Thu, 01 Sep 2016  |  

This article first appeared on the Yahoo 7 website at this link: 

Disclosure: I undertook work for Purplebricks ahead of their launch into Australia in August.


Here's why the real estate industry could be set to change

The real estate industry is about to confront some serious competition from a new entrant to the market.

Purplebricks, a UK based real estate firm, have judged that the market for selling property in Australia is ripe for a new competitor to enter the market, having been framed more than a generation ago and characterised by high fees that cost property sellers dearly whenever they sell their house.

It is important to disclose that I was engaged by Purplebricks to look at some key facts on the Australian property market as they considered how they could disrupt and recast the industry but in doing this work, I was impressed with their business model.

In doing that work, it was clear to me that real estate agents have been making considerable profits from home sellers as the three decade boom in house prices has massively outpaced wages for the rest of the workforce.

Fri, 26 Aug 2016  |  

This article first appeared on the Yahoo7 web site at this link: 


Aussie house prices are set to fall

Australian house prices are set to fall … and it’s all about supply and demand.

There is not much doubt about that, but the big questions are how substantial the falls will be and how long the price declines will last?

The supply of dwellings is increasing in line with an extraordinary construction boom. Australia is building dwellings at a record level. At the time, underlying demand for dwellings is falling as population growth has slowed to its weakest pace in close to a decade.

Let’s look at the dynamics.

Over the course of 2015, Australia’s population rose by 326,100 people. This is well down from the peak level of almost 460,000 in 2008, 422,000 in 2009 and even 400,000 in 2012. In terms of the new demand, 326,100 people will require around 142,000 new dwellings to live in based on the estimate by the Australian Bureau of Statistics of 2.3 people occupying each dwelling. In 2014, with population growth of 328,500, 143,000 extra dwellings were needed.

Mon, 22 Aug 2016  |  

I was delighted to be involved in the preparation of the research report by the Chifley Research Centre – “Inequality: The Facts and the Future

The report is at this link: 

It was released today and it outlines a range of critical issues relating to income and wealth inequality, but the key issues for me related to how reductions in inequality can be positive for economic growth.

Fri, 19 Aug 2016  |  

This article first appeared on the Yahoo 7 Finance web site at this address: 


Poor economic data is bad news for Australia

Entrenched low wages growth and on-going softness in the labour market are fundamental reasons why the retail sector is struggling to grow.

This week has seen data showing wages growth plummeting to record lows and the pace of employment growth continues to muddle along, with a huge skewing to part-time jobs as full-time jobs languish. It also means that the unemployment rate remains closer to 6 per cent than 5 per cent.

It is not good news.

A basic economic principle is that it is hard for consumers to spend extra money if they are not getting much of a pay rise or worse, if they are unemployed. On those measures, the average weekly earnings data, which measure the actual dollars and cents that go into people’s pay packets, rose just 2.1 per cent over the past year. At the same time, the economy has been stuck in the mud, with the unemployment rate remaining between 5.6 and 6.3 per cent for the last three years.

As a result, it is not surprising at all so see that over the past 7 months, retail sales have risen by a paltry 1.2 per cent or an average of less than 0.2 per cent a month.

Thu, 18 Aug 2016  |  

This article first appeared on the Yahoo 7 Fiannce website at this link: 


Here's why the banks aren't passing on the full cash rate cut

The banks are being blasted for not passing on in full the 25 basis point interest rate cut from the RBA earlier this month.

The government is so annoyed and outraged that it will be insisting the CEO’s of the Big Four banks will appear each year before a Parliamentary committee where they will have to explain their business operations, including how they determine their retail interest rate settings. The Opposition Labor Party is ramping up its push for a Royal Commission into banking to determine whether or not banks are ripping off their customers.

Making matters uncomfortable for the banks is that fact that they are reporting their half-yearly profits at the moment. Those profits are big. So far it’s over $9.4 billion for the Commonwealth Bank and $5.2 billion for the ANZ.

The interesting issue with these spectacular headline results is the realisation that banks profits are not growing much and their cost of doing business, which clearly feeds into the interest rates they charge their customers, has not been falling to the same extent as the cuts in official interest rates.

Wed, 17 Aug 2016  |  

I recorded a podcast with the team at Business Insider:  Here is the link for what was a good fun chat. 

From BI's Paul Colgan:

On the Devils and Details economics and markets podcast this week we’re joined by Stephen Koukoulas, one of Australia’s best-known economists. “The Kouk” is a former chief economist at Citi and he also once led global research for TD Securities in London. 

He was also a senior economic adviser to the Gillard government, so he has a particular expertise on fiscal policy. The fiasco of the national census on Tuesday kicks off our conversation but we also took the opportunity to tap Stephen for his insights on the state of national economic policy.

Wed, 10 Aug 2016  |  

The annual Breakfast with the Economist series is just a few weeks away.

It's in Auckland on Tuesday 30 August; Sydney on Wednesday 31 August and then Melbourne on Friday 2 September. It's free (other than your time) to attend. 

To register, click on this link: 

Standard & Poors Chief Economist, Paul Sheard will open each breakfast with a view on global conditions. Like previous years, he'll give terrific insights into things like negative interest rates, QE and why growth and inflation are so low.

In Auckland, the panel members will be Michael Gordon, Sharon Zollner, Nick Tuffley and Chris Green.

In Sydney there will be Bill Evans, Su-Lin Ong, Shane Oliver and Jo Masters.

Melbourne will have Bill Evans, Alan Oster, Alan Kohler and Callam Pickering.

