains an example of the time horizon of property investors (bought in 2013, ready to accept an offer in November 2014 for reselling, not executed apparently because the buyer wanted to set of rental units vacant. Now the owner has issued notices of steep rent increases to the elderly if not old pensioners). No marks for noting that abolishing stamp duty would be most welcome by people who treat homes as merely tradeable asset.

  58. Megan
    June 19th, 2015 at 20:27 | #58

    Telekinesis Commissioner?
    Perpetual Motion Commissioner?

  59. June 19th, 2015 at 21:30 | #59

    When you think about it, with a new technology like wind power, that is only about 500 years old, you’d definitely not want to rush in and have major regrets later.

    Not like, say, if you coal mine caught fire, or your nuclear power plant melted down, or your natural gas exploded, or your transmission lines started major bushfires.

  60. Ernestine Gross
    June 19th, 2015 at 21:42 | #60

    @John Brookes
    “When you think about it, with a new technology like wind power, that is only about 500 years old, you’d definitely not want to rush in and have major regrets later.”

    Good one.

  61. Megan
    June 19th, 2015 at 23:28 | #61

    @John Brookes

    It’s probably not because it’s new that is the problem.

    Being at least 8000 years old, maybe it’s too old?

    And it certainly isn’t renewable, once a breeze is gone it’s gone. And what about the days when the wind doesn’t blow. And what about at night when the wind blows, but it blows out your candle so you can’t see your map? And what if you use up all the wind so there is none left for kids to fly kites? That wouldn’t be fair.

  62. Megan
    June 19th, 2015 at 23:30 | #62

    @John Brookes

    It’s probably not because it’s new that is the problem.

    Being at least 8000 years old, maybe it’s too old?

    And it certainly isn’t renewable, once a breeze is gone it’s gone. And what about the days when the wind doesn’t blow. And what about at night when the wind blows, but it blows out your candle so you can’t see your map? And what if you use up all the wind so there is none left for kids to fly kites? That wouldn’t be fair.

  63. June 20th, 2015 at 01:51 | #63

    Researchers at Columbia University have built a sweet little cart powered by the expansion and contraction of bacterial spores in response to changes in humidity. Since the bugs have had the concept for around a billion years, the scheme is quite reliable, if limited in acceleration. Bags I be Bacterial Spore Commissioner.

  64. June 20th, 2015 at 02:14 | #64

    The US has at most 10% of the world’s Catholics. Francis was certainly not aiming the encyclical as a polemic in domestic US politics. It would be crazy to think it won’t have a considerable effect in Poland, the Philippines, Mexico, Brazil and other major Catholic countries.

  65. June 20th, 2015 at 02:15 | #65

    Oops, I commented on the wrong blog entirely!

  66. Donald Oats
    June 20th, 2015 at 14:00 | #66

    Apparently we don’t need a Disability Commissioner, or an Information Commissioner, etc.

  67. Moz of Yarramulla
    June 20th, 2015 at 15:21 | #67

    Ivor :
    @Moz of Yarramulla
    I distinguish between rates and land tax. So in effect – with this adjustment – rates are a form of income tax.

    I know you do, but I think you’re wrong. Both are “pay this % of the land value” and you’re saying that because the labels are different the effects are different. There are so many adjustments in the tax system that the exact nature of one of them doesn’t matter, because the system as a whole is so complex.

    Forcing people to sell land to pay tax does not interest me and does not help democracy particularly when the land does not earn an income.

    That’s pretty inconsistent. And as a response to “my family had to sell the farm to pay rates” it’s a non sequitur. Farms, at least in theory, are profit-making businesses. This one definitely was, it just wasn’t making enough to cover rates on 400 houses (which is what 100 acres is, expressed as the land value of 1/4 acre sections).

