All posts by Bryan Kavanagh

I'm a real estate valuer who worked in the Australian Taxation Office (ATO) and Commonwealth Bank of Australia (CBA) before co-founding Westlink Consulting, a real estate valuation practice. I discovered, by leaving publicly-generated land rents to be privately capitalised by banks and individuals into escalating land price bubbles, this generates repetitive recessions and financial depressions. We need a tax-switch: from wages, profits and commodities onto economic rents/unearned incomes, if we are to create prosperity and minimise excessive private debt.


David McWilliams
David McWilliams

Those who’ve not caught up with David McWilliams’ insightful Irish financial journalism might remember his recent television series “Addicted to Money”.  The latest post on his website is a thoughtful deconstruction of the absolutely ludicrous hoops through which Ireland is jumping, presumably for the sake of ‘saving face’ and doing ‘what is expected of it’ [or rather, expected of its taxpayers and inhabitants by the international financial community for the next generation or so].

I’m much more impressed with McWilliams’ alternative solution.


South Island New Zealand

New Zealanders are debating the introduction of a land tax to counter their savage decline into the GFC.  Of course, it’s arguable that if they already had a significant land tax in place, their economy wouldn’t have experienced the financial collapse caused by their bout of speculation, and would have generated more real wealth instead.

All the old property lobby canards are already being trotted out:  What about the ‘poor widow’? [She needn’t pay the land tax and can put it as a charge on her estate.];  It’s a wealth tax! [Er, yes, it’s based upon the value of the land the community has ceded to your use, and those with more valuable land will pay more than those with less valuable land, or  none. This is unfair? ]

Go for it New Zealand!  The main question is will Australia and the US allow you to go for it – because the first country that raises itself out of the economic mire in this fashion will stand out like a beacon from all the others – and they’ll have to follow.  But Australia and the US both heavied you over your ‘No nuclear ships’ policy and you stood tall.  So, you’re more likely to introduce it than we are in Australia.  This could get very interesting!



As the negative fallout deepens from the government roof batts and solar panels stimulus saga, the question becomes whether Peter Garrett will survive as Minister for the Environment, Heritage and the Arts.  It seems to confirm that  governments are pretty useless in areas other than defence, law and order and public infrastructure.

What about education, health and social welfare, do I hear you ask? I’d suggest that governments have been drawn into these areas simply as a safety net from the pathologies that will always flow from aberrant taxation.  Think about it.  May not the fact that government has been drawn into the business of education, health and social welfare signify that too many people have paid too many taxes  over three levels of government for too long in Australia, and that this acts to destroy many other possibilities and opportunities?

Maybe we should more rightly conclude that ‘taxation and bloated governments destroy’?  In my opinion, this is a much more productive way in which to consider the world’s failing economies.  ‘The only certainty in life is death and taxes’ could be re-written ‘the only certainty in life is death and land rent’ because, whereas taxes can be abolished, land rent cannot.  It is either collected privately, publicly, or both.

John McRobert has made a great contribution in educating Australians to the devastation taxes wreak upon the Australian economy.  While his suggestion of a 2% tax on spending in Online Opinion yesterday would be a vast improvement on what we have today, I was inclined to respond:

“John McRobert has long displayed an excellent understanding of the vast damage wrought upon the Australian economy by an incredibly perverse taxation ‘system’. The role of taxation on industry and thrift in delivering the world into the GFC is undoubted.

However, I am less seized by his spending tax to replace the multitude of taxes with which we’ve been shackled. How would this deal with the undergound cash economy – or with barter? Also, although John’s proposal is infinitely superior to what we have now, a tax on spending will still tend to inhibit spending to some small extent.

Nor is his spending tax likely to curb property bubbles which is clearly the other half of the reason we’re having this GFC. A tax on land values would do all John McRobert is seeking and then some. It also addresses housing unaffordabilty for this and future generations of Australians by putting paid to the property speculation industry.”


I’ve showed here and here that real wages increases actually topped out at the outset of the 1970s, at the peak of the Kondratieff Wave, and have consequently headed downward into the current depressionary K-wave trough.

