On the tweaking of negative gearing suggested by keithi, yes that’s a feasible suggestion. At the minimum, but “slowly slowly” to avoid precipitating a price crash, we need to move away from negative gearing.

And bb, credit card debt is recorded in the RBA Bulletin sheet C01hist (downloadable from the RBA website; they’ve recently improved the reporting there–and I have some work to do in my import routines as a consequence). The outstanding balance now is $43 billion, $31 billion of which is accruing interest. That’s about 3% of outstanding household private debt, but of course, it’s the component that cops the highest interest rate.

A dental surgeon once told me he spends $300K on this credit card per annum to claim the frequent flyer points. My question is how much of credit card spending is actual debt, rather than just a convienant way to purchase which is not really debt.

One is the ‘holiday home’. When you travel to SE Queensland and areas within say 2 hours of Sydney, there a many empty homes - at least most of the time. One place we had to pay an exorbitant rent for a few days on stated in the front of their visitor’s book to the effect that we were privileged to be able to use it because they don’t rent it often. This means many are claiming tax deductions yet leave the home / units empty for much of the time.

I think the tax system should tighten up on allowable deductions (negative gearing) just like ‘hobby businesses’. If you don’t rent it for at least 7 months of the year, then you don’t get the tax deductions below 50% and a shading in of deductions to 70% (the % is the proportion of the year that the property is actually rented out.
This would have the effect of shifting empty housing stock (at the main) into becoming full time accommodation at full time rents. This would apply to some of the older units and houses. This would have the effect that older Australians will be able to holiday in Australia (saving on overseas trips - balance of payments), make available more housing for people to live in - lower income people will be attracted to some of this housing as you see in areas along the Gold Coast.

This would help the housing / rental crisis, contribute to decentralization in some instances and help the Federal Budget.

We can’t forget that as Steve has pointed out, those that have benefited most from the current speculative bubble are the ones making the decisions now.

Those making the decisions can do that because the masses granted them the power through the ballot boxes. If all of us here spread the word among the masses, it will certainly help increasing the momentum from change.

This is just our hope.

Tax incentives should be given for investment in new homes or substantial renovations that will increase the economic capacity of the home. Likewise, tax incentives should be given for investment in company/business start-up or expansion, not speculation on the price of existing shares.

The main problem I see is that changes such as these will require huge vested interests to be ignored and overcome, eg. real estate agents make their living from speculation, ie. the constant turnover of property. Their role is very much diminished when new homes are built.

Likewise where would all the stockbrokers be if we suddenly adopted a system that discourages a high turnover of shares in search of capital gain in favour of long term investment in increasing the productive capacity of the nation?

We can’t forget that as Steve has pointed out, those that have benefited most from the current speculative bubble are the ones making the decisions now. We would be asking this generation to make changes in policy that will negatively impact on their “wealth” for the benefit of future generations. Having said that, it must be done.

I hope someone listens to your 2020 submission, Steve.

dyork, you make good points but I just wanted to fine-tune one of your assertions. You said that “Australia has no sub-prime crisis”.

I’m not sure that’s true. From listening around the place, especially to mortgage brokers, it seems to me that people have found many loopholes/avenues/call-them-what-you-will to borrow imprudently large amounts from the banks.

One example that comes to mind is a friend of mine, who (bless her heart) has absolutely no idea about finances. She runs a private accomodation service to homeless and troubled youth. She applied for a loan to by an old nursing home for AUD 450,000 and was approved. She reported (honestly) that she had no full time work (only part time as a waitress), no significant assets and earned no more than $20,000 pa.

The brokers flat out fudged the figures (over-valuing the property etc.) to secure the loan.

Only after me begging her not to take the loan did she decide not to take it.

If that aint subprime, I don’t know what is.

Maybe it’s truer to say ‘we have no subprime crisis…. yet’

Cheers

John

What part do corporations play in this debt riddled society which we inhabit?

Apologies for picking on individuals, but you Westfield with a CPI + 1.5% rent increase mentality, and the ability of monopolies & duopolies such as Bunnings, Coles, etc etc able to raise prices at the flick of an electronic switch. Competition in Australia is DEAD, and as such we are all being cornered into higher prices at OUR expense!

Mal

One of the reasons for speculation by ordinary folk is the lack of faith in paper money. This is highlighted in the recent speculative mania on commodities which is driving oil and food prices to the moon. House prices are also partly driven by this lack in faith as many that invest in real estate do so because they fear debasement of the currency through credit inflation. They also seek to live in houses that are often way too large, McMansions, but again do so in order to preserve their wealth.

Thus the idea of accumulating assets comes about because fiat currencies throughout history are debased first through speculative lending, as in your submission Steve, and then by government deficit spending. Thus sound monetary policy including various tax disincentives to speculation come into play as Chewman and yourself mentioned. Your made a very pertinent point Chewman regarding barriers to productive enterprises.

Contrarian, your idea of encouraging saving is fine but there must also be encouragement for investment. People seek financial security by nature but even if the RBA did its job, and optimally moderated the money supply, governments/systems cannot guarantee that a dollar today could buy the same as a dollar in 20 years time as production/GDP may fall for various reasons, lack of oil for example. Putting capital to work in stocks, bonds or starting one’s own business are risk taking ventures but important for innovation, something Steve has mentioned before - I think.

Lowering company tax, granting targeted foreign investment tax cuts to companies inwardly investing in capital projects that create sustainable new industries in this country will do a lot to ensure we as Australians continue to prosper.

You just have to look at what Ireland did in the early 2000’s. Although it wouldn’t look like a great example today with the current over investment in property, it has produced a world-class pharmaceutical and hi-tech industry base, including a young workforce that is highly educated to service it. A large barrier to entry for any country wishing to replicate such a feat in today’s climate.

Strategic Government policy on a large scale has a lot to do with future prosperity. That’s my 2020..