For those not following the Australian economy (and judging by the readership statistics of this blog, that’s most of you), there’s some huge fun to be had in observing the logical knots people are currently tying for themselves.
The problem is that the Reserve Bank of Australia has again, not lowered interest rates. The last time the RBA moved rates was in August 2