Dr Gavin Putland has updated the Kavanagh-Putland Ratio chart–which includes all Australian real estate sales (i.e., residential, commercial-industrial, rural and other) as against Australian GDP–to include details for the financial year ended 30 June 2024.

But we’re now in April 2025, are we not?

Yes, but not to worry, the K-P Ratio assists to forecast economic recessions within the forthcoming 12 to 18 months; so we may say the aspect is reasonably good for the rest of 2025 and the first half of 2026.

What we need to see to call an upcoming recession is a 25% decline in the year-on-year ratio, together with a significant decline in real estate prices. We experienced both of these in 2018 (which heralded the 2020 ‘Covid’ recession) but not in 2023 when, although the ratio declined, real estate prices did not.

So, you didn’t get to read it, Donald?

~~~~~

#21: Consider the merits of taxing land and natural resource values instead of incomes and purchases.

The elephant in the room.

The public capture of publicly-generated land and resource rents, together with the un-taxing of incomes and purchases, is the way to mend hopelessly fractured economies.

~~~

Zip it up!

Last night’s ABC Radio National episode of “The Minefield” with Waleed Aly and Scott Stephens discussed ‘optimism’. Their guest was the Australian Catholic University’s Adam Lovett. It was heavily philosophical until Lovett joined the discussion to mention the manner in which we’ve progressed over the last hundred years. Waleed Aly was quick to remind Lovett that the last century had featured two world wars and a depression.

I could see how the writings of Henry George, together with his address “The Crime of Poverty”, filled an immediate void in their discussion. His work not only anticipates world wars and suggests reasons for the decline of empires, but also explains the reason for what George called ‘industrial depressions’. The subtitle of his magnum opus, “Progress and Poverty” is in fact “An inquiry into the cause of industrial depressions and of increase of want with increase of wealth …. The Remedy”. Perhaps relevant to reasons for being optimistic, eh, gentlemen?

Now, not everybody has read Henry George’s work. [By the way, he was married to an Australian, Annie Fox, and visited Australia with her in 1890. It was probably this intensive three-month speaking tour in 1890 which brought about the first of his strokes on his return to the United States.] George’s visionary books were distilled from the best of extensive readings of the social philosophers. Of people who have read him today, many have missed the particular addition he’d been able to draw from reading these philosophers. A relative few have not missed it: –

He put it into an equation: P – R = W + I

Each of George’s works poses the substantive question: Who is it that is taking the ‘R’ from production?  It’s certainly not labour; nor capital. Is it we the people, as represented by our governments, and is that ‘R’, the economic rent, being delivered, equally to all, as a citizens’ dividend? Of course, the answer to these questions is “No”. We’ve introduced a tax regime which channels the economy’s surplus product ‘R’ to those who rentseek at the expense of all others.  This turns Australia’s fair go‘ into a mockery.

Henry George warned that the escalated land prices that we generate from privatizing publicly created land rent, and the taxes we apply to our incomes and purchases, both act to destroy social cohesion.

The evidence is increasingly pointing to him being correct.

(About which, nevertheless, I’m terminally optimistic. 🙂 )

Philadelphia’s first tax law 30 January 1693:

“Put to the vote: as many are of the opinion that a public tax upon the land ought to be raised to defray the public charge, say ‘yea’.

“Yea!”

– Carried in the affirmative, none dissenting.”

________________

OK, if that was their first tax law, where did their money come from, please, Artificial Intelligence?

Before Philadelphia’s first tax law was enacted on January 30, 1693, the funding for public expenses in the early colonial period likely came from a variety of informal sources, as was common in nascent colonial settlements like those in Pennsylvania. Since this was Philadelphia’s initial formal tax legislation, prior to that, the government and community would have relied on alternative means to cover costs.

In the late 17th century, colonial governments, including William Penn’s Pennsylvania colony (of which Philadelphia was a part), often depended on contributions from settlers, fees, fines, and grants or loans from proprietors or wealthy individuals. William Penn himself, as the founder and proprietor, invested significant personal funds into the colony’s establishment, including infrastructure and governance. Revenue might also have come from trade, such as the sale of goods like furs, timber, or agricultural products, which were staples of early Pennsylvania’s economy. Additionally, quitrents—annual fees paid by landowners to the proprietor—were a common mechanism in Pennsylvania, though enforcement was inconsistent in the colony’s early years.

Without a formal tax system before 1693, Philadelphia’s public charges—such as maintaining roads, supporting officials, or funding defense—would have been met through these ad hoc methods. The decision to implement a land tax in 1693 reflects the growing need for a more structured and reliable revenue stream as the settlement expanded and its administrative demands increased.

So, in short, before the 1693 tax law, Philadelphia’s money likely came from a mix of voluntary contributions, proprietor funding (like Penn’s), trade income, quitrents, and fees or fines, rather than any formalized taxation.

See also https://www.prosper.org.au/royalties/

HOUSING CRISIS

COST-OF-LIVING CRISIS

Why is this ignored? Or, is it invisible to politicians? Taxing ALL land values more and abolishing more than 100 other taxes as a trade-off–as recommended by the Henry Tax Review–would most certainly decrease the average 80% land component of our house prices.

“Where’s the money to come from?” We seem to have forgotten the virtuous circle by which we once funded all Australian infrastructure projects, that is, by the taxing of land values over all the jurisdictions benefitting from the infrastructure project: via municipal rates and state land taxes. Thank God our forebears just got on and did things for us without all the contrived BS! We really don’t know how this should work?

The uplift in land values from any infrastructure project is automatically incorporated into all land values and their totals appears in state and territory categories in the National Accounts at Table 61 to ABS Catalogue 5204. Separating the cost of each infrastructure project out of these land values for each infrastructure project is unnecessary: it’s ‘already in there’!

If Melbourne’s Suburban Rail Loop wasn’t warranted, maybe it shouldn’t have commenced. However, the proposed SRL isn’t just from Cheltenham to Box Hill as is being characterised by the media and the SRL’s political opponents. It does have significant raison d’être, as it would eventually loop around Melbourne and connect to airports. 

If every new infrastructure project is to be pigeonholed by the incoming government of a different political persuasion--in much the same manner as the Victorian ALP government put an end to the Liberal government’s connection between Eastlink and the Western Ring Road–then what has Australia come to in this regard?  How sad!     

Incidentally, just as our roads and freeways were once ‘free’, insofar as they were paid over a number of years out of the uplift in land values they provided, not from private tollroads, so should our railways if we want to get a vastly increasing number of people off our highways and roads and onto a more efficient means of public transport. 

We should bear these longstanding principles in mind if we’re to put an end to what appears to be current mismanagement and party politicisation of worthwhile infrastructure projects.

We need also end the intensive ‘privatisation’ or ownership of our infrastructure that we’ve come to witness. Getting the cost of infrastructure ‘off the public balance sheet‘ has come at a great cost to all Australians.