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