Had we drawn more revenues from land immediately post WWII, and less from production and industry, the real wage increases and prosperity up to 1972 would have been even greater.  And had we captured only half our land rent since 1972, my report “Unlocking the Riches of Oz” demonstrates that Australia’s GDP would now be more than $2 trillion per annum (double what it is today).

If we took the more natural approach to revenue raising, we’d be able fend for ourselves much better without government intervention. But now, like the FIRE sector, government has come to believe that the world revolves around it when, as with the FIRE sector, government has grown to pathological proportion at the expense of real wealth creation, whether it be of a Liberal (conservative) or Labor (liberal) stripe.

When we come to see political parties, government and the FIRE sector for what they are, the primary ingredients of the GFC, then we might be able to remedy it; but not before.

In the meantime, governments of all persuasions will continue ‘stimulating’ economies, bailing out banks and real estate markets while, as it’s being done in the eye, an ill-informed public clings in misguided hope to one or other of the impotent political parties for a salvation that aint going to come.

The best stimulus any government can apply right now is to abolish taxes and capture its land rent.  It’s revolutionary, but it works. Unfortunately, neither the Right nor the Left accept this solution, because it’s only the Georgist school of economics that advocates it.  Interesting that it was predominantly Georgist economists who called the GFC.  Maybe they’ve studied and learnt the lessons of history better?



As if to underscore why income tax must be abolished, Australians now learn the tax man’s been given the power to break into your home. People once resisted taxes upon their earnings, equating it to theft, but we’ve long surrendered the point to powerful interests and errant policy makers.

Income tax was introduced in the United States as a temporary WWI measure.  Similarly, the Commonwealth of Australia assumed the power from the states in WWII.  But, like geese, we’ve come to accept that being taxed on our income is as natural as night and day. Forget the fundamentally intrusive nature of income taxes, we’ve got to get revenue from somewhere, and politicians have come to see the incredible income tax bureaucracy as a great source of non-productive employment – a bit like the FIRE sector – and it doesn’t offend the wealthy.

For those with smart lawyers and accountants, income taxes remain relatively easy for the wealthy to avoid and evade. Fred Harrison’s excellent book, “Ricardo’s Law – House Prices and the Great Tax Clawback Scam” provides insight into how the wealthy claw back every cent they’ve ever paid in income taxes, and then some, through increases in the land value of their real estate holdings.  It goes unremarked that this privilege is unavailable to renters and those whose only real estate asset is their home.

The privacy intrusion and unfairness accompanying income taxes are, of course, done away with when revenues are drawn mainly from publicly created land values. But land-based revenue remains low on purpose – so as not to threaten the same power and privilege that has been permitted to widen the rich-poor gap and deliver us the GFC.

C’mon, off those sofas and back onto your hind legs, people!


~~~~~~~~~~~~~~~~~~ What we take, NOT what we make! ~~~~~~~~~~~~
~~~~~~~~~~ What we take, NOT what we make! ~~~~~~~~


My colleague Dr Gavin Putland’s work is so compelling, sometimes I should step aside from my blog and invite others to take a peep at it.

Gavin sums up why the GFC occurred and what we need to do about it here. It might sound technical, but it’s worth reading, because it says it all. Policy makers take note:-

“A simple equation involving price, rent, appreciation, interest and tax predicts that for realistic values of the parameters, the price of land should be infinite — or, if finite, far in excess of lenders’ capacity to supply credit and of borrowers’ capacity to service loans. In practice this means land prices will be bid upward until the financial system breaks, causing a credit crunch whose effects flow through to the rest of the economy. The associated “correction” in land prices, perhaps combined with financial reforms ostensibly designed to prevent any recurrence, eventually restores confidence. But unless the parameters in the equation are permanently changed, the recovery merely sets the stage for the next crash. The only parameters that can be permanently changed are those pertaining to tax. Paradoxically, the indicated tax reform would enrich property owners: by removing perverse incentives and encouraging investment in infrastructure, it would increase capacity to pay for land, so that the new (stable) price trajectory would be higher than the present (unstable) one. The alternative to such reform is a continuation of periodic financial crises and recessions.”

Read more here …

Whither Australian real estate?

BMW Edge Theatre


I attended the joint Australian Property Institute-Real Estate Institute of Victoria “State of the Market” seminar yesterday in the inspiring BMW Edge Theatre at Melbourne’s Federation Square.

