Macro Housing Conditions – The Long-Term Outlook For The Australian Housing Market

27 09 2012


Macro-Housing conditions the long-term outlook for the Australian housing market 

by  on Sep 09, 2012

Leading Australian economist Leith van Onselen provides the 121st Annual Henry George Commemorative dinner presentation. The wide ranging discussion covers land and housing prices, bank lending, demographics and investment behaviour plus the commodity boom’s influence on incomes and thus land prices.

More of Leith’s work can be seen on



Australian Dollar to FALL

20 09 2012

There’s an institutional research report about the Australian dollar that has gained a lot of attention around the world in the past few days. It is by a boutique insto research firm called Variant Perception. Called “Australia: The unlucky country, it argues:

A substantially weaker currency in Australia is inevitable given fundamental factors. Oversized banks dependent on external financing, a bursting housing bubble and a slowing Chinese economy are all fundamental factors which are likely to weigh on the currency. As we explain, a weaker currency can either come in the form of the RBA reducing interest rates or a balance of payment-like crisis in which foreigners pull funding from the banking sector. In both cases, the RBA would likely have to expand domestic liquidity substantially to prop up the banking system.

  • Australia is a classic case of the Dutch Disease. The Dutch Disease denotes the loss of competiveness in the tradable manufacturing and industrial sector as a result of a resource/commodity boom which leads to an overvalued real exchange rate. In Australia, the mining sector has crowded out almost all other sectors of the economy and also funnelled credit and liquidity into a housing bubble in the real estate sector.
  • Australia net external debt levels resemble those seen in the European periphery; the currency is fundamentally vulnerable. Australia has been running a persistent current account deficit since 1980 and the country’s negative net international investment position is one of the largest in the world. On this background, the strong currency makes no sense and fundamentally the currency is very vulnerable to capital flight from the banking system.

Find the rest of the article on:

NZ’s financial stability “very worrying” – JB Were

17 09 2012

7:15 PM Monday Sep 17, 2012

New Zealand should be “very worried” about the stability of the country’s financial system and active government support is required to save key regional industries, such as Solid Energy’s Spring Creek coal mine, says a top strategist for Australasian broking house JB Were.

Bernard Doyle, head of strategy in New Zealand, also argues the RBNZ should intervene to drop the value of the kiwi dollar.

Prime Minister John Key dismissed concerns about an unstable financial system as “nonsense”, but Doyle’s comments come at a time of growing concern about the high value of the New Zealand dollar.

“The RBNZ is one of the few central banks running relatively orthodox monetary policy,” said Doyle in a research note. It was a “rarity in the global economy,” with positive interest rates and no policy to print money.

“Unfortunately, in a world where the major central banks are breaking all the rules, this is not an advantage,” he said.

The government should also be willing to support key regional industries, in a move similar to its creation of the nine-day fortnight during the 2008 global financial crisis to assist Fisher & Paykel Appliances, now subject to a Chinese takeover bid, to survive.

“Spring Creek will be an important precedent,” said Doyle. The mine was a major employer and contributor to the fabric of the West Coast economy, while volatile global coal prices make “long production decisions particularly difficult.”

Key said the Cabinet expected a report on Spring Creek from the new Solid Energy chairman, Mark Ford, within a week.

Doyle’s commentary comes one week ahead of the departure of Alan Bollard as governor of the RBNZ, to be replaced by former World Bank managing director Graeme Wheeler, and as opposition parties clamour increasingly for a change in monetary policy settings to ease the high kiwi dollar.

Doyle says the RBNZ has been “playing with a straight bat” on its inflation targeting while the US Federal Reserve prepares to print “an unlimited quantity of money”, the Bank of England is “printing money and providing cheap loans”, and the European Central Bank is “making cheap money available”.

Meanwhile, Asian central banks appeared to be targeting relatively stable developed economies like New Zealand and Australia to diversify their foreign reserves holdings, pushing the kiwi dollar up.

Most controversial was the central bank of the financial secrecy and tax haven Switzerland, which had been managing its currency against a “hard ceiling” for the last year.

In New Zealand, current monetary policy settings were “importing other people’s problems.”

Doyle says the RBNZ should cut the benchmark official cash rate to below its current historic low point of 2.5 per cent, use new tools to lean against the potential for lower rates to create an unwanted housing boom, and put “soft caps” on the New Zealand dollar.

Doyle suggests the RBNZ should accumulate New Zealand dollars at various price points, from 82.5 US cents through to 90 cents, at a time when the local unit has been consistently trading in recent days above 82.5 cents, and stood at 82.80 cents late today.

Doyle said the combined effect of Norske Skog halving production at its Kawerau pulp and paper mill, the possible closure of Spring Creek and the threat to the Rio Tinto aluminium smelter were examples of an unstable post-global financial crisis world.

In this environment, some industries would be more reliant on government support than in the past.

While intervention “should feel unnatural to government…passive government in the post-GFC world is equally dangerous.”

Doyle likened a deal for Spring Creek to the US government’s temporary bail-out for the automobile industry in 2009.

– BusinessDesk NZ Herald


What the Economic Crisis really means to you and what you can do about it?

7 09 2012

Published on Aug 29, 2012 by
Doing It Ourselves aims to broaden understanding of the debt crisis and peak resources and encourage action for the sake of personal preparedness, happiness and ethical living. This animation sums up the key challenges facing our global society of credit crisis and resource scarcity and describes a path we can take to a happier life, now and in the future! Find out more at


Errors Commits NZ To Future US Wars

4 09 2012

Mr “Banker” Key does it again! As if selling New Zealand assets to foreigners is not enough, he takes matters to another level in true ‘elite’ style…

Wake up Kiwiland..Mistake, gaff…I think NOT!