Prosper Australia

photo credit: alexkon

Karl Fitzgerald

Project Coordinator and Web Editor
the Saturday Age - Business section, p2, Oct 25th.

FREE market principles are being put to the test like never before. With share prices collapsing, policymakers are scrambling to keep up with the loss of confidence in the market.

Prime Minister Kevin Rudd has stepped into the breach with gusto. A $1.5 billion injection into the property market via the first-home owners grant will keep the banks and property lobby happy. And yes, the ubiquitous financial analyst will support this, too. But what about single people?

The 1% cut in interest rates will save the property investor $200 a month. One can rest assured this will not be passed on to renters. Single renters will also miss out on the $1000 Christmas bonus.

With the market benefiting from this additional buying power, these economic forces will push housing prices even higher, strangling Rudd’s affordable housing credentials.

Pensioners must understand that these same forces will soak up their handout, too.

The planned infrastructure projects will also make prime locations more valuable. Meanwhile, property prices are dropping dramatically in sprawling suburbs.

The monopoly power inherent in land deems economic growth irrelevant. All social developments are captured in higher land prices.

Rising property prices are only good for banks and speculators. The IMF’s Boom-Bust Phases in Asset Prices and Fiscal Policy Behaviour report reveals that economic downturns are more pronounced when following a housing price bubble.
(more…)

photo credit: x_jamesmorris

Wednesday’s release of the Architecture of Australia’s Tax and Transfer System
review paper saw commentary by lobby groups attacking capital gains taxes.

PETER ANDERSON, CEO ACCI: Our capital gains tax has not been looked at in an analytical way for more than 20 years. And capital gains tax as it currently is structured is a tax on investment. So we need to try and reduce the level of taxes on constructive investments.

The property lobby is also wanting to look after their interests. However, we were heartened to read in the government’s Tax and Transfer paper:

The OECD (Johansson et al 2008) has recently undertaken a cross-country study of the effects of different taxes on economic growth. The indications from this analysis are that property taxes have the least detrimental impact on growth, followed in order by taxes on consumption, taxes on labour income and taxes on capital income.

(p237)

Read the OECD report - Do tax structures affect aggregate economic growth? Empirical evidence from a panel of OECD countries
(more…)