I often find myself cringing throughout hubristic keynote speeches delivered by this or that bank chief economist at these six-monthly professional gatherings. As the GFC slowly loomed onto the horizon, they continued to regale us with charts and data purported to proclaim how strong and invulnerable the Australian economy is. Never a mention of the incredible $2.4 trillion real estate bubble into which Australian real estate had developed, nor of the $670 billion or so in debt that will have to be wiped off, making our big four banks tremble at the knees.

At a dinner function about a year ago, I mentioned to Chris Plant, Victorian President of the Australian Property Institute,  that I usually have to grit my teeth throughout many of these episodes, reminding myself that I need my continuing professional development points to total at least 20 by the end of the year. I’ve found there’s never a heterodox view permitted within the real estate industry, and the “State of the Market” presentations are upbeat to a fault.

However, while Westpac’s senior economist, Matthew Hassan, didn’t mention Australia’s real estate bubble (the biggest in the world incidentally), he gave an excellent presentation yesterday. It was laced with a number of meaningful charts, clearly explained. This can be no V-shaped recovery, Matthew suggested: there is unsustainable debt to come to light in the US which virtually ensures we may expect a ‘double-dip’, or ‘W-shaped’ recovery.

Hallelujah, Matthew! You said it like it is, and the conclusions you drew from your research seemed pretty solid to me. And you know what? (as Keven Rudd would say), I’m sure the packed audience appreciated your research and lack of BS.

Tony Crabb, Director of Investment Strategy at Savills, gave an optimistic account of the outlook for commercial, retail and industrial property in his inimitably smooth fashion, while Tim Church, head of real estate at UBS, opined that Australian real estate investment trusts seemed primed to climb back out of the hole into which they’d recently descended.

When I couple my barometer of the economy with the data presented by Matthew Hassan, however, as much as I’d like to believe Tony Crabb and Tim Church’s optimism,  I have a feeling they were wearing the industry’s usual rose-coloured specs yesterday.

Peter Garrett responsible for four deaths?

Peter Garrett
Peter Garrett

I loved Midnight Oil’s “Beds are burning” both for its great anthemic quality and for the line “the time has come to say fair’s fair, to pay the rent, to pay our share“.  It’s a pity it only related to our aboriginal brothers and sisters, when it could have been employed in the broader sense, to include us all.

On radio 3AW this morning Neil Mitchell held the “Oils” lead singer, now Minister for the Environment, Heritage and the Arts, Peter Garrett, responsible for the deaths of the four men who died installing the roofing insulation provided as part the federal government’s stimulus package. Implementing the program hastily and with insufficient training was destined to be extremely risky, if not disastrous, as it has proved to be.  As the responsible minister, maybe it could be said that Peter Garrett was ultimately responsible for the four deaths?

Neil Mitchell
Neil Mitchell

On exactly the same reasoning, Neil Mitchel, I trust you accept responsibity for the deaths of those who die for lack of daily wherewithal because of your publicly aggressive opposition to land tax?  When the ‘Harvey Report’ into Victorian state business taxes recommended reforming the land tax system you said on 28 February 2001:  “I think we (3AW) have a job … to convince the government not to do it!” Every year since then you have sympathetically taken calls from listeners claiming the state land tax to have affected them unfairly. Nevertheless, for all its distortions caused by the threshold, exemptions, multiple rates and aggregation provisions, most of which the Harvey Report had recommended reforming , it remains a fairer tax than any other state tax.  Had it been reformed along the lines of the Harvey Report recommendations, but also extended to all residential properties and increased significantly in order to replace Victoria’s share of the GST, payroll tax and stamp duty, it is arguable that Victoria’s state product would currently be double what it is today.

The reasoning behind this statement is carefully explained in “Unlocking the Riches of Oz” showing that Australia’s GDP would now be about $2 trillion instead of $1 trillion, had we captured half our publicly-generated land rent since 1972.  In other words, the deadweight costs of the taxation of thrift and industry and bursting real estate  bubbles are in fact costing Australians some $1 trillion dollars a year.  That’s an incredible amount.  If the Australian public were also to get a better return (than the crimnially low 10 cents a tonne) for the natural resources we ship overseas, it is quite arguable that most taxes could be scrapped, and that every man woman and child could receive a citizens’ dividend that would abolish the need for pensions and superannuation.  I hope people might peruse the reasoning accompanying the spreadsheet figures in “Unlocking the Riches of Oz” before they were to dismiss this apparently exaggerated claim.

