Prosper Australia

Photo: Colin Cheesman

RENTS are expected to jump another 10% this year after building approvals fell to their lowest since the end of 2006.

Home-building approvals have dropped nearly 8% in a year, after falling another 0.7% in June, in seasonally adjusted terms. Apartment approvals have dropped 22% in a year, down 1.4% in June after a 19.5% slump in May.

Rents to increase a further 10% this year on top of the 12.7% increase over the last 12 months? Have our wages increased by 22%? No. They never will. Not from the waged sector. But those earning speculative income regularly have such growth.

But why the lack of new homes? Most likely is that land prices have reached such a zenith that it is no longer economical for builders to undertake risky ventures. The supply of cheap credit over the last decade has been filliped by tax carrots magnetising entrepreneurs into the land banking market. Thus the bubble in land prices.

Stag-Rental?
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State control urged as rent surges 12.7% is the headline that attracts our eager eyes in the Age today.

Many of the city’s most affordable suburbs have been hardest hit, with the typical rent on a two-bedroom house in Oak Park, Glenroy and Fawkner surging by 25%, according a report by the Department of Human Services.

Using our economic analysis we can see the Law of Rent strongly at play here. The crux of our argument comes down to this: landlords have a monopoly power over tenants in that they can say that renters must pay the asking price or ‘move out to the boondocks’! The 25% surge in rents see landlords playing the market, understanding that rents can be increased by that much in order to bring these affordable suburbs into line with other more trendy areas.

What option do renters have? (more…)

The Economics of Thailand

Karl Williams

A conundrum wrapped in a paradox is perhaps the best way to describe Thailand, and its economic system is no exception as our rolling travelogue will illustrate. To pick apart this puzzle, I had the assistance of the only two geoists in Thailand, who were also my gracious hosts in Bangkok – retired vice-admiral Suthon Hinjiranan and his son Pop, who has a PhD in town planning. Suthon recently translated “Progress and Poverty” into Thai and is battling alone against a tsunami of cashed-up property developers but, like a true Cat-Seer, agrees that “everything else is a waste of time”.

Firstly, a few basic facts on Thailand: population – 62 million (32% in urban areas); life expectancy – 70 years; GDP per capita – US$9000; ethnicities – 75% Thai, 14% Chinese and 11% other; religion – 95% Buddhist; literacy – 94%; economic system – speculation-fueled neo-classicism tempered by traditional cultural values. But let’s dig deeper to unearth how the vast proportion of Thais earn a paltry A$4 or $5, alongside an obscene number of brand new urban assault vehicles (4WDs) cruising the streets?

Why are there sparkling new skyscrapers and shopping malls alongside sprawling urban slums and vacant land?
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Gavin Putland

The ACT’s Land Rent Act, with promised savings of 79% compared to the standard mortgage-based system of home ownership, took effect on July 1. This is an innovative housing affordability policy. Here’s what I wrote about it a week before it became law.

I make the following assumptions (which do not seem to be spelt out in the Bill):

• that the capping of increases in rent will be apportioned to some measure of the general level of wages;

• that a land rent lease will be granted without any up-front payment other than the first rent instalment;

• that if a land rent lease is transferred, the transfer price (if any) will be included in the single price of the “house” or “home”;

• that the proposed extension of the scheme to lessees on higher incomes will be accomplished by repealing or amending paragraph 5(2) of the Bill.

From my reading of the Bill, I understand as follows:
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Time: 7pm, Friday August 1

A kilogram of beef contains between 15,000 and 100,000 litres of embodied water. For every kilogram of wheat grown in Australia, seven kilograms of topsoil are lost. We give lip service to concerns about peak oil and greenhouse gases, yet our agricultural industry is utterly dependent on unsustainable quantities of polluting petrochemicals.

There’s no reason why this insanity can’t be quickly and effortlessly changed to a geoist system of economics which inherently recognises the true value of natural resources. The major obstacle to change actually lies with the peddlers of our current neoclassical economics. You can side with these peddlers and relax, ignore the food riots, have a beer and flick on the TV, or you can come and be prepared in the knowledge that will help in the transition away from the consequences of our dietary choices.

Speaker: Karl Williams (a.k.a. Mr. Ed)
Venue: Prosper Australia, 1st floor, 27 Hardware Lane, Melbourne
All welcome, light supper provided, gold coin donation, inquiries to Karl Fitzgerald or on 9670-2754

Leading Georgist author Fred Harrison was interviewed on the Renegade Economists last week regarding his new book The Silver Bullet.

