The great dust – up.  You can bank on that!

The great dust – up. You can bank on that!

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Coincidentally, Sydney this week experienced a once in a lifetime (so they say) dust – up which as it turns out was both physical and personal. One was delivered by Mother Nature and the other is the mother of all property taxes and by all reports (leaked thus far) it will take some time for the dust to settle. Since GST was introduced in 2000 on an electoral platform that taxes would come down (only to see them increased) – nine years on, Fort Fumble (Federal government) and every state and territory government is now drowning in budget deficits.

Briefly, there was a ‘red’ lining to the clouds when former US president Bill Clinton (give the man a cigar) said Kevin Rudd (The Emperor) was one of the world’s smartest leaders. Clinton said “his friend was well – read, well – informed and an expert on China.” Well Slick Willy that’s why we call him The Emperor, because just like China everything is now in the red!

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Tim Mooney Photography

www.timmooneyphotography.com

My tax rules: the Ken Henry way by Peter Martin from The Sydney Morning Herald was certainly an eye opener or as Ken Henry puts it “a-once-in-a-generation game changer.” We have heard that before (twice this week too).
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NO RELIEF FOR HOMEBUYERS

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“But the Henry review has come to the conclusion that other state taxes, much complained about, aren’t actually that bad. Stamp duties on conveyancing and land transactions are changed at a time when people are already borrowing and can afford to pay them. “(Yes every Australian loves making a Stamp duty donation for nothing because in the backyard of the property they are purchasing money actually grows on trees they are purchasing.) “They don’t seem to be much slowing our relentless desire to trade up and they help claw back the untaxed profits we make from capital gains tax exemption for the family home. The review won’t recommend an end to real estate stamp duties for as long as the capital gains tax exemption remains, and even it is unlikely to have courage to recommend an end to the exemption.” You call that a once-in-a-generation game changer?

The Henry Report should be called the Titanic as there are leaks everywhere and unlike ‘leeks’, I see no green-shoots.

PAYROLL TAX TO STAY

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“Payroll tax is also widely abhorred but from the review’s standpoint is pretty harmless.” Brilliant this comes from a person who has never paid it! “Not only will it stay in defiance of the bulk of submissions on the topic but the review will recommend it be extended by withdrawing a range of exemptions. There are taxes that genuinely hurt employment, the review believes – those that discourage foreign firms from setting up shop and staying here.”

A tarot card economic review (in my opinion) where an “abhorred tax that is pretty harmless despite bulk submissions against this” for simply employing people – now what point is he missing? The Australian Bureau of Statistics (ABS) labour figures for August identified that Australia’s unemployment rate remained at 5.8 per cent; however the economy shed 27,100 jobs which was more than expected. How many would have been saved if we did not have Payroll Tax? We will never know! But we do know that Ken Henry predicted that Australia’s unemployment would peak at 8.5 per cent.

Now I am getting confused, so allow me to elaborate. This week, Treasury Secretary Ken Henry advised the Australian Institute of Company Directors that the Australian economy would have contracted during the global financial crisis if the government (on his recommendation) had not introduced its stimulus measures. What a no brainer, when his report promotes Fort Crumble wastage disguised as a stimulus (tax payer expense) yet rejects on the other hand, individual and business stimulus that otherwise generates and absorbs unemployment.

The Henry Report is a no -no- no report where the stimulus packages only resulted in credit card debt reductions which now brings me to our banks. Well two of them anyway. Where once upon a time (you know the fairy tale) our four banking institutions Westpac, NAB, ANZ and CBA were known as the Four Pillars. Have a look at this to see how the World banking pecking order has changed from 1999 to 2009 (move your mouse at the bottom of the page on each year from 1999 to 2009 and watch the appearances and disappearances.)This is a fascinating report where Westpac and the CBA debut in 2009.