So, I agree that there is, unfortunately, a sense in which Peter Garrett is responsible for the four deaths of the roof insulation installers. But I also consider that your spreading disinformation on land tax has done similarly, Neil. At a minimum, it has acted to reduce Victoria’s gross state product to favour real estate speculation, and is at least partly responsible for Victoria’s decline into the GFC.

A big call?  Maybe.  But yours this morning on Peter Garratt was no less so.

RBA to stop bubbles?

Glenn Stevens
Glenn Stevens

The governor of the Reserve Bank of Australia, Glenn Stevens, now considers central banks should be more proactive in dealing with dangerous asset bubbles.

I made the same suggestion to the previous governor, Ian Macfarlane in “The Coming Kondratieff Crash” in 2001, but Mr Macfarlane sought to place the blame for the financial threat well and truly outside his own backyard, saying in a talk to the Economic Society on 10 July 2001:  “The major threat to our future growth prospects now comes from the international economy, not from domestic factors.”

Mr Macfarlane and others will undoubtedly claim that the GFC did indeed emanate from overseas,  but this would be to ignore the case made by my colleague Dr Gavin Putland that data show recessions usually begin at home.

Glenn Stevens’ statement does merit a hearing from our policy makers: but it won’t get it.  It never does.  Nor would ratcheting up interest rates be the most appropriate policy.

Don Mercer
Don Mercer

Stevens’ earnestness reminds me of a statement made by Don Mercer when he took over as CEO of the ANZ Bank from Will Bailey in 1992.  Surveying the rubble surrounding him following the bursting of the 1989 real estate bubble, Mercer bravely declared that we had learned lessons from the ensuing recession that would see to it that such crashes would never occur again.

Maybe Australia’s recession hasn’t happened yet, Don, but it is only a matter of time.  Whilst messrs Rudd and Swan congratulate themselves for having forestalled an Australian financial collapse by means of their stimulus package, they might contemplate the possibility that their action was premature, because our real estate bubble hadn’t even burst, and that, in fact, their pre-emptory action acted to re-stimulate Australia’s incredible property bubble.

It’s implicit in Glenn Stevens’ statement that he believes early action on interest rates might choke off future bubbles. It could help a little, Glenn, but didn’t you notice that property bubbles also developed during the high interest rate regimes of the 1970s and 1980s?

No, I’m afraid the ONLY way to put an end to property bubbles, Glenn, is for policymakers and our elected representatives to ensure that a man’s home (or, more properly, his block of land) is no longer his tax haven. That is, tax policy should encourage industry and destroy real estate speculation, not vice versa.

Central bankers meet secretly in Sydney


It has come to my attention from a usually unreliable source that the secret meeting of central bankers convened in Sydney for today and tomorrow has come together to discuss my blog.  Apparently, most central banks consider that my assertion that we’re having this GFC because tax systems around the world have for too long been slaughtering wage and salary earners and rewarding real estate speculators is valid.

My source, who shall remain nameless, believes that the final paragraph of the letter calling the meeting posed the question:  “If Kavanagh is correct that finance, insurance and real estate is not the hub of the economic universe as we had previously thought, and if we are to end issues involving sovereign debt, then maybe tax systems do need be altered to send the right signals?”

Were this most unreliable rumour found to be true, the central bankers’ Sydney initiative would deserve international support.



Phew! Good to hear from Davos 2010 last week that things are looking up again. A ‘fragile’ recovery is underway it seems. Looks like I was wrong and will have to pull the plug on this blog!

Not really.  What a cacophony of misbegotten ideas to set world economies aright! Try as I might, I didn’t hear one suggestion that came close to solving the world’s social and economic problems, notwithstanding the presence of Sharan Burrow, the Australian president of the International Trade Union Confederation.

Davos didn’t properly define the cause of the collapse, so it stands to reason that it can’t possibly have a valid response to it.

