Blog

Sun, 17 Jul 2016  |  

This article first appeared on the Yahoo 7 Finance at this link; https://au.finance.yahoo.com/news/what-the-turnbull-government-must-do-now-011720936.html 

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What the Turnbull government must do now

The Coalition won the election. Labor lost.

Politics, like sporting events, are pretty simple – you are a winner whether the margin is a point or 50, whether you win by a nose or 20 lengths. The prize is the same regardless of the margin. The Melbourne Cup, Olympic gold or government.

Prime Minister Turnbull and his team will set the agenda on economic and budget policy for the next three years. Whatever policies it took to the election, the economic change unfolding domestically and around the world means that the issues confronting the government are different today than even a few months ago and future risks, both positive and negative, cannot be fully anticipated.

All that should matter for the Turnbull government is having the nous, pragmatism and common sense to adjust policy as these unforecastable events unfold. The Coalition government must do all that it can to promote economic growth, repair the budget and lower the unemployment rate.

The Abbott and Turnbull governments failed on all these three fronts in its prior term, so it is to be hoped it has learned from these shortcomings and over the next three years delivers on its commitments on these vital benchmarks. It needs to stop spending money in low priority areas and look to the tax base to restore the budget balance.

Wed, 06 Jul 2016  |  

This article first appeared on The Guardian website at this link: https://www.theguardian.com/australia-news/commentisfree/2016/jul/04/labors-chris-bowen-most-valuable-player-of-the-2016-election 

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Labor's Chris Bowen – most valuable player of the 2016 election

The champions of the 2016 election are the shadow treasurer, Chris Bowen, and his economic team. They treated the electorate with respect by releasing detailed policy choices on difficult issues. These choices set the scene for Labor’s overall campaign which has been remarkably successful given how far Labor were behind the Coalition at the end of 2015.

Bowen prosecuted the case for Labor’s economic policy framework during the campaign, even when it meant the proposed tax changes drew howls of indignation from parts of the electorate and allowed the Liberal party to launch scare campaigns about collapsing house prices and budget deficits.

Without the policy proposals and details outlined by Bowen, Labor would not have stood a chance.

Tue, 05 Jul 2016  |  

Despite the market ructions from Brexit, with the Chinese economy slowing, the US federal Reserve flipping and flopping on its monetary policy outlook, the ‘sell everything’ suggestion from RBS analyst Andrew Roberts is looking very ill.

Markets are strong.

The bet I offered Roberts ( https://thekouk.com/blog/sell-everything-my-challenge-to-andrew-roberts-of-rbs.html ) has a scorecard:

The Kouk 10
Roberts     1

As has been the case for the bulk of the year, the only market where Roberts is ahead is Nikkei which is down 8.2 per cent.

Including that fall, the average rise in the 11 items that Roberts suggested should be sold, the gain so far is a stonking 15.6 per cent.

                                                     Level at time         Latest            Difference %
                                                         of bet
US stocks S&P500                               1925                 2103                9.3
Brazil stocks Ibovespa                        39500               52568              33.1
China stocks Shenzhen                        1850                 2002                8.2
Japan stocks Nikkei                             17200              15776              -8.3
US house prices Case-Shiller              182.83             186.63               2.1
UK 20 city house prices Hometrack    228800           237500               3.8
Sydney house prices Corelogic           915.00             999.13              9.2
Iron ore US$ tonne                              40.50               56.22             38.8
Oil WTI US$ tonne                               31.50               48.99             55.5
Copper US$ tonne                               4325                 4879             12.8
AUD/USD                                          0.7000              0.7530              7.6

Simple average                                                                               15.6

Enough said.

Tue, 05 Jul 2016  |  

This article first appeared on the Yahoo 7 web site at this address: https://au.finance.yahoo.com/news/will-the-election-delay-trigger-the-loss-of-australia-s-aaa-rating-051531071.html 

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Will the election delay trigger the loss of Australia’s AAA rating?

To think that the election result will by itself be the trigger of a loss of Australia’s triple-A credit rating is to be ignorant of the last few years of economic and budget news.

While the hotch-potch of new Senators will make it difficult for the new government, which ever side that may be, to get legislation passed, the Turnbull government’s economic policy agenda was limited to just one meaningful policy – a cut in company tax rates.
Even if Turnbull had won the election convincingly, there would still only have been that lame and expensive company tax cut policy, which in fact undermined the medium term structural integrity of the budget.

It might even be the case that the failure to get the company tax cut legislation through the Parliament, if that happens, will stave off a downgrade to the credit rating given the money saved!

Mon, 04 Jul 2016  |  

This article first appeared on the Yahoo 7 website on 30 June at this address: https://au.finance.yahoo.com/news/will-saturday-s-election-produce-another-shock-result-010344513.html 

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Will Saturday's election produce another shock result?

Election day is almost here.

It’s basically a choice between some extra spending on education and health, paid for by a change to negative gearing and capital gains tax rules versus a substantial company tax cuts paid for by cuts to education and health. The polls are all close, either line ball at 50:50 or one side or the other ahead 51:49.

While the betting market have the Coalition hot favourites at $1.10 (Labor are $7.00), there have been a slew of recent election results that have seen the underdog win. Be it the Brexit vote, the 2015 UK election, the State elections in Queensland and Victoria in recent years, all were shock results largely unseen by the pollsters of the betting markets.

Everyone agrees that there will be a swing to Labor. It will pick up seats. But the strong, but by no means unanimous, view is that Labor will fall just short. The new House of Representatives might be something of the order of 78 to the Coalition, 65 to Labor and seven minor party seats.

