The Barometer of the Economy
The Kavanagh Putland Index
Dr Gavin Putland
Thursday Oct 20th, 6.30pm
1/27 Hardware Lane
RSVP pls to this free event.
Dr Gavin Putland will analyse the size of the Australian land bubble in the context of previous land booms. This indicator compares bubbles in relative terms by dividing land sales by GDP, reflecting the size of the bubble to the growth in the economy.
It’s two decades (to the month) since Bryan Kavanagh started calculating the total annual value of property sales in Australia, using records dating back to 1972.
It’s one decade since he first published the result of dividing that total by GDP, obtaining a measure that seemed to indicate whether the property market was in a bubble, whose bursting would cause a recession. His project, which became the flagship of the Land Values Research Group, has now accumulated four decades worth of data.
It’s only 1/4 of a decade since Gavin Putland modified the method of dealing with incomplete data (only Victoria’s records go all the way back to 1972) and with the fall in inflationary expectations that followed the recession we “had to have”. But, as he has reprocessed the old data and is now taking over the accumulation of new data, it falls on him to present the results up to June 2011.
What does the ratio of property sales to GDP – dubbed the “Kavanagh-Putland index” – say about the current state of the property market? What are its implications for the wider economy? How reliable is the raw data? How well does this index agree with alternative leading economic indicators, such as housing finance and numbers of residential sales?