Federal budget 2009 – you’re now the judge and jury

Federal budget 2009 – you’re now the judge and jury

In years gone by, on Budget night the government (of the day) would broadcast in the first sentence the surplus (this last happened in 2008). This time around, there was absolutely no mention of the exact deficit figure which is quite unbelievable to say the least. Should one then assume that the hiding of the deficit beast within the Australian economy is part of the spin, better known today, as political whispering?

One can then assume that transparency is not exactly of paramount importance, given that the previous largest Budget deficit was $18 billion back in 1992 -93 and 1993 – 94. The Budget Speech 2009/10 took most by surprise as it was pure political spin, better known as being politically correct – a A$57.6 billion was obviously deemed “Not For Publication”.

A$57.6 billion Budget deficit is nothing more than a temporary phase that our economy currently is experiencing , so Wayne Swan keeps reminding us. This was brilliant sugar coating as the reality of a double dissolution election jumps to the fore, given that the Budget deficit will escalate alarmingly should Federal Labor serve a full term.

Piers Akerman wrote on his Daily Telegraph blog “Prime Minister Kevin Rudd and Treasurer Wayne Swan have lost a word. They can no longer bring themselves to utter “billion”. Asked yesterday on radio why he’d declined to mention the precise deficit amount in Tuesday’s Budget speech, Swan replied to a direct challenge with the answer “57”.Not 57 billion. Just 57. Then, in Question Time, Rudd responded to a similar challenge with his reply, “57.6.” Sounds like a clue to me.

I read with interest the Macquarie Research Economics Report – “It is important to note, however, that the vast majority of policy action was taken by the Government prior to the formation of the 2009-10 Budget. As a result, policy actions in this Budget appear to be more targeted towards achieving political objectives rather than undertaking any major spending reform.”

Prior to Budget night we heard a record twenty one Budget leaks. In the Budget speech there were ten references to the word recession and two to the words Great Depression. This was modern day political conditioning, where the implanted theme was to expect the worse and then be suitably impressed with the outcome … again – a brilliant spin.

No doubt Ruddy Fantastic was rejoicing when last week, when the Reserve Bank of Australia (RBA) announced that it believes the current recession will not be as severe as the recession of the early – 1990’s. What the RBA failed to identify was that back in the 1990’s the internet had not been invented.

Well that’s a relief, we are already noticing overdue confidence within the Mosman real estate market. We foresee a tight winter as the expected avalanche of distressed properties hitting our markets simply won’t happen. One does not have to be an economist to realise that if supply is constrained then demand increases. We anticipate very few new properties being offered to the market until September.

The waiting game, which is happening everywhere as Peter Costello wrote in the Sydney Morning Herald www.smh.com.au on April 29, 2009 “Buy now and pay much more later.” The member for Higgins wrote “I’ve often wondered about those advertisements that offer: “Buy now. No repayments for 24 months. You pay nothing until 2011.” Pre – empting the forthcoming Swan Budget Costello wrote “I wonder if people ask themselves whether it’s going to be easier to pay more, later than it is to pay less now? Or do they just take the benefit today and leave the worrying until tomorrow. “For mine, a smart analogy, given that Australians now have a A$57.6 billion Budget deficit and the interest meter is running.

Peter Costello went on to write – “And there’s no repayment? Actually, the Government borrowed this money, so it will have to pay interest to the lenders. And since it gets all its money from taxpayers, it’s the taxpayers who will foot the interest bill.” For those residing in Fort Crumble – in less than a month our NSW government will deliver its budget and it will get even uglier as it is in deficit, which equates to more increased taxes. This budget has the potential to be the hardest cash grab in history, which adds fuel to why Ruddy Fantastic sugar coated his Federal Fudge – it. Expect a shocker which is actually in line with the way Fort Crumble has administered NSW.

In summation Peter Costello wrote – “I recommend that families enjoy the Government’s “buy now, pay later” policy because a bill is coming. And it will be a big one. We don’t yet know how many years, or decades, of interest payments are in front of us.”

“Retailers would not get away with the kind of sales technique the Government has engaged in. Retailers have to detail the number of repayments, the interest rate and the all up cost before the sale. You get to choose whether to take the package. What’s more, if a retailer gives misleading information the interest payments are suspended. Try getting that from the Federal Government.”

This week’s brilliant aerial capture by Tim Mooney is of Balmoral Beach Club and its Nippers squad – points a poignant question, how old will these nippers be before they see a Federal budget in surplus?

Now for the steak knives … Mosman Council is installing parking meters along Balmoral Beach and other harbour side locations from July, 2009. Interesting debate brewing and here is a video of those against. Many of those whom appear are subscribers to Virtual Realty News.

