Prosper Australia

The bluntness of Interest Rates is again in the news: Average Pay Wont Buy a Home. Whilst we hear again that mortgage payments are taking an increasing share of our pre-tax income (now 37.4% to service a median home), the Opposition Treasurer Malcolm Turnbull proposed that the real pressure on inflation was global prices for food and energy.

We also have conflicting growth patterns throughout Australia with the mining states of QLD & WA booming whilst NSW & Victoria are sluggish. So why use interest rates that slug all sectors of the economy equally?

In comparison, the Land Value Capture tool is well rounded rather blunt because booming land values in WA are captured by a flat percentage, whilst lower land price growth in NSW means they don’t pay a disproportionate amount compared to their economic well-being. Businesses with investment loans also do not suffer. Neither do exporters fearing yet higher exchange rates triggered by higher interest rates. First Home Owners can have peace of mind that the only increase they pay is reflected by the higher market value of their site, as LVC rates aren’t altered seasonally.
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Make sure you watch this 7 minute expose on the Tax Clawback scam. Some of you may recognise Ross Ashcroft from our Comics of Economics night earlier in the year. Check Earthsharing’s YouTube channel to keep in touch with Australia’s latest. We have a few goodies coming up soon too.

Thursday March 13th, 7.00pm, Frank Halkyard Library, Prosper Australia rooms

in conversation with Bryan Kavanagh

Join leading economics commentator Steve Keen as he discusses his new report Deeper in Debt. (PDF, 1.5MB)

Assoc Professor Keen, author of Debunking Economics, will outline the perils we face from excessive borrowing. He has leading research on how Australia faces greater recessionary risks than even the US.
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An article summarising the National Housing Conference in Sydney yesterday called for all the usual policy reforms: cull negative gearing & First Home Owners Grants, reform capital gains tax and rent assistance. ‘These are measures that add to demand for housing without boosting supply’ says AHURI researcher Tony Burke. Thankyou Tony, we have been pushing this for years.

Why do journalists talk about supply side reforms but refuse to go into detail? The biggest supply side issue is Land Banking, with speculation on the right to a roof over our head curtailing future generations’ freedom. Meals are skipped to pay the rent, but land is in effect wasted and often left idle through speculative motifs. Tim Colebatch earlier this week told us just one in twelve dollars borrowed for housing is going into building new housing. We have calculated huge speculative vacancies that are under-reported.
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Tim Colebatch’s interesting article today on Investors’ Housing Splurge shows how dominant the speculative dollar is over the genuine developer’s dollar. Colebatch says “Only one in every 12 dollars lent to investors was used to build something.” This must arouse a few questioning minds to ask if such loans are for any productive purpose? If first home owners are being beaten out of the market by investors with a greater borrowing capacity, one must ask whether these investors deserve negative gearing?

Prosper Australia’s Research Officer Gavin Putland has promoted a possible reform that this week’s State and Federal Housing ministers should discuss. Negative gearing should be limited to new buildings only.
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Can you believe that Moscow now has the world’s most expensive real estate? Georgists can challenge themselves to read between the lines:

Russia’s great leap forward into a world that few can afford

The article provides a prompt on how oil rents have been capitalised into higher land prices.

Russia’s foreign investment laws strongly limit investments in the energy sector. However such limitations on non-agricultural land are absent. Thus local and international speculators have made a calculated assessment, based on sound economic laws, that oil rents will flow through the economy and into higher rents. ie higher city land prices.

The article then goes on to tie a link between Moscow’s dizzying real estate prices and those of Japan in the late 80’s. If the article had taken the analysis to its rational conclusion we would have read: ‘If the economic rent was collected as public revenue then such asset price bubbles would never have occurred.’

Leading Georgist author Fred Harrison was interviewed on 3CR’s Renegade Economists radio show on Wed Jan 30th. The discussion was so good we had to get it online.

Download it here (MP3, 16.54 min, 15.5 MB)

Fred systematically explains why the top 10% own 80% of the earth.

Check Fred’s books here, he’s writing up a storm.

Tune in today to the Renegade Economists on 3CR from 5 - 6pm Wednesdays.

Hosts Karl Fitzgerald & Rayna Fahey will interview David Bollier, acclaimed author and editor of www.onthecommons.org. He will discuss how the ‘commons’ movement is developing, where some of the latest areas of development are occurring and just how far copyright law is being taken. The show will also feature an interview with Progress journal editor Karl Williams, hearing about his travelling exploits through Thailand and the effects land monopoly have on the marginalised. A summary of Fred Harrison’s blistering attack on the tax system from last weeks show will also take place.

Tune in via 855AM on the dial or www.3CR.org.au to stream (click on top left hand side)

Finally Victoria’s Churches are opening up their massive landholdings, seeing land rightfully as a place for homes not speculation. In Churches’ radical plan for cheap rental housing, we hear that Victorian Churches own 2100 properties, some that have been vacant for over a century.

Hopefully the Churches look at the Community Land Trust model. This would see rent paid into a central fund. Over time rents increase, but are captured by the housing fund and used to purchase more land for housing. This is how a Community Land Trust works.

Please note (!) the words attributed to a church spokesman - “I definitely believe that it is God’s work (to use the land),” he said.

Media Release 01/02

Prosper Australia is elated to hear that the Brumby government is returning to its senses by recognising Land Value Capture as the most efficient way to raise public revenue. However, the progressive tax tiers need to be rolled into a flat tax.

“Land Tax is the most efficient of all government revenue raising systems as it incurs the least deadweight costs on economic transactions,” said Prosper Australia spokesperson Karl Fitzgerald today. “This is widely accepted by economists. However, it is not very popular with those who like to engage in asset protection, otherwise known as tax dodging.”

“The progressive Land Tax rates can be flattened as location naturally captures the higher incomes associated with proximity to services.”

“The government needs to recognise calls from business for a reduced tax burden and less red tape. By offsetting the higher tax take with the removal of payroll tax, the government will help develop Victoria’s competitive advantage.”
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