    Despite that, I think that land tax is an excellent thing and provided it’s not too high means that people either have to get value out of their land, or sell up. Especially in a tax system where the government reclaimed some of the value they add to land, that would benefit everyone. Viz, people like my ggparents would also have paid a big chunk of tax on the difference in value between a rural dairy farm and 400 sections 10km from the CBD (someone built a bridge, so distance changed from “a day in the trap travelling around the harbour” to “drive across the bridge”.

    I think you should be agreeing with me?

    Perhaps, but that would require a better argument that you seem capable of.

  68. Megan
    June 20th, 2015 at 20:37 | #68

    Speaking of the “press”…

    Many more cables to come. And the US is up to its eyeballs in supporting this dictatorship, Australia sends its citizens to kill and die for these psychopaths.

  69. Ikonoclast
    June 21st, 2015 at 12:00 | #69

    I am sure J.Q. has made this point before. The strategic importance of the M.E. will rapidly decline as the importance of oil as an energy source declines. This is unless it can re-position itself a supplier of solar produced electricity to Europe. But then again, Spain alone probably has the area and conditions to supply solar generated electricity competitively to all of Europe so why buy it from the M.E?

  70. June 21st, 2015 at 15:08 | #70

    @Collin Street

    No Colin Street, when renting in Australia, you can afford a house that you couldn’t afford to buy.

    I just looked at some 2 bedroom apartments at 154 Mill Point Rd South Perth. If you want to rent, it will cost you about $500 per week. If you want to buy, it will cost you about $500,000.

    To service a loan of $500,000 it will cost about $650 per week. You need to through in another $50 per week for council rates etc as well. So renting is cheaper than buying.

    But not by much! Record low interest rates and reduced expectation of capital gains have seen to that.

  71. john goss
    June 21st, 2015 at 19:41 | #71

    The high interest by Chinese people in australian real estate occurs for many reasons but one is that many Chinese people like australia. Its one of the costs of popularity that the price of real estate goes up -especially the attractive real estate. It’s just one of those things we have to manage as best we can.

  72. Donald Oats
    June 21st, 2015 at 20:53 | #72

    Speaking of in the press, the Canadian, Paul Watson, better known as the captain of the Sea Shepherd, has had his Canadian passport cancelled, even though he was born there, and has roots going back to the 1500’s. This is how the Australian revocation of citizenship bill could be misused by the relevant minister to toss out people they don’t like.

    Tyrants rule where good people do nothing.

  73. Ikonoclast
    June 21st, 2015 at 21:08 | #73

    @John Brookes

    OMG! A 2 bedroom apartment costs $500,000? That is patently ridiculous.

    It costs $500 a week to rent? Also ridiculous.

    And it costs about $700 a week at least to service loan and pay costs!!!

    That whole situation is totally ludicrous. Without negative gearing, Chinese money and the housing bubble this whole economy comes crashing down. It’s completely unsustainable.

    When the music stops a LOT of people are going to lose a LOT of money. Supposed asset values with no real wealth behind them are just going to disappear in a puff of smoke (about the same time that the mirrors shatter and the sh** hits the fans).

  74. Megan
    June 21st, 2015 at 21:20 | #74

    If you include Hong Kong and Taiwan, there are more than 500 “Chinese” billionaires.

    One reason for so much of that money ending up in Australian domestic real estate is that it is a relatively “safe” place to park wealth.

    The average middle class Chinese aren’t in the market. They are lucky if they get to be the tourists we see around the place. The Chinese working class are struggling to survive, never mind visiting here let alone buying Australian real estate.