Download his 16 minute interview covering issues such as Botswana’s success, a critique of Jeffery Sach’s Resource Curse theory and an overview of colonial motivations. Essential listening/ reading for those genuine in addressing the Millennium Development Goals.

Make sure you sign up to receive the Podcast to the Renegades delivered to your computer each week.

Hear the author Fred Harrison interviewed on the Renegade Economists tomorrow. Make sure you are podcasting us so you never miss the show.

Fred Harrison’s new book levels some very serious charges at the current leaders of the poverty industry.

The good intentions, the money, the rhetoric, the pity and the media histrionics are but a pinpricks to a world rampaging monster. They say there is no silver bullet.

It takes Harrison’s razor sharp pen few words to zero in on the limitations of Joseph Stiglitz, Naomi Klein and Jeffrey Sachs.

Economics is a damaged social science because its exponents fail to work with comprehensive models of the real world.

As our understanding of the Silver Bullet grows, so does respect for the level of investigative reporting in the very readable 179 pages. Insights to Zimbabwe’s plight, China’s growing elite and even the Kalahari Bushmen are viewed through the lens of land rights and the reform needed to encourage their ‘creative energy’. The reports Harrison unveils give us hope that academics are wary of rent seekers.
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Tuesday July 22nd at 6.45pm for 7pm, Level 1/ 27 Hardware Lane, Melb

Join us for a warm night of films! See the Earthsharing Challenge film Who Owns Anglesea? This 10 minute short film shines a spotlight on housing affordability and how this effects the seaside town of Anglesea.

Following this will be legendary Australian cartoonist Bruce Petty’s inspiring new doco-animation, Global Haywire, a must see for those concerned about the plight of the world and wanting to see a refreshing, humorous documentary.

Beyond the typical critique of the Washington Consensus, Petty looks into the eyes of the Enlightenment and asks if we’ve stuffed it up? The development of systems and statehood, rationality and reason have been distorted. The multitude of inventions, the white goods revolution, computing and bio-technology have done little for genuine liberty. Read a review here.

The usual drinks and nibblies will follow. We haven’t seen you or so long, we hope to see you for a social night.

$5 entry to cover the royalties.
RSVP appreciated

Diary Dates

• The True Cost of Food - Karl Williams presents on Fri August 1st, 7pm
• Economics for Activists - Karl Fitzgerald presents on Tuesdays nights 6.30 - 8pm, Aug 5 - 26th
• 117th Annual Henry George Dinner, Tues Sept 2nd, 6.30pm featuring Terry Dwyer (ANU) @ Pumphouse Hotel Function Room

The tax unit for an asset-holding tax should be the asset!

Gavin Putland

Recommendation 10 of the Draft Report of the IPART Review of State Taxation suggests “changing the tax unit for land tax from joint ownership to the individual” as a means of reducing complexity caused by aggregation of site values.

That raises the question: As land tax is a tax on site values, wouldn’t it be simplest if the tax unit were the site? Our first submission to this Review proposed a mechanism which would indeed make the tax unit the site, without creating winners and losers in the transition to the new system. With a little elaboration, the transitional arrangement can account for the effects of aggregation before doing away with it.

Origin of the problem

Because the acquisition of major assets requires income in excess of necessary consumption, the distribution of major assets, including land, is more unequal than the distribution of income. And because land tax (in NSW and other Australian jurisdictions) exempts owner-occupied residential land, the ownership of taxable land is more concentrated than the ownership of land in general. For these reasons, land tax would be strongly progressive even if applied at a flat rate with no threshold. The purpose of a threshold is not so much to make the tax more progressive as to limit the number of taxpayers, especially among swinging voters. But a threshold, by itself, creates the opportunity for landowners to minimize tax by holding a large number of low-valued sites, this strategy being especially viable for urban speculators who “buy at the fringe and wait”. To close the loophole opened by the threshold, site values are aggregated before the threshold is applied.
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Desperation in the housing market is leading to varied responses. The latest the Age has promoted is the Container Home phenomenon. Miners earning $100,000 have been forced into them in Port Headland and other fast growing mining communities. Now a company is promoting shipping containers on the eastern seaboard as a means to solving the housing crisis.

Nice try. However, it requires the land to place them on. Whilst public lands could be used, why not free up the 119,623 unoccupied properties identified in the 2006 Census?
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