Our NSW government – boom one day and bust the next!

Our NSW government – boom one day and bust the next!

Yes – Fort Crumble (NSW government) is basically lost and now trying to turn back time. Today, it is stone motherless broke and with no idea how to turn the economy around, can conveniently lay the blame on the global financial crisis. The 2008/09 budget announcement re-winds the clock to 1996 (when NSW was last in deficit). With an estimated budget deficit of $1.3 billion for 2008/09 and net debt to rise to $12.9 billion by June 2010, it’s hard to believe that Fort Crumble can return a budget surplus again. (It could not manage NSW in economic growth – with record tax/GST receipts).

Last Sunday, editor of The Sunday Telegraph Neil Breen wrote “Labor bungling a total turn-off” where he too turned back time. Neil Breen wrote “On Tuesday, Treasurer Eric Roozendaal will deliver the 15th budget since Labor was returned to government in NSW at the 1995 election. They switched off. Long ago.”

What an amazing capture by Tim Mooney – my favourite photo so far and one that illustrates just what makes Mosman so special. A natural suburb with a striking seascape where nature is preserved over housing development – be the judge? Since Tim joined our online platform, Virtual Realty News, many subscribers have contacted him to purchase his photos for their enjoyment.

Website: www.timmooneyphotography.com

Email: info@timmooneyphotography.com

Back to Neil Breen, “You need only read the following excerpt to understand why. It’s from then Treasurer Michael Egan’s first budget speech 14 years ago.

Labor was back in power and was feisty.

“For too long, we have put up with long hospital waiting lists, an understaffed police service, inadequate child protection and lack of accommodation for the disabled.”Mr Egan thundered.

“This budget delivers major improvements in hospitals, schools, police and crime prevention and community services.” Sound familiar?

Fourteen years on, everything is broken and now, our Premier ‘Nathan Please’ has listed Mosman police station for sale – indeed a backward step. If he can’t manage a surplus, how can he manage debt – by living in the past?

Thank goodness the Reserve Bank of Australia (RBA) remains on the money. This week it released board minutes from its last meeting – keeping its powder dry. As our economy manoeuvres its way through a global crisis there are obvious and escalating concerns which were highlighted when the Commonwealth Bank raised its standard variable rate last Friday (still below competitors.)

As the retiring member for Higgins announced this week, the greatest challenge facing our economy in years to come will be interest rates and yet, leading economists still maintain that borrowers should remain on variable rates. I don’t agree.

The problem with interest rates, is lack of competition as identified this week in www.crikey.com.au “Since the financial crisis first became apparent, the Government has explicitly put competition second to the need for stability within the Australian financial sector, waving through the merger of two of the five largest banks in Westpac and St George and acquiescing in the Commonwealth’s (CBA) rescue – purchase of Bankwest. The consolidation has come at a time when non- bank mortgage lenders and regional banks have either been driven from the market or badly bruised by the financial crisis, magnifying the damaging anti-competitive effects of the dominance of the Big Four.

Once competition is lost in Australian markets, it is awfully hard to regain. The ACCC has no divestiture power, so even when we are over the impacts of the financial crisis, we will not be able to regain even the limited degree of competition that applied until 2008. The only sensible course of action for most consumers is to buy bank shares, and get at least some benefit from the gouging, exploitation and bastardry that our banks can get away with.

But that’s no help to small businesses that can’t get loans, or face usurious interest rates when they do, or exporters, who face a punishingly high Australian dollar courtesy of our interest rates. Or, for that matter, to the workers who depend on them.”

Much like Michael Egan’s prediction in 1995 (it never came to fruition – only his pension evolved) BIS Shrapnel’s Residential Property Prospects report announced that house prices will rise by nearly 20 per cent over the next three years. “Green – shoots” of recovery based on the first home buyers grant and low interest rates. Green shoots can quickly become red shoots should banks up interest rates – which explains why the RBA continues to keep their powder dry.

One day later, the following graph appeared online criticising BIS Shrapnel for its forward thinking because such forecasts do not consider the x-factor and three years on so much can change. There again, fourteen years on and nothing has changed for the NSW government (other than a huge deficit). With fewer banks today, this scenario is no different from the control that Woolworths and Coles have over food and petrol prices.