  75. jungney
    June 21st, 2015 at 22:27 | #75

    Both of my kids are renters in Sydney. Take out the grossly inflated rent and they might have a decent life. I regularly cook for them, in their shared housing, using the cheapest f+v, in order to show them how to eat cheap and still live well. Slow cooked meat. Stews. The Aussie version of Bolognese sauce with pasta. And all because the Chinese ruling class, the children of a totalitarian caste, like Novak described the Russian rulers, the Nomenklatura, are looking to hide their dirty money here, in Australia, with the complicity of Coalition retards, who know nothing beyond the smell of money. Along with the dirty Indonesian Generals who like Perth and FNQ for their bolt holes. They are all already lining up for a crack at the NT. They can see the opportunities opened up by Government money – they see the tradies, the leccos, plumbers, builders in the territory with waterside mansions, fishing boats, choppers and reckon they are entitled to a crack at this free for all. Then there’s the prostitution that always surrounds US bases. Eff me. It’s almost enough to make a man go up and have a go.

  76. June 21st, 2015 at 23:37 | #76


    I really reckon you should stop holding back!

    But much as the Chinese might be part of the problem, its more of a local thing. Negative gearing has always made investment properties attractive, and the capital gains tax concessions of Howard lit a fire under it. Then there is the “get rich quick” mentality and the ludicrous idea of “financial independence” which basically means not wanting to work for a living.

    When you have part of the population aiming to live very comfortably indeed off the labours of others, it can’t go well.

  77. June 22nd, 2015 at 09:33 | #77

    So Chinese people buying property is bad? Let’s pretend that people don’t think it is bad because of racism, so what are we left with? If it’s not bad because the people buying properties aren’t pink enough, then it must be because foreign money is bad. Of course, when a pink person, sorry, I mean when an Australian citizen buys a house, the only reason their home mortage rates are so low is because of foreign money. So we have to put a stop to that. No more foreign investment in Australia. Now this will make us all poorer, but it will cause housing prices to fall as interest rates soar.

  78. Moz of Yarramulla
    June 22nd, 2015 at 13:46 | #78

    Ronald Brak :
    If it’s not bad because the people buying properties aren’t pink enough, then it must be because foreign money is bad. … No more foreign investment in Australia.

    As the medical people say, the dose makes the poison. It’s also possible to allow foreign investment but restrict it in some ways (as the Chinese do very effectively). We could, for example, say that only tax residents can own houses. Or we could have a land tax that was, say, 0.1% of the land value times 2 to the power of the number of properties owned. Or we could just live in tents with our unicorns, which is more likely. Because our politicians love their “investment properties”, and would lose them if house prices halved.

  79. Troy Prideaux
    June 22nd, 2015 at 14:46 | #79

    @Ronald Brak
    I can assure you that there’s been an even greater outcry in Hong Kong from mainland Chinese buying up property (mostly apartments actually) there and driving up prices and creating social problems. I think they’ve actually legislated something quite significant to curb it.
    Again, in most areas of Australia it’s unlikely to be much of an issue at all. In my area, it is.

  80. Megan
    June 22nd, 2015 at 23:45 | #80

    The ALP/LNP fascist duopoly voted together today, yet again, to pass legislation censoring the internet.

    The genuine opposition today consisted of the Greens, Lleyonhjelm, Ricky Muir and Glen Lazarus.

    This country would be in a much better place if the ALP/LNP fascist duopoly between them held less than 50% of the legislative vote and a genuine cross-section of our society had the REAL balance of power.

  81. Donald Oats
    June 23rd, 2015 at 02:09 | #81

    I’m in complete agreement with you on this one. I don’t think people appreciate how creeping the use of this new law will be, perhaps thinking that a VPN will see them right: they are sadly mistaken.

  82. Moz of Yarramulla
    June 23rd, 2015 at 09:38 | #82

    Donald Oats :
    I don’t think people appreciate how creeping the use of this new law will be, perhaps thinking that a VPN will see them right: they are sadly mistaken.

    Scarily, a lot of journalists are not bothered either. By that, or the criminalisation of journalism (ASIO laws, the migration secrecy laws, the other “extraordinary powers” laws ({cough} there are so many that the name is a bit misleading)). I was shocked when the ASIO powers went through with barely a murmur (they can grab anyone for questioning, hold them 24 hours, 5 years jail if they don’t answer questions). These days that’s just the way the law works.