Banks got a bit of a hammering. While they can’t hold their heads high over their part in the GFC (and many bankers were conspicuously absent from Davos 2010), might I suggest we dig a little deeper than the role bank credit played in the collapse?

Was it banks that caused the decline in real wages ever since 1972, Sharan? No, it was rather the combination of increasing taxation and increasing land prices.

People understand how taxes reduce net incomes: but land prices?  That’s a bit more difficult to explain but, trust me (or else take a peep at Unlocking the Riches of Oz again), there is necessarily an inverse relationship between escalating land prices and real wages. It’s also explained by the equation P = R + W + I (production is the sum of publicly generated land rent, plus private wages and the return to private capital).

So, if real wages are declining and real land prices are heading moonward, OF COURSE people had to resort to taking on greater and greater levels of debt!

Hey, Davos! Here’s a hint: maybe we can create effective demand, pay down debt and abolish impossible land prices if we capture more land rent for revenue, and pay less taxes on our productive efforts! So, stop patronizing us with stupid, interfering solutions! Get out of the way, and out of our pockets!

But that’s not all!  Listening to the entertaining breakfast team of Ross Stevenson and John Burns on radio 3AW this morning, I learn that the superannuation industry isn’t happy taking only 9% of Australians’ wages to make some asset or other favourite in their speculative binges with our billions. They want more – maybe 12%-15%! So, that’s taxes taking, what, a third?; mortgages taking a third; super taking a sixth? I guess that still leaves us another sixth on which to live (i.e. for food, clothing, entertainment, etc.)?

The really sad part is that when Ross and John ran a survey on whether we should pay more, as the super funds are seeking, one third of the respondents said ‘yes’! Sigh!  When will we be left alone to retain the salary we have earned – without the government and super funds demanding we give more and more of it to them?  When will we begin to stand on our hind legs about this enormous con! There’s a natural source for government revenue, fellas! Try publicly-generated land rent!  [Sorry, I forgot: that’s a ‘no-no’!]

Oh!  And I just heard on the news that the federal treasurer, Wayne Swan’s got plans to assist with Australia’s ageing society.  [Isn’t it great the government’s always coming up with these ideas to spend our money?]  Hey! It doesn’t include getting out of our pockets so we can look after ourselves, does it, Wayne?

Edward Gibbon Wakefield
Edward Gibbon Wakefield


We know that taxation destroys, and that land rent conserves, but policy makers nonetheless favour taxes on production, thrift and exchange, incorrectly stating “There’s not enough rent”.

It’s not stretching the truth to say that current revenue regimes were designed by sociopaths. Here’s a story that might reinforce this proposition.

Edward Gibbon Wakefield’s dad, also Edward, was a rotten father. Oh, yes, he hung around philosophising with John Stuart Mill’s dad, James Mill, but, what with that and his real estate business and his farm, he had no time at all left for young Edward Gibbon.

By age 15, Edward Gibbon Wakefield fulfilled every criterion for a sociopath.  He’d been kicked out of three schools. His mother, not being able to control him, had sent him to his stronger-willed grandmother. When Edward was 11, grandma Priscilla wrote back in 1807: “my mind painfully engaged in the perverseness of dear little Edward – his obstinacy if he inclines to evil terrifies me“. His “pertinacious inflexible temper makes me fear for his own happiness and of those connected with him” He “has a mind that requires delicate handling“.

Whilst in Newgate prison for marrying the second (or was it the third?) heiress he had abducted, Wakefield had this great idea! You could keep the masses genuflecting to the landed gentry if they couldn’t afford the price of a block of land! All you had to do was to set the land at “sufficient price” and they were your slaves! So, you didn’t need convicts in new colonies if you had tax-paying wage slaves who couldn’t afford a block of their own!

The idea was enthusiastically taken up in founding the new, gentrified colony at South Australia.  Although it worked up to a point, it was a bit of a pity that workers were thrown into unemployment within the year and that economic depression ensued.

Nevertheless, Adelaidians still erected a monument to Wakefield and named roads after him, because he was part of the landed gentry, you see, and he foreshadowed the very system to which we adhere today: i.e. let landowners line their pockets with the real wages stolen from those who work and produce. The middle class won’t even understand the process, or, for that matter, why recessions always follow the bursting of land price bubbles.  Just ask all those who attended Davos last week.