What is the real state of the economy?

[Gough]

Pinning all of our economic hopes on coal & iron ore just as all the signs were showing a slowdown could be the worst economic decision we've seen for many a political cycle - at the same time as any new and emerging industry faces cuts to any form of support.
Unbelievable.

Newcastle City Council are divesting itself from coal ffs. The argument is no longer ideological, it's economic.

 

[Pie eyed]

I still can't believe you can do an Arts degree in Feminism???
Anyway...on topic.
Tony has done a remarkable job of basically nothing.
At least he can blame Joe and drag someone else into the abyss with him.

 

[Ratts of Tobruk]

I still can't believe you can do an Arts degree in Feminism???
Anyway...on topic.
Tony has done a remarkable job of basically nothing.
At least he can blame Joe and drag someone else into the abyss with him.

Be fair. He's reduced taxes and reduced consumer confidence. And increased the debt.

Of course the right like to claim that dropping taxes increases confidence and returns more $ through through the mythological Laffer Curve. But for some reason it didn't work this time. Or the time before that.

But they've got a great idea for the next election. This time they decreasing taxes. And increasing the debt. To pay off the debt. You know it makes sense.

 

[madmug]

Be fair. He's reduced taxes and reduced consumer confidence. And increased the debt.

Of course the right like to claim that dropping taxes increases confidence and returns more $ through through the mythological Laffer Curve. But for some reason it didn't work this time. Or the time before that.

But they've got a great idea for the next election. This time they decreasing taxes. And increasing the debt. To pay off the debt. You know it makes sense.

They are trying to shift the tax burden further down the economic ladder. The GST is a regressive tax & they want to spread & increase it.

Apart from fear & division, I'm not sure what they are trying to do. Where is the jobs planning? Where is the tax white paper? Where is the debt crisis plan?

Where is the economy going? Where are the growth sectors?

 

[Ratts of Tobruk]

Where is the jobs planning? Where is the tax white paper? Where is the debt crisis plan?

Where is the economy going? Where are the growth sectors?

Unfortunately they were all in an attachment on an extra tab of the spreadsheet so the govt missed them.

 

[yibbida]

http://theaimn.com/economy-heading-south-no-one-at-the-helm/

real net national disposable income per head, fell 1.2 per cent, the biggest slide since the GFC

Sober reading.

The only reason we showed any growth at all in the June quarter was due to a 41% increase in government defence spending. This is what it took to deliver a 0.2 growth result.

 

[NSWCROW]

Unfortunately they were all in an attachment on an extra tab of the spreadsheet

 

[nylexbandit]

They are trying to shift the tax burden further down the economic ladder. The GST is a regressive tax & they want to spread & increase it.

Apart from fear & division, I'm not sure what they are trying to do. Where is the jobs planning? Where is the tax white paper? Where is the debt crisis plan?

Where is the economy going? Where are the growth sectors?

Without looking I imagine property is one of the only ones. Which is a real concern.

 

[Ratts of Tobruk]

When describing the latest figures, Hockey actually described us as a ‘commodity economy’ like Brazil. I thought resources made up 9-12% of our economy, and I definitely thought we were smart enough and diverse enough to not be considered a commodity economy but perhaps I have the definition wrong. Or maybe Hockey was just desperate to re-frame the conversation?

 

[madmug]

When describing the latest figures, Hockey actually described us as a ‘commodity economy’ like Brazil. I thought resources made up 9-12% of our economy, and I definitely thought we were smart enough and diverse enough to not be considered a commodity economy but perhaps I have the definition wrong. Or maybe Hockey was just desperate to re-frame the conversation?

Keating was honest with his 'banana republic comment' we then spent years diversifying. All that has been crushed by the LNP. Now we will wear the consequences.

Crushing manufacturing jobs, transport jobs, RE, is costing us dearly. Free trade agreements have been disappointing for most people. Except of course those who fund the LNP.

People, we are in for a rough ride.

Thats what you get with the 'adults in charge'

 

[Mofra]

Keating was honest with his 'banana republic comment' we then spent years diversifying. All that has been crushed by the LNP. Now we will wear the consequences.

This x 1000.