Reece Coleman, Director – Real Estate Services at Fairfax Digital has responded to our queries about property data in last week’s edition. Here are Reece’s responses – http://www.rwm.com.au/2009/05/the-mumbo-jumbo-of-politics-and-property-data/

Editions of Virtual Realty News, thanks to Ruddy Fantastic have been extended another two years as a direct result of the retirement age extension. I’ll make a mental note to write an edition then, called , where are they now? Let’s hope it won’t be a case of still paying off Ruddy Fantastic’s temporary budget deficit.

We have expanded our RWM real estate media platform where aside from weekly, Tim Mooney photographic contributions we will also be adding weekly videos for your enjoyment of our weekly E-Zine. We are always re-shaping our online industry with new technology investments and setting new industry standards.

Next week – we assess Malcolm Turnbull’s Budget response and from what I observed he was smoking!

Cheers ^__^

For this week’s recorded Mosman real estate, Cremorne real estate, Neutral Bay real estate and Cammeray real estate sales http://www.rwm.com.au/news/

16 Responses to “Federal budget 2009 – you’re now the judge and jury”

  • M Jackson says:

    Contrary to popular myth, the water in Australian plugholes goes down the same way as everywhere else. So, too, the housing market. Figures from the Bureau of Statistics on Monday showed that prices in eight capital cities were down by a record 2.2 per cent between December and March. The fourth quarterly fall in a row brought the year-on-year rate of decline to almost 7 per cent.
    The market had appeared to defy gravity for a while. A fall of about 3 per cent in 2008 was nothing when set against double-digit declines in the US and UK. Crash refuseniks pointed out that the really rapid increases in house prices had ended by late 2003, after which rises were moderate. And it was true that lending was choosier. “Low-doc” and “non-conforming” loans – Australian for subprime – accounted for 1 per cent of the mortgage market in mid-2007, compared to 13 per cent in the US.
    But in almost every other respect, this is an incipient slump like all the rest. Data from the Commonwealth Bank and the Housing Industry Association shows housing affordability has collapsed since 2000, based on mortgage payments as a percentage of average income. Yes, successive interest rate cuts – to a 49-year low of 3 per cent in April – are helping, given that almost all Australian mortgages are on a floating rate. But consumers are still over-borrowed; since 1990 debt has grown twice as fast as the total value of assets held by households.
    Gross rental yields of about 3 per cent, meanwhile, are near all-time lows; if houses were stocks, they’d be trading on wobbly price/earnings multiples of more than 30 times. Unemployment data, to be released on Thursday, may show a rise to almost 6 per cent, the highest level in six years. Job ads fell again in April. Mortgage flows are sputtering. The props are falling away.
    Currently the SFE is constructing a tradeable index on Australian housing, which should be completed and ready by August 2009. I cant wait to go short. If there was one specific to the Lower North Shore in Sydney, I would have double the size positions

  • TMW says:

    Robert

    In your own words “hard hitting and to the point”

    The crux of the budget being Buy now Pay later would suggest to TMW

    that we would be better off with Gerry Harvey being in charge of the office.

    At least,Robert, he can read a balance sheet !!!

    Best Wishes for future editions

    TMW

    Ps If TMW could offer a little advice here maybe you should have

    included a comment on the opposition’s response as I’m sure you

    appreciate “last weeks news is old news”

  • I’m told TMW stands for The Mosman Wordsmith?

  • Patricia says:

    This week’s budget increased the Age Pension for singles and couples, partly financed, for example, by reducing concessional limits on tax deductible super contributions, means-testing for the private health insurance benefit, and changes to family tax benefits. It is time to slaughter the sacred cow of exempting the family home from the Age Pension means test. It is a gross inequity that many age pensioners on the Lower North Shore live in homes that, regardless of their condition, are worth $1m+. The increased Single rate of Age Pension will pay approx. $16,500/p.a. (Couples will be paid approx. $26,000 total), funded by taxpayers who are paying rent or a mortgage, possibly repaying HECS, raising a family, etc. The pensioner paper millionaires are not required to apply their home equity to their support in old age; perversely, the system encourages them to keep their home until they die, when it will be inherited (capital gains tax-free if sold within two years) by their beneficiaries. The beneficiaries should thank the taxpayers for preserving their inheritances in full!

  • Steve Henry says:

    Aerial beach photo is spectacular. Nice find!

  • Patricia says:

    Full and part Age pensioners receive the Pensioner Concession Card, which entitles the recipient to subsidised PBS prescriptions ($5.30 per script); reduced property and water rates; reduced energy bills; and telephone allowance, to name just a few benefits. My neighbours, pensioners whose older home on a large block with waterviews could be worth about $2.5m, also receive Meals on Wheels (MOW) several days per week from Mosman Council. This is perverse. The Health and Community Care (HACC) funds that support Mosman’s MOW could be better directed to communities/individuals with real need, not to Mosman pensioner paper millionaires.

  • James says:

    Patricia,

    So what does an old person who just happens to have lived in Mosman all their life, but has no income, no cashflow yet a property that has increased substantially in value, supposed to do?

  • Patricia says:

    James – Duh, take out a reverse mortgage or sell it and down-size, thus freeing up a large chunk of capital to apply to their own support. This is my final posting on this subject.