Wayne Swan criticises the CBA for “selfish acts” and its rate increase of 0.10 per cent that “threatens recovery” of Australia’s economy (still the lowest). It is somehow puzzling that Ruddy Fantastic then shakes his sauce bottle to all and sundry in an effort to stimulate our economy. Not in agreement, Westpac and St George then increased fixed mortgage rates by 0.5 per cent, citing higher wholesale funding costs. Quite the opposite when the Reserve Bank of Australia (RBA) announced that our Big Four banks are currently enjoying healthier net interest margins (NIM) than before the global financial crisis. “The major banks ‘ NIM currently averages 2.27 per cent, which is a little above the level before the onset of the financial market turbulence in mid 2007.” Nation Building or Bank Gilding?

Back to the NSW budget – with a brilliant spin to kick start the housing sector. A short lived spin – where just one day later the Australian Bureau of Statistics (ABS) announced that (in the first quarter of 2009) home building fell to its lowest level in eight years. Economists then predicted that this sector would increase significantly in the second half of 2009 – this won’t happen as the banks are no longer lending to developers – fact. Re – affirmed by the latest ABS release which (alarmingly) identifies that our NSW government policy (rhetoric) is definitely not in sync with banking policy.

ABS data for the three months to March, identifies that the number of new housing starts has fallen to 5,400, down from 7,500 compared to March 2008. In the March quarter 2004, new starts were 11,000 (a fifty per cent decline). This is what then happens – the following data shows that Sydney clearance rates are now at 71 per cent and above 80 per cent, is considered a boom market.

Subscriber sales jumped this week to $892,096,219. Over the last 18 days, we have sold 16 properties to the value of $47,000,000. I might add that RWM is the only local agency reporting such great sales. As I wrote last week “better to be in the market than on it”, and that means growing your online market, not reducing it. The leaders in real estate today, are those who invested and developed successful online media platforms (years ago). Times have changed. We have and as our sales results prove, businesses need to move with the times. http://www.rwm.com.au/sales-list/sold_listing/

RIP – Paul Eastaway, a Mosman identity who will be greatly missed. A very funny and caring man who brought a smile to everyone’s dial – so many wonderful memories.

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/

3 Responses to “Our NSW government – boom one day and bust the next!”

  • On behalf of the Maccormick Clan thanks for your comment on Paul Eastaway our cousin and a great family man !!

  • Robbie Mac says:

    Ah yes – bank lending rates to small business. Doesn’t get a lot of press this. Try 15%+, for a business with a turnover in the multimillions, with blue chip clients, not capital intensive and been operating since 2001. Why so high? Because they can, and do. Happy to reduce it, IF I cross collateralise with personal (i.e not business) real property, which I refuse to do, as that joins all my risks, rather than separates them. They see this is a lack of confidence, I see it as smart. Too much for them, as it becomes a battle of risk positions and profiles – an entrepreneur against a faceless corporate behemoth. So I pay the price for this risk management strategy, and I don’t see any politicians wringing their hands in angst at my dilemma. Yet time and again the economics indicates that small business is the engine room of the nation, yet the price of fuel for this engine is of no concern to any, other than those paying it. Unlike groceries, fuel, mortgage rates et al, et seq, etc, etc. No choice really but to buy bank shares – if you can’t lick ’em, join ’em!

  • Gordon says:

    Very few in the federal government, and none in the unspeakable NSW charade, are interested in businesses (unless they have heavily unionised workplaces). They see anything to do with even small business as pandering to the evil capitalists, so we get the outcome that Robbie Mac outlined.

    Another example was the risible Petrol Commissioner, which made zip, zero and nil difference to petrol prices. If minister Chris Bowen had been remotely serious about fuel prices, he would have included all fuels (since diesel and LPG fuel most business vehicles) and then given the Fuel Commisioner power to actually do something.

    The NSW budget is just like the previous 14. Promises, promises, most of which have been/will be “postponed” and announced again and again. One of the few actual policies was to further overheat the sub-$600,000 housing market, which as Robert pointed out last week is sure to result in tears big-time down the track. And the good news is. . .?

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