Dutch Disease will hit us hard

 

[swansfan51]

He's reduced taxes

No he hasn't, that is a blatantly false claim. Tax has increased both absolutely and as a percentage of GDP.

 

[madmug]

Without looking I imagine property is one of the only ones. Which is a real concern.

Yes.

Growth in property prices doesnt grow jobs. It only grows useful wealth if you have an investment property in a growth area. It also excludes more & more people from entering the property market.

Sometime, somehow, we are going to have to reverse the stupidity of current Gument policy. We have to get back on RE development, we need to invest in high end manufacturing, we are going to have to fight the export of jobs. We need Gument to work for this country & not just for international rationalisation that does very little for us & does a whole lot for multinational corporations.

 

[Showbags]

Yes.

Growth in property prices doesnt grow jobs. It only grows useful wealth if you have an investment property in a growth area. It also excludes more & more people from entering the property market.

Sometime, somehow, we are going to have to reverse the stupidity of current Gument policy. We have to get back on RE development, we need to invest in high end manufacturing, we are going to have to fight the export of jobs. We need Gument to work for this country & not just for international rationalisation that does very little for us & does a whole lot for multinational corporations.

Correct. Successive governments have been complicit in basically educating people to, instead of trying to be innovative and create wealth through creating a brilliant product or service or investing in a great new and exciting business. They have been educated to pour all their money into speculating on property.

This is sucking the guts out of the real economy. People aren't spending because they are hocked to the eyeballs in mortgage debt, they aren't taking risks because they are worried about not being able to service their mortgage repayments. It's not public debt that should be the concern in this country, it is the private household debt that is destroying innovation and risk taking which is the factor that leads to growth.

The government instead of looking to relieve their own debt burden needs to look at ways to unburden the private sector debt burden which is choking the economy. A stimulus package akin to the first two (but much greater in scope) should be looked at in my opinion, but instead of giving it to people to spend, tie the stimulus to people reducing their debts (so basically the government taking on the debt of the private sector).

At the same time the government should be looking at much more tighter prudential regulations, abolishing negative gearing on existing houses etc to make sure the money isn't just funneled back into the property market again.

 

[Ratts of Tobruk]

No he hasn't, that is a blatantly false claim. Tax has increased both absolutely and as a percentage of GDP.

"Blatantly"? Revenue from tax I guess you mean? I wouldn't be suprised, but in the interest of bipartisanship you have to see one of the very few things he 'achieved' were removing some parts of the super profits tax from mining, and the carbon tax in its entirety. Just lately they removed the bank deposits tax that never got legislated so we're going to hear Liberals bang on and on about how they "reduced taxes". Your point, and the fact it hasn't helped the economy overall cuts at their argument too.

Which taxes did they put on? The highest tax threshold got a temporary levy, but I'm blanking a bit on others.

they aren't taking risks because they are worried about not being able to service their mortgage repayments.

I agree. And the whole point of this invest in property obsession was Howard's political plan that 'interest rates will always be lower under a Howard govt'. When he said 'the times will suit me', he sure got that right. His politics were only relevant for that economic sweet spot the ALP set us up for.

 

[Maggie5]

Insiders yesterday, this is the best? that Robb came up with:

BARRIE CASSIDY: On the economy, two years on, can you name one economic indicator, one area where you're doing better than the previous government?

ANDREW ROBB: Absolutely. We've created three hundred and - the economy has created with our assistance 336,000 new jobs ...

BARRIE CASSIDY: You're going to unemployment?

ANDREW ROBB: No, I'm just saying to you - hang on, Barrie. Just give me a chance to explain. The economy was blessed for 15 years with the mining boom. Mining booms, prices go up and prices come down. It's finished. Both sides of politics knew that. It was captured in the forward estimates of our opponents when we got to office. So, we had a problem. We've got to transition, right, to other things that we're good at. Now, those 336,000 jobs are not mining jobs; they're new jobs, they're new jobs - hang on. They're new jobs in areas like tourism and hospitality and financial services, education, health, all the areas - other areas we're good at. The last year of Labor - we are creating four times as many new jobs as the last year of Labor.

BARRIE CASSIDY: But I asked to you give an economic indicator that has improved.

ANDREW ROBB: Well that's indicator: new jobs.