  • It’s always interesting to read the variations of public opinion – they certainly are differing. Personally, I believe that in our property markets we have seen the worst with Q4/08 and Q1/09 being the hardest by a long shot. It is all about about confidence and purchasers whilst still in conservative mode are now engaging with property markets.

    Not sure how many watched Stateline last night with Quentin Dempster interviewing Nathan Rees. Unlike his Federal counterparts who had a record 21 leaks, when asked about our state Budget in two week’s time he went on the defensive.

    Rees – “No I’m not going to speculate. I’m not gonna make any indications. Suffice to say that the $4.8 billion in reduction of GST revenue is a difficult issue for us to deal with.”

    He is right there given that in economic growth and record tax receipts they could not deal with it then. Now broke – it will be a very hard tax on the taxpayers of NSW. We can expect new taxes and old taxes being increased – this will be a shocker! Talk of another new annual tax on the principal place of residence is getting stronger. One can only assume this further explains why Ruddy Fantastic is distancing himself from the Rees Government at Fort Crumble.

  • For M Jackson – I have been reading about these derivatve markets with both interest and amazement. So I will write about this very topic next week and the huge flaws in the process – which are yet to be debated (until next week) 🙂 Short selling Sydney house prices? A world first for the ASX indeed and it has disaster written all over it – I look forward to your responses then.

  • M Jackson says:

    Patricia,

    Are you for real? Apart from being a smartass, you are also pretty naive. Reverse mortgage. Oh yeah, that’s a brilliant idea. How ridiculous :

    A falling property market ; increasing debt ; no chance to generate income to pay it back. I could take you through the mechanics but perhaps it is way over your head. great idea in a bull market, but the minute the capital growth stops, it makes no sense. It is a one way bet, just like the long beta play every second Aussie has been on for the past 15 years via the share market. Compound that with sharp rises in unemployment and an environment where credit is frozen and debt is now toxic…and its game over for stupid products like reverse mortgages. You can add in the fact that pensioners have been hit by rates heading towards zero, dividend payments being cut and a Labour Govt now hell bent on squeezing them to get as much as they can to pay for that useless stimulus package that is no nothing more than a long terms recipe for a banana republic…

    SO, PATRICIA, WHAT DO YOU HAVE TO SAY IN RESPONSE??

  • Michael A says:

    Readers,

    M Jackson may have a valid point here. It is easy to talk a market up but where is the demand coming from? I really cannot see how property prices cannot do anything but fall. The very people that completely missed what was coming over the past few years are the same people now proclaiming that we have found the bottom and we are now into the recovery. Sorry, we have 15 years of relentless partying, goverment-fuelled free money, a system where debt was the same as earned money, and we have now had a systemic collapse. And people think after a few months that’s it
    ? Dont confuse a euphoric bear market rally with the underlying fundamentals which show that the rules have now changed. Where, exactly, is the money going to come from to create the new growth? Surely you cannot all think it is that simple. This thing is playing out and most people will be faked out thinking that its all sunshine out there.

    The very people that fuelled the boom in Sydney upper-end property are the ones that were leveraged and predominate the finance industry. One and one equals two. How hard can it be to see what will happen now?

  • Robbie Mac says:

    Team

    Haven’t seen it covered in recent times, so would appreciate some thoughts on the average “time on market”. Again, I am certain the stats will be less than robust, but my study of the display advertising suggests that whilst the quantum and value of property on the market seems open to debate, it seems very clear that those that DO make it to market seem to be staying there much longer than prior to the previous twelve months or so.

  • Patricia says:

    M Jackson – Your one-eyed, myopic tirade has brought me out of my retirement on this subject! I agree that AT THIS POINT IN TIME a reverse mortgage would not make sense (but how about in 10 or 20 years’ time?). Instead, a Mosman pensioner paper millionaire could sell the family home (I know it’s not worth what it was three years ago, but it’s worth a lot more than it was bought for in 1965), downsize, and release the capital for their own support rather than being subsidised by taxpayers.

    This is a simplistic response because I do not have the time, nor is this the appropriate forum, to cite a host of policy initiatives and funding formulas that could be developed to unlock the capital from the homes of pensioner paper millionaires to fund their retirement. It is inequitable and immoral that the taxpayer subsidises pensioner paper millionaires, consequently preserving the full inheritance of the pensioner’s beneficiaries.

    And with that, M Jackson et al, I shall retire from further posts on this subject regardless of the degree to which you may goad me.

  • Patricia – I would agree 100 per cent with you on this. Given the atrocious position our deficit now finds itself in the governments of the day have to start making the hard decisions. I think that many would be most surprised by the numbers of residents in Mosman already on reverse mortgages.

    I also believe we are not that far away from the total abolition of middle governments either.

  • Nick says:

    Robert,

    Alas the removal of middle (read State Governments), I wish it was tomorrow, but can’t see it happening in our life time.

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