Australia has decided

We’re going to try to reflate the bubble in land prices

Sell more home loan credit – at any cost to the economy!

It is literally this decision that has been decided, because Henry George showed wages and the return to capital goods are are what’s left over after rent [bigger mortgages] has been extracted.

Undoubtedly, the Morrison government will now try to keep the property bubble from deflating further–as per the Rudd-Swan government’s $50 billion plus expenditure from 2008–if a recession is to be avoided. But it’s too late now, ScoMo!

The answer lies here, but it’s too difficult for politicians to carry through, so batten down, folks!

OZ ELECTION: SCOMO DOES IT!

Wow!

Now let’s see how you handle the bursting real estate bubble, ScoMo. You can’t blame Bill Shorten for it now!

And your budgetary surplus is going to fix a collapsing economy?

Don’t think so!

You’d better try reinflating the bubble ……… ?

WHAT WENT UNSAID IN THIS ELECTION

An economy amok

No political party has shown the guts to challenge the privatisation of our natural resource rents. These were once seen as common property and captured as a public good. We now collect these only at the margins. i.e. In the last six years taxes on real estate captured from 8.6% to 10.8% of all taxation, even during our greatest real estate bubble. Yet rent-seekers complained vehemently even about this!

The point that land and resource rent (such as the electro-magnetic spectra) are publicly-generated, and therefore owed back to the public as a citizens’ dividend, goes missing in obeisance to the parasitically-extractive practice of rent-seeking. Political parties are unable to call it out, only fiddling at the edges with measures such as slightly increasing taxes on capital gains, or seeking to curtail one part of the negative gearing of real estate purchases.

Because we fail to capture these resource rents which carry no excess burden in costs when publicly collected, we’re forced to levy taxes on wages, goods and services and non-extractively earned profits. These taxes carry an excess burden of twice the amount of tax levied.

The chart above shows the ‘squeeze’ taxes on productivity and the privatisation of publicly-generated resource rents (red, blue and green) are applying to the productive segment of the economy (coloured blue).

No politician is prepared to remedy this pathological situation in which Australian wage earners are being denied their fair share of the GDP pie whilst rent-seekers rip them off. They’ll all talk about the damaging outfall, but they won’t apply the solution.

SUB-PRIME LOANS ARE GOOD?

Australian residential markets are in decline and many people find they owe the bank more than their home is worth – i.e. they are in ‘negative equity’.

So, what does the government do – and the opposition agree to? They agree that instead of new home buyers having to put up a deposit of 20%, they will only have to find 5%.

How stupid! Come and put you head in this mortgage noose because we’re both trying desperately to stop this bubble which has extended in Australia since 1996 from deflating further.

Don’t let the market do it’s thing, let’s create a US-type ‘sub-prime’ mortgage catastrophe!


REAL TAX REFORM: WHAT DOES IT TAKE?

An old Nicholson cartoon from THE AGE

The current tax system continues to reward rent-seeking in the “game of mates” being played out at great cost to the Australian community.

It wasn’t always thus. Australia had an even better record than the USA (below), in capturing back some of the uplift in property values provided by services and public infrastructure – at all 3 levels of government. (The USA did it only at local and state levels.)

The recommendations of “Australia’s Future Tax System” (2010), namely, abolishing some 120 taxes and relying on 4 only, income tax, the goods and services tax, an all-in land tax and a mining tax, though moving in the right direction, have largely been ignored.

What then does it take to reform a tax regime that fosters speculative rent-seeking, the pumping up of asset values and the taxing of wages, instead of genuine productivity and wealth creation?

Where is the Productivity Commission on this? It appears to be failing in its duties, in no lesser fashion than the Banking Royal Commission found APRA and ASIC to have issues in this regard.