  83. Megan
    June 23rd, 2015 at 10:11 | #83

    @Moz of Yarramulla

    they can grab anyone for questioning, hold them 24 hours, 5 years jail if they don’t answer questions

    AND, jail if they even tell anyone about it.

    All voted in thanks to the ALP/LNP fascist duopoly.

  84. J-D
    June 23rd, 2015 at 10:18 | #84


    A genuine cross-section of our society would include a majority of people who vote for either the Coalition or Labor.

  85. Collin Street
    June 23rd, 2015 at 11:01 | #85

    The ALP/LNP fascist duopoly voted together today, yet again, to pass legislation censoring the internet.

    There are authoritarianisms that are not fascism.

  86. David Irving (no relation)
    June 23rd, 2015 at 11:30 | #86

    @Collin Street

    There are authoritarianisms that are not fascism.

    Perhaps, but the coalition demonstrate most of the characteristics of crypto-fascists, at least. The ALP, not so much – they are more like craven cowards.

  87. J-D
    June 23rd, 2015 at 13:31 | #87

    @David Irving (no relation)

    What do you have in mind as the characteristics of crypto-fascism?

  88. David Irving (no relation)
    June 23rd, 2015 at 17:24 | #88

    A partial definition: “Political ideology that imposes strict social and economica lmeasures as a method of empowering the government and stripping citizens of rights. … Some of the defining characteristics of fascism are: (1) racism, (2) militarism, (3) dictatorship, and (4) destructive nationalistic policies.”

    I’d say the Abbott government ticks a fair few of those boxes.

  89. Megan
    June 23rd, 2015 at 17:32 | #89

    A majority of Australians shop at either Coles or Woolworths. So?

  90. J-D
    June 23rd, 2015 at 21:33 | #90

    @David Irving (no relation)

    What do you have in mind as the characteristics of dictatorship?

  91. J-D
    June 23rd, 2015 at 21:33 | #91


    So the model represented by Coles and Woolworths has the implicit endorsement of a majority of the Australian people.

  92. zoot
    June 23rd, 2015 at 22:43 | #92

    So the model represented by Coles and Woolworths has the implicit endorsement of a majority of the Australian people.

    Not necessarily. It may be that a majority of the Australian people endorse neither, but as they lack any real alternative they simply choose what they decide is the least worst of the two.

  93. Megan
    June 23rd, 2015 at 23:20 | #93


    Yes. Although, I would probably put it as – they have no choice, it’s an indistinguishable duopoly.

    The ALP/LNP fascist duopoly is the same. People aren’t actually “choosing” at all. The best they can do is reject one over the other at any point.

    Endorsement suggests “choice” when in fact there is effectively no difference.

  94. J-D
    June 24th, 2015 at 07:35 | #94

    @zoot and @Megan

    People are not coerced to shop at Coles and people are not coerced to shop at Woolworths. People have alternatives to both. Many people choose to avoid both Coles and Woolworths in favour of the alternatives. Other people could choose to do so. If they did, Coles and Woolworths would cease to dominate in the way that they do. The domination of Coles and Woolworths continues because people choose to buy from them, will continue as long as people continue to choose in the same way, and will disappear if people choose differently.

    People are not coerced to vote for the Coalition and people are not coerced to vote for Labor. People have alternatives to both. Many people choose to vote for one of those alternatives and neither the Coalition nor Labor. Other people could choose to do so. If they did, the Coalition and Labor would cease to dominate in the way that they do. The domination of the Coalition and Labor continues because of the way people choose to vote, will continue as long as people continue to choose in the same way, and will disappear if people choose differently.

  95. Ikonoclast
    June 24th, 2015 at 08:22 | #95


    Does full choice really exist in a system which systematically and systemically both restricts and influences choices? People are all “free” to take off their clothes and run down the street in the buff. Why do they not do so?

