Fri, 09 Sep 2016  |  

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


What's the point of budget repair if so many Australians are unemployed and underemployed?

What’s the point of budget repair if 725,000 Australians are unemployed and a further 1,067,000 people are underemployed?

At its most basic level, economic policy is about maximising the speed at which an economy can sustainably grow to ensure the pool of unemployed and underemployed workers is as small as possible.

The superficially strong 3.3% annual GDP growth rate in this week’s national accounts would normally signal a stronger labour market. The skewing of that growth to exports of bulk commodities, where employment is small, means the domestic side of the economy is still not growing fast enough to attain full employment.

There was also a significant contribution to GDP from government demand, something that flies in the face of the government’s obsession with budget repair. It is unclear where economic policy is currently being aimed.
The policy priority is to reduce spending to ensure the deficit is as low as possible and to return to budget surplus. Such policies take money from the economy and by definition, growth slows and with that, the rate of job creation softens and unemployment is higher than it would otherwise be.

Thu, 08 Sep 2016  |  

Hidden away in the quarterly national accounts are data on the volume of tobacco consumed in Australia.

The excellent news is that in the June quarter 2016, the volume of tobacco consumed fell 2.3 per cent to be at the lowest level ever recorded in the national accounts, which has data going all the way back to 1959.

More remarkable is the five-fold increase in the population over this time which means the fall in per capita smoking levels are even more acute.

The plain packaging laws for cigarette packets were introduced in December 2012, even though the Liberal and National Parties voted again them (sort of cute in the current debate to note the donations to the Coalition parties from tobacco companies, but that is another matter).

The shadow Health Minister at the time the legislation introducing plain packaging went through the Parliament, Peter Dutton, was doubtful weather the laws would work, when in 2011 he called on the government to prove that plain packaging would cut smoking levels. He said “We would like to see the evidence the government in replying on.”

Thu, 08 Sep 2016  |  

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


What is driving Australia's economic growth?

Can you believe it?

Australia’s economy grew by 3.3 per cent in the year to the June quarter 2016, to lock in the fastest rate of growth in four years.

It’s a growth rate that is hard to fathom given how weak the recent labour market data has been, and given that inflation is well entrenched below the bottom on the Reserve Bank’s target range. Think also of a sluggish stock market, the fact that the RBA has been compelled to cut interest rates to a record low 1.5 per cent and the stubborn widening of the budget deficit and you’d be convinced that the growth performance of the Australian economy was in the slow lane.

So what is happening?

Mon, 05 Sep 2016  |  

As we get well entrenched in the second half of the year, markets and economies continue to track along with more good news than bad.

For RBS analyst Andrew Roberts, who grabbed global headlines with his “sell everything” forecast at the start of the year, this is bad news. Anyone who followed that forecast, which looked absurd at the time, will be hurting badly as most stocks, commodities and other asset prices keep on rising.

For those who might have missed it, when Roberts made his ridiculous forecast, I offered him a bet that he would be wrong – not on ‘everything’, but just 6 of 11 variables. The bet I offered Roberts 

He squibbed at the chance to put his money where his mouth was.

Some eight months since the bet and the scorecard reads as follows:

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 0.6 per cent.

Mon, 05 Sep 2016  |  

This article first appeared on The Adelaide Review web page at this link: 


On The Road To Federal Budget Repair

Not that you’d know it from the commentary, but the Federal Budget could easily be in surplus in a couple of years. And that is without there being much in the way of spending cuts or tax hikes to get there.

There are a few very important issues in the budget figuring that confirm the Budget is already on the road to repair, and that any efforts to speed up the time to return to surplus would risk hurting the economy as well as pushing the unemployment rate higher.

It is difficult to work out why anyone interested in striving for faster economic growth and more jobs would want to fast-track the return to budget surplus. Given the economy is muddling along with economic growth currently a little below trend – with wages growth running at record lows and inflation decelerating to be well below the RBA target range – a budget deficit now is appropriate. So too is a slightly extended path to budget surplus. Only if the economy was stronger would it be economically responsible to have policies framed towards a more rapid surplus objective.

But the economy is fragile, ebbing between an assessment of a glass half-full and a glass half-empty. Any decision from the government to cut spending and/or hike taxes in the name of budget repair would dampen the economy arguably when it needs a bit more of a boost from the policy makers. Certainly the RBA is of that view having recently cut official interest rates to a record low of 1.5 percent.

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.


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: 


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.