ABOUT ME

I worked with the Australian Taxation Office and the Commonwealth Bank of Australia before co-founding a Melbourne-based valuation practice in 1997. I was a director of the firm until I retired in 2013.

I’ve spoken in international forums, including two Pacific Rim valuation conferences and participated  alongside professors Michael Hudson and Steve Keen on “Lifting the Lid on the GFC” at Melbourne Town Hall in 2009. In 2013, I addressed an academic symposium on land value taxation in Chengdu, China.

I have an interest in property cycles and the economic implications of taxation. My Unlocking the Riches of Oz in 2007 critically assessed the impact of taxes on incomes and purchases, concluding that these taxes effectively halved Australia’s potential Gross Domestic Product.

COGNITIVE DISSONANCE

As far back as 1973 I noted an analytical disconnect between the economy and what occurs within the overarching Australian real estate market. Part of the Australian Taxation Office, including the valuation section in which I was employed, had just moved into the WH Holmes Building, a new building at 270 King Street Melbourne, when the builder Mainline Corporation, one of Australia’s biggest office-builders, collapsed in 1974. It became generally accepted that the collapse of Mainline Corporation and Cambridge Credit, the finance arm of the National Bank of Australia, were harbingers of Australia’s 1974-75 recession.

INQUIRY

Asking myself why federal Treasury and the Reserve Bank of Australia had done nothing to curb the speculative real estate bubble that had spawned the bust, I concluded that while they and the Australian Bureau of Statistics had data on private borrowing levels, they had no data series on Australian real estate sale aggregates.

This was confirmed years later in 1988 when I inquired  with the Australian Bureau of Statistics, the Reserve Bank of Australia and federal Treasury. I was informed they didn’t collect and collate real estate sales data from the Australian States and Territories. Shortly thereafter, under the aegis of the Land Values Research Group of which I became director following the death of the late great Allan Hutchinson, I undertook the task.

RESULTS

After assessing my best estimates of total Australian real estate market sales back to 1972, I saw that real estate bubbles appear to develop when total real estate sales rose beyond 19% as measured against GDP. I nominated this index as the ‘Barometer of the Economy’, finding it offered the ability to forecast economic recessions once the index fell back below the notional 19% ‘bubble line’. The barometer indicated the Australian real estate market to lead and direct the economy.

Colleague and subsequent director of the Land Values Research Group, Dr Gavin Putland, added the annual rate of change in the index and created the Kavanagh-Putland Index. Recession was indicated within two years when the index declined by 25%.

“WE’LL ALL BE ROONED”, SAID HANRAHAN:  A JEREMIAD? 

Clearly, the study of economics is hamstrung by its failure to incorporate considerations of national real estate markets and the sheer amount of land and natural resource rents (some 50% of the economy) into analyses. It follows, therefore, that media commentary on business and economics remains pretty superficial because, although some commentators have made the connection to national real estate events, they can’t appear to be seen as ‘doomsayers’.

Some things do follow logically, however. If I were to jump off a tall building, I’ll go splat at the bottom. Therefore, I don’t see pointing to certain economic verities and proposing positive solutions to indicated failings as doomsaying.

Defenders of status quo boom-bust as ‘the natural business cycle’ aren’t defending capitalism, but rather the excesses of rentierism which regularly undermine the socio-economic fabric.

Analyses of the Great Recession/GFC failed, because they offered no solutions to regular boom-bust of which this was the latest example, and each crash seems to get worse. I concluded that it would be cathartic to provide commentary as the the current Kondratieff Wave unfolds into another possible economic depression.  If my thoughts influenced others about the current economic failure, all the better.

Although I commenced my blog on 26 August 2009, I’ve included pieces sent earlier to others, including politicians. To say they weren’t concerned about the ills of rent-seeking is understatement. This becomes more than curious, given that Australia once led the world in socio-economic reform.

“The Depression” blog explains the incredible extent to which grossly misnamed ‘real estate markets’ control and misdirect economies. There can be no real estate market until, by taxing away a significant part of the rent of land instead of taxing our incomes and purchases, we pose the question “Am I using this piece of land to which I have title, or simply speculating in its potential price?”

It’s pretty broad stuff: you’ll find no terribly sophisticated ‘safety belt’ prose here, i.e. “On the one hand it may be this, but on the other ….”

• Bryan Kavanagh

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ps. I also tweet @bryankav123