I will be moderating all of the discussions. So for the best economics event of the year, register now and turn up, rain, hail or shine.   

Fri, 05 Aug 2016  |  

This article first appeared on the Yahoo 7 website at this link: 


The real reason home-ownership is so unachievable

Home ownerships rates have fallen in Australia over the last 15 years. The recent report on Household, Income and Labour Dynamics showed that home ownership rates have dropped from 68.8 per cent of households in 2001 to 64.9 per cent in 2014. The fall among younger age cohorts has been more acute than for older people.

Almost all of the focus of the falling home ownership rates has been on rising house prices as the key factor forcing younger age groups, in particular, to rent rather than buy. Home ownership rates among older generations remain relatively high.

There is no doubt that high house prices in parts of Australia – Sydney and Melbourne in particular – have played a role deterring younger people from entering the housing market. Saving a 20 per cent deposit for an average house is, for example, roughly twice as burdensome now as it was two decades ago.

Even though record low interest rates have offset the financial burden of servicing a larger mortgage that results from higher borrowings, a 20 per cent deposit on an average loan takes around 100 per cent of average annual household income today compared with 50 to 60 per cent of income in the 1990s.

These issues are very real but they explain only a part of the story for declining home ownership rates. They have been over-emphasised in their importance as reasons behind the fall in home ownership rates. In the middle of last year, the Reserve Bank of Australia examined the causes of the decline in home ownership rates, especially for younger people and its findings are enlightening.

Thu, 04 Aug 2016  |  

This article first appeared on The Guardian website at this link: 


Interest rate cut too little, too late by an RBA with flawed glass half full attitude

In the dismal science of economics, the Reserve Bank of Australia has failed dismally when it comes to its inflation target and managing demand in the Australian economy.

On Tuesday it cut official interest rates to 1.5%, but in doing so it leaves the Australian economy condemned to some of the highest interest rates in the industrialised world. The RBA has not looked all that closely for overseas guidance – this latest cut comes years after the US, the eurozone, Britain and Canada set interest rates at 0.5% or less.

This harsh assessment of the RBA’s slow and cumbersome approach to interest rate cuts is backed up by several vital macroeconomic indicators. The annual increase in the consumer price index has been below 2% – the bottom of the RBA target band – since late 2014. There is no evidence in recent data that inflation will pick up any time soon.

The unemployment rate in Australia is the same as it was at the depths of the global financial crisis. This extraordinary lethargy in the labour market has occurred simply because the economy has been too weak to create enough jobs to lower it.

Tue, 02 Aug 2016  |  

This article first appeared on the Adelaide Review web site at this address: 


Government Needs To Change Economic Policy Tack

The Turnbull Government starts its second term with a dilemma and a mental block on policy.

With the economy muddling along and growing at a weak pace – with unemployment rising and inflation dead in the water – the government needs to change policy tack to help deliver a stronger rate of growth in the years ahead and to stem any unwelcome rise in the unemployment rate.

There is a mistaken notion that such pro-growth policies will cost the budget money at a time when the budget deficit is uncomfortably wide. Making the government uneasy in the post-election climate is the fact that the budget deficit problems are at a point where the credit rating agencies are threatening to take away Australia’s important triple-A credit rating.


Inflation is low and remains low

Thu, 27 Apr 2017

This article first appeared on the Yahoo7 Finance website at this link: 


Inflation is low and remains low

Inflation edged up a little in the March quarter – from an annual rate of 1.5 per cent at the end of 2016, the headline rate rose to 2.1 per cent. The underlying rate of inflation, which the RBA trends to place more weight on when it comes to assessments of interest rate policy, was even more muted, lifting from 1.5 per cent to 1.8 per cent.

And recall, the RBA target range for inflation is between 2 and 3 per cent.

Annual underlying inflation has been at or below 2 per cent since late 2015, and has been below 2.5 per cent, the midpoint of the inflation target, since the end of 2014. That is a long time.

The data today confirm that inflation is low and remains low and in isolation, continues to give the RBA plenty of scope to further reduce interest rates. When the recent data on unemployment, building approvals, private sector business investment and wages growth are added to the mix, the case for an interest rate cut is strong.

The Australian budget is likely to confirm this is a big-spending, big-taxing government

Thu, 20 Apr 2017

This article first appeared on The Guardian website at this link: 


The Australian budget is likely to confirm this is a big-spending, big-taxing government

While much of the focus of the upcoming federal budget will, quite rightly, be policy issues associated with housing affordability, areas of changes to spending and revenue, there will also be an opportunity to analyse the underlying values of the government.

This will be the fourth budget of the current Coalition government and will show us the ‘big picture’ of government policies and priorities. There will be data on aggregate government spending, taxation receipts, gross and net government debt and the budget deficit.

The most accurate way to analyse the trends in the key budget figures will be to assess them as a ratio of GDP. Government spending, for example, totalled $48.8bn in 1982-83 and this rose to $423.3bn in 2015-16, which is, at face value, an enormous increase. But spending actually fell from 25.8% of GDP in 1982-83 to 25.6% of GDP in 2015-16. It is a similar issue with government debt, the budget deficit and other benchmarks.

Based on the performance of the economy since the last fiscal update in December 2016, the budget is likely to confirm that this is a big-spending, big-taxing government with a strategy for continuing budget deficits and rising debt as it funds some of its pet projects.

It is all but certain that government debt will remain above 25% of GDP in 2017-18 and the forward estimates, meaning the government will be the first in the last 50 years to have spending at more than a quarter of GDP for eight straight years.