Top 20 Financial Institutions by market capitalisation, $b, 1999 – 2009

Enter Paul Keating, past prime minister. Although I never liked the man, I must admit that he is making plenty of sense. Paul Keating joins the 7.30 Report

Kerry O’Brien “Former Labor prime minister Paul Keating is concerned that as the heat starts to come out of the global financial crisis, the big four banks have corned almost the entire market for new housing loans. Before the crisis, the Commonwealth, Westpac, NAB and the ANZ had just 60 per cent of that market. But new found dominance of the big four is now starting to be reflected in their margins on housing loans.”

Paul Keating “There’s a lot of clever things to do. I mean, here we haven superannuation the third largest pool of savings in the world. $1100 billion, growing at $100 billion a year. These funds could hold Australian AA-house mortgage bonds. No trouble at all. In fact we saw all these dreadful numbers for super, people losing money, but if they had had your or my mortgage they would be getting 6 per cent solid, or 5.5 or 6 per cent.”

Paul Keating “So therefore, we have to work out how much we can have the super funds take the mortgages up. And I think one of the ways that can happen is for the central bank, the Reserve Bank, to trade in housing bonds like it trades in treasury bonds. So it makes a liquid system, a liquid market.”

Paul Keating “And that way … you saw the super funds, they lost enormously on the real estate investment trusts, average losses of 70 per cent. So in property, their portfolios in super were too narrow. If they were widened to take into account the really good mortgages of most Australians – you know, the default rate is .00001 per cent, it’s nothing.”

No doubt Mr Keating read the Bank Mergers Report “The acquisitions of St George Bank by Westpac and Bankwest by the Commonwealth Bank in 2008 increased the market share of the ‘big four’ banks, raising concerns that increasing concentration from bank mergers may be significantly reducing competition in the Australian market for financial services.”

The Housing Industry Association (HIA) survey found that in August, new home sales posted the largest monthly increase in more than three years. Sales of houses were up 11.8 per cent and apartments jumped by 7.5 per cent. It is not just property that is on the run. David Jones this week posted its highest full year profit (on record) up 6.3 per cent.

Interest rates have now bottomed which was clearly identified when the Reserve Bank of Australia (RBA) released this week their Financial Stability Review . “In summary, global financial conditions remain challenging. But, while further setbacks cannot be ruled out, the severe downside risks that loomed six months ago have significantly abated.

Interest rates set to increase and Mosman has just 66 houses advertised on Domain down by approximately 300 per cent this time last year. So if interest rates increase why increase the stimulus further? Humming to the song “I see red, I see red, I see red.”

Whilst on red – have a look at this red hot exclusive release in the Mosman market ESCARPA

Cheers ^__^

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

3 Responses to “The great dust – up. You can bank on that!”

  • Gordon says:

    It’s probably true that bureaucrats love taxes on homes and businesses because they are dead easy to identify and easy to collect. If you don’t pay the tax, you don’t get to own your home or run your business.

    The other category of people who support higher taxation are the political class, the chatterati. They want property, capital and business taxes to be imposed and increased because they have the idea that only rich and privileged people own homes or run businesses, and they should be slugged to provide a good income – for the chatterati.

    Since Fort Fumble seems to be mostly occupied by people who are in these categories, the all-too-evident current outcome is that the productive sectors which could drive recovery from recession are getting no encouragement to increase vital employment numbers.

    However, at least it is possible to dispel the unfounded rumour that there is a rift between our state and federal governments. On the contrary, Fort Fumble is delighted to have their state counterparts getting lots of attention. By comparison with Fort Crumbled, even Fort Fumble looks good (well, not so bad).

  • Fletch says:

    Yes Gordon,
    Also look at all the ex- pollies from the left with their snouts in the trough or good times.

    Graham Richardson – that is well documented.

    Bob Hawke – lives in a waterfront at Northbridge, complete with mini golf on the roof and plenty of area to have discussions etc

    Paul Keating – lives in Eastern Suburbs I believe

    Michael Lee – the man who gave us Optus Pay TV cables – he sits on boards

    I could spend all afternoon on this.

  • Mike says:

    Thanks again for your inciteful Friday review. I also have to agree, allowing superfunds to invest in tier one mortgages would make sence, perhaps up to 80% of valuation.

    Have an astroglide weekend……..

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