BARRIE CASSIDY: Unemployment was 5.7 per cent. It's now 6.3. That's not an improvement.

ANDREW ROBB: Yeah, but if - well, you see, it's statistics and statistics.

BARRIE CASSIDY: Yes. And this is a key one.

ANDREW ROBB: Well, the participation rate of women has never been higher, right. The participation rate, if it was the same as it was under Labor, our unemployment rate would be 5.8. What the high participation rate shows, that there is confidence. People feel they will get a job, so they're out there trying to get a job. Previously, they they would not even be registered. Four years ago, three years ago, they would not even be registered. Now they're registering for - to get a job, so the participation rate is much higher than it was under Labor, and if you allow for that, the unemployment rate is at 5.8. Now, people said this economy's going to absolutely ...

Only 700,000 jobs to go to meet the million promised in their first term. LOL.

How many newly created new jobs in areas like tourism and hospitality and financial services, education, health, are long term? Can anyone see workers from the MV industry getting any of those jobs? These losses still to be added to unemployment figures in the next 12 months.

 

[Showbags]

"Blatantly"? Revenue from tax I guess you mean? I wouldn't be suprised, but in the interest of bipartisanship you have to see one of the very few things he 'achieved' were removing some parts of the super profits tax from mining, and the carbon tax in its entirety. Just lately they removed the bank deposits tax that never got legislated so we're going to hear Liberals bang on and on about how they "reduced taxes". Your point, and the fact it hasn't helped the economy overall cuts at their argument too.

Which taxes did they put on? The highest tax threshold got a temporary levy, but I'm blanking a bit on others.

I agree. And the whole point of this invest in property obsession was Howard's political plan that 'interest rates will always be lower under a Howard govt'. When he said 'the times will suit me', he sure got that right. His politics were only relevant for that economic sweet spot the ALP set us up for.

The first home owners boost, negative gearing, lower interest rates, foreign investment and a complete lack of appetite for risk (from both lenders and borrowers) has fueled this bubble that we are seeing.

The worst thing is it becomes a spiral. Property prices keep going up. So people need to take on more and more debt to buy property. This means it costs more to service this debt. So people spend less, there is less demand in the real economy (that creates the jobs and prosperity). The property market is the gluttonous zombie that keeps growing and eating the rest of the economy.

As I said the best way out of it is for the government to step in and take on much of he household debt burden themselves (as they are in a much better position than the private sector). Introduce prudential regulations to reduce property speculation and abolish negative gearing for existing houses. This is only the tip of the iceberg of what needs to be done.

Don't hold your breath with this government though. They, like the Howard government before them, see increasing house prices as a sign of an economy doing well.

 

[Ratts of Tobruk]

The worst thing is it becomes a spiral. Property prices keep going up. So people need to take on more and more debt to buy property. This means it costs more to service this debt. So people spend less, there is less demand in the real economy (that creates the jobs and prosperity). The property market is the gluttonous zombie that keeps growing and eating the rest of the economy.

As I said the best way out of it is for the government to step in and take on much of he household debt burden themselves (as they are in a much better position than the private sector). Introduce prudential regulations to reduce property speculation and abolish negative gearing for existing houses. This is only the tip of the iceberg of what needs to be done.

And with so many people with so much debt, to cause the property prices to stop going up is to detrimentally effect the financial plans of those people so it's politically very hard.

Labor has said they want to do something about neg gearing, but in the standard way of Labor this century it's a rather conservative approach to limiting it. I guess the plan would be to assess the worth of that small movement to restrict it and then to go further (of course still at a slow pace) later on.

 

[madmug]

And with so many people with so much debt, to cause the property prices to stop going up is to detrimentally effect the financial plans of those people so it's politically very hard.

Labor has said they want to do something about neg gearing, but in the standard way of Labor this century it's a rather conservative approach to limiting it. I guess the plan would be to assess the worth of that small movement to restrict it and then to go further (of course still at a slow pace) later on.

What Gument should be doing is limiting the number & value of properties being claimed under negative gearing. Unless you are a productive business enterprise.

This should end the practise of setting up ones own business based on tax deductions. But it wont stop legitimate buyers getting into the housing market or the extra property as a superannuation/savings method.

 

[Mofra]

What Gument should be doing is limiting the number & value of properties being claimed under negative gearing. Unless you are a productive business enterprise.