    We do not live in a socio-political-economic world of free will or free choice. We live in a socio-political-economic world of constrained will and constrained choice. If the “system” is producing 10 litre tins of blue paint, 10 litre tins of red paint and thimble-sized tins of green paint what colours will people choose to paint their houses? Even though they are “free” to choose?

    I hope you can understand a parable. 🙂

  96. June 24th, 2015 at 09:10 | #96

    I know you get your jollies from being deliberately annoying in a pedantic, nit-picking, goal-post-shifting kind of way.

    Here’s another list of defining characteristics of fascism. See how many of them fit the Abbott government. I’ll grant our electoral system is still pretty honest, before you pick that particular nit.

  97. Julie Thomas
    June 24th, 2015 at 09:18 | #97

    J-D says: The domination of Coles and Woolworths continues because people choose to buy from them, will continue as long as people continue to choose in the same way, and will disappear if people choose differently.

    In the other thread, Rational Liberal says: “free human beings can choose how to respond to charity. They can choose to be grateful, insulted, motivated…your problem is YOU choose to believe it is insulting and that gives you the right to tell other people what to do…by force….Now THATS motivated cognition….hahahahaha!..”

    They both think it is all about choice but I’m with Iko who asks: “Does full choice really exist in a system which systematically and systemically both restricts and influences choices?”
    Choice depends on motivation; understanding the choices people make requires understanding the motivations but even before we make a choice we have to be aware that there are other choices.

    There is always the path that we didn’t even know we could take.

    Look at how Rational Liberal reveals one of the things that motivated him; he says that he chose his alias because he ‘knew’ that it would annoy people. But his choice of name didn’t annoy me, so he is motivated here by a belief that isn’t even true, I hardly noticed his alias except to wonder briefly why someone would choose such a boring name when you could choose to be funny or pay tribute or just be yourself.

    Or this claim could have been a post-hoc justification of his choice of name after it was challenged. What was the motivation if that was the case? To protect his ‘self’ image that requires he always be the winner. Like our PM, he sees life as an eternal struggle in which there are two sides. Sigh.

    Anyway, back to Rational Liberal and his motivations.

    If he is telling us the truth that he is motivated to annoy people, why is that the case? Is it because he has that sort of personality – and is this nature or nurture?

    Does this sort of personality become annoyed by certain words himself and then ‘projects’ that way of functioning onto everyone else?

    I’m using projection as Freud described it in his list of defense mechanisms that hold up quite well as an early recognition of what is now called ‘motivated cognition’.

    For rational liberal, it would be so easy if I was motivated to be grateful for a system in which I must beg or ask nicely for things that I need rather than be able to earn them. But why would a free person be motivated to think like that?

  98. J-D
    June 24th, 2015 at 09:20 | #98


    Please note that it is not a case of my asserting without evidence that people can vote for a party that is neither Labor nor the Coalition. I am simply reporting the demonstrable fact that many people do vote for parties that are neither Labor nor the Coalition. It is a denial of reality to insist that people don’t have that choice when people are observably exercising precisely that choice.

  99. J-D
    June 24th, 2015 at 10:50 | #99

    @Julie Thomas

    I did not write and do not think ‘it is all about choice’; that is a misrepresentation of my views.

    The question ‘Why do the majority of Australian shoppers shop at either Coles or Woolworths?’ is a good one and so is the question ‘Why do the majority of Australian voters vote for either the Coalition or Labor?’ is also a good one. I’d like to know the answer to both of those. But it will hinder, not help, to find answers to these questions if the demonstrable facts are denied.

  100. Julie Thomas
    June 24th, 2015 at 11:06 | #100


    Okay, happy to admit that I have misrepresented your view. I do that; but it is not a deliberate choice; it must be some sort of motivation I have that I am not currently able to process.

    I agree that demonstrable facts are important and we do need to understand what motivates people to vote against their own interests or to not even vote, and to understand the motivation that underlies the way people choose their supermarket.

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