The Barometer of the Economy

Tues Oct 30th, 6.30pm
1/27 Hardware Lane, Melbourne
Presenter: Dr Gavin Putland

RSVP to this free event

Dr Gavin Putland discusses the role of Australia’s largest market – the land market – in influencing economic activity.

In 2001, Bryan Kavanagh found that a high ratio of property sales to GDP indicated a bubble, and that a steep decline in that ratio indicated an imminent recession. This built on the work of Fred Harrison in Boom Bust 2010 and previous writings.

On past form, according to figures available in October 2011, the decline in the ratio between 2009-10 and 2010-11 should have led to recession in 2011-12. The GDP figures for 2011-12 now indicate that there has not (yet) been a recession.

The following issues will be considered:

  • Did we dodge the bullet?
  • Did GDP give a misleading impression?
  • Did recession set in later – just in time to blame the “carbon tax”?
  • Or must we revise the threshold at which recession is predicted?
  • Will revisions to the data indicate that the decline in the ratio was
    not as deep as first thought?
  • If so, does that mean the housing market has entered a recovery phase? – or a “bull trap” phase?
  • As a predictor, how does the ratio of property sales to GDP compare with housing finance and numbers of residential sales?
  • What other indicators can we use?

Dr Gavin Putland from the Land Values Research Group will deliver the latest insights into the holy grail of economics – the ability to predict future economic cycles.

photo by: James Cridland

3 Comments

  1. Bobby Fischer18-10-2012

    Your Kavanagh-Putland index here:

    http://blog.lvrg.org.au/2011/10/kavanagh-putland-index-back-in.html

    Looks very interesting when cross referenced with Prof Keen’s long term ‘credit impulse’ here:

    http://cdn.debtdeflation.com/blogs/wp-content/uploads/2011/04/041011_2142_ThisTimeHad13.png

    and here:

    http://cdn.debtdeflation.com/blogs/wp-content/uploads/2011/04/041011_2142_ThisTimeHad12.png

    In fact, where your index predicts a recession based on it dipping below the 19% bubble line (mid 70s, early – mid 80s and early 90s, almost coincides 1:1 with a negative credit impulse reading from Prof Keen’s work.

    Note the very large negative credit impulse reading in 2010 that also predicts a recession/depression that hasn’t yet happened.

    Based on Prof Keen’s work going back to the depression era, there can be a lag effect of a couple of years from the data e.g. onset of the 1890s depression, while the 1930s saw an immediate onset of a depression with a large drop in the credit impulse – probably because it coincided with a larger ToT shock than the 1890s and property speculation wasn’t as rife in the 1930s.

    Anyhow, it appears your indices are very complimentary in predicting a recession/depression on that basis where property speculation is rampant in the economy.

  2. David Chester20-08-2014

    It is a source of amazement to me that as fellow Georgists (whose knowledge about land and the economy is unequalled), we seem to have so limited an understanding about how the general macro-economy works. I include the parts of our social system that are not within the land sector.
    It seems to me that instead of pushing our land ideals, excellent as they are, we should also be expressing in clear terms a complete description and analysis about how the whole macroeconomics system works. With one exception (myself) no Georgist has tried to do this in exact terms, yet using a system of logic and some not difficult high-school mathematics it is certrainly possible. My completed but unpublished book contains this vital information and also has the seeds of at least two discoveries not popular (amongst fellow Georgists) but proven true numerically.
    These are that taxation is not a drag on the progress of the economy, even if it is not on land values. The other discovery is that the short term introduction of LVT is about 3 times more beneficial than when the income tax is raised by the same incremental amount!
    As far as I can tell these matters have not been investigated let alone understood, because Georgists will not get down from their tree and examine the whole of the big picture. Seing the cat is a catastrophy for our general wider knowledge, there is a whole menagery out there!

    I wish to communicate and share with you what I have written about theoretical macroeconomics, with a view to seing it in print, after your kind advice is hopefully taken. So please write to me at:

    chesterdh@hotmail.com

  3. Karl Fitzgerald
    Karl Fitzgerald21-08-2014

    Hi David,

    Bryan Kavanagh has forwarded your manuscript for referral. I for one will be interested to see how you disprove deadweight costs and compliance costs. Can I send you my tax paperwork? It does sound interesting that LVT is 3 times more beneficial than income tax per %. Keep up the good work.

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