Wed, 29 Jun 2016  |  

This article first appeared on the Yahoo7 Finance website at this link: https://au.finance.yahoo.com/news/house-prices-are-falling-232920240.html 

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Are falling house prices masking something more worrying?

For Australia as a whole, the fall is small, at just 0.2 per cent in the March quarter according to official data from the Australian Bureau of Statistics.

This nationwide picture masks something a little more worrying across a number of cities which are showing more significant price falls. This means some buyers are risking negative equity in their house, which means that the value of the mortgage is larger than the value of the property.

In Perth, where the unemployment rate has almost doubled over recent years, the ABS data show housing prices falling 4.8 per cent since the peak in the first half of 2014. Prices are now back to the level of early 2013 meaning that those who have bought a house in the last three years in Perth have either only just broken even – at best – or have lost money.

Wed, 29 Jun 2016  |  

This article first appeared on The Guardian web site at this address: https://www.theguardian.com/business/2016/jun/27/australia-must-consider-fiscal-stimulus-if-brexit-crisis-hurts-the-gobal-economy 

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Australia must be ready to pump cash into the economy if Brexit bites

Brexit is important for Australian policymakers. Whichever side wins the 2 July federal election will need to have policy pragmatism to deal with the potential fallout.

With the British people electing to permanently destroy their wealth, incomes and living standards by voting to leave the European Union, global economic risks have intensified. One only has to witness the savage reaction in financial markets as it became apparent the “Leave” vote was winning.

There were several trillion dollars of value lost to global stock markets, the yield on government bonds fell to never-before-seen levels and currency markets went into meltdown, with the British pound dropping more than 10% to reach its lowest level since 1985.

Australia will not be immune from the fallout from the Brexit vote.

Tue, 28 Jun 2016  |  

Here is a terrific ABC TV The Hack program The War of Young People.

I reckon it was worth a look. Here is the link:  https://iview.abc.net.au/programs/hack-live/DO1527H001S00#playing    

Mon, 20 Jun 2016  |  

Prime Minister Malcolm Turnbull will be on Q&A tonight and let’s hope that at least a few of the questions cut to the key points of economic management. With the economy confronting a range of economic challenges, here are nine questions that Mr Turnbull should be asked.

Tue, 14 Jun 2016  |  

This article first appeared on the Yahoo7 Finance website at this link: https://au.finance.yahoo.com/news/why-negative-gearing-makes-little-difference-to-house-prices-220614834.html 

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Why negative gearing makes little difference to house prices

Negative gearing makes little difference to house prices.

Other factors such as new construction, demand from population growth, the unemployment rate and the overall business cycle are far more important determinants of house price changes than tax rules. One only has to look at the recent capital house price trends for unambiguous proof.

Since January 2015, Sydney house prices have risen by around 20 per cent. Over the same timeframe, Perth house prices have fallen by around 9 per cent.

This massive 30 per cent differential between Sydney and Perth house prices in just 18 months, has occurred with the existing negative gearing and capital gains tax laws in place. Nothing has changed in tax policy over that time. Quite plainly, something other than negative gearing rules are impacting on house prices.

THE LATEST FROM THE KOUK

Why are Bill Shorten and Labor scared to run on the economy?

Tue, 21 Mar 2017

This article first appeared on The Guardian website at this link: https://www.theguardian.com/australia-news/2017/mar/16/why-are-bill-shorten-and-labor-scared-to-run-on-the-economy 

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Why are Bill Shorten and Labor scared to run on the economy?

The dust is settling from the Western Australian election and there are some implications for the way the federal Labor party should conduct itself from now until the next election if it is to enhance its chances of winning.

For the Liberal party, the lessons are clear. It might sound trite to mention it but its electoral success will depend almost exclusively on its ability to deliver materially better economic conditions between now and election day.

For Labor, the task is easier. It needs to take the initiative on the economy, economic policy, the budget deficit and government debt and highlight how poor the Coalition has been in most aspects of economic managements since the 2013 election.

In those three-and-a-half years of the Coalition being in charge of the economy and budget, growth has been sluggish despite favourable conditions in Australia’s major trading partners. The Australian economy should be stronger because of the welcome news of the Australian dollar falling sharply in recent years, which has provided a boost to domestic economic conditions. What’s more, interest rates have been cut to record lows, yet the economy has been struggling to register annual GDP growth near 2.5%, the unemployment rate is the same as when the Coalition won the 2013 election, wages growth has plummeted to a record low, and the government debt has grown significantly faster than during the previous Labor government, which of course included the fiscal stimulus measures that kept Australia out of recession.

Ever since the mid-1990s, the Labor party has been reluctant to run hard on issues to do with the economy. For some reason, it is riddled with self-doubt that stems, it appears, from the high interest rates of the late 1980s and early 1990s, and its proactive use of budget debts and moderate debt accumulation during the global crisis to ensure Australia kept growing and to protect an estimated 200,000 jobs.

A $2 billion national building snow job

Sat, 18 Mar 2017

Prime Minister Malcolm Turnbull reckons his Snowy Hydro $2 billion investment is a “nation building project”.

Yes, that is what he said. Really. Turnbull think a one-off $2 billion government infrastructure project is “nation building”.

Let’s look at $2 billion in the context of the Australian economy.

In the December quarter 2016, Australia’s GDP was $435,445 billion dollars (seasonally adjusted). This works out at $4,769 billion a day which makes the $2 billion snow job about 10 hours GDP.

Useful? Sure!

Nation building? Ha!

By 2020, Australia’s GDP will be around $510,000 billion a quarter and $2 billion will be akin to about 8 hours GDP.

Here’s what elese $2 billion is now days.