"Negative gearing" is merely claiming an interest deduction though which isn't asset specific - margin loan interest on a share portfolio that yields less than the claimable interest paid for the financial year is the same principle, ditto non-residential property.

 

[nylexbandit]

My view is that losses on property should be quarantined to gains on property. Also, am not against main residence being taxed. Might involve some complications to work out the appropriate cost base to tax, but given the rotting of the main residence exemption, I think it needs to be changed.

Re drivers of growth, good article in the age today re impact of the loss of manufacturing

 

[medusala]

Of course the right like to claim that dropping taxes increases confidence and returns more $ through through the mythological Laffer Curve.

More nonsense. Countless examples exist to show the existence of the Laffer Curve eg Coolidge, Thatcher, Reagan etc.

http://theaimn.com/economy-heading-south-no-one-at-the-helm/

Per head eh Y? Well given that we can use per head figures, now we can talk about the recession under the ALP. Is that right?

 

[Ratts of Tobruk]

More nonsense. Countless examples exist to show the existence of the Laffer Curve eg Coolidge, Thatcher, Reagan etc.

What immaculate examples. Hard to argue with such thorough information.

 

[medusala]

What immaculate examples. Hard to argue with such thorough information.

Anyone with the vaguest understanding of taxes is well aware that income tax cuts under the first two led to revenue growth, ditto CGT with Reagan

Also see latest example re top rate of tax in the UK under Cameron. See also below the view from UK govt department. So lets admit you were wrong and move on.

http://www.thisismoney.co.uk/money/news/article-2139425/Official-analysis-shows-rate-tax-48.html#ixzz3l37Eob3S

Lord O’Donnell, who stepped down as Cabinet Secretary last year, said figures from the independent Office for Budget Responsibility show 48 per cent would be ‘revenue-maximising’.

Lord O'Donnell was quoted in an interview published in political magazine The House. He said: 'What struck [me] was the – it’s buried away in a footnote – solution to one of the all times biggest problems that economist have faced, which is what’s the income tax rate which maximises revenue?

'And there it is, nobody’s mentioned it really, it’s there in a footnote: 48 per cent. That’s what’s there in the OBR report

Keating was honest with his 'banana republic comment' we then spent years diversifying. All that has been crushed by the LNP. Now we will wear the consequences.

Crushed? Can you please explain how.

 

[Ratts of Tobruk]

Anyone with the vaguest understanding of taxes is well aware that income tax cuts under the first two led to revenue growth, ditto CGT with Reagan

Also see latest example re top rate of tax in the UK under Cameron. See also below the view from UK govt department. So lets admit you were wrong and move on.

http://www.thisismoney.co.uk/money/news/article-2139425/Official-analysis-shows-rate-tax-48.html#ixzz3l37Eob3S

Lord O’Donnell, who stepped down as Cabinet Secretary last year, said figures from the independent Office for Budget Responsibility show 48 per cent would be ‘revenue-maximising’.

Lord O'Donnell was quoted in an interview published in political magazine The House. He said: 'What struck [me] was the – it’s buried away in a footnote – solution to one of the all times biggest problems that economist have faced, which is what’s the income tax rate which maximises revenue?

'And there it is, nobody’s mentioned it really, it’s there in a footnote: 48 per cent. That’s what’s there in the OBR report

Yeah, nah. You can't claim that Cameron's tax cuts were the reason for increased revenue, and also say 48% is the sweet spot, because he cut below that number. The point is, unsurprisingly, that economic situations alter year to year, region to region, and there is no peak in a Laffer Curve that govts could grab and get maximum revenues. And as for your examples, I don't see any detail yet again in terms of Reagan, Thatcher, etc. You have to try and subtract the other economic factors and work out what is going on. And of course statistics suggest people are actually paying at most 20-30%, rather than anything like 40+%, so if the govt could cut tax 'minimisation' loop-holes then tax cuts could more realistically be considered. And I don't really buy into the whole idea that if taxes are low enough people will stop trying to avoid it. Obviously if the loop-holes have economic hurdles which would make it less worthwhile, that makes sense, but I can't see us losing the greedy people who justify that govt waste their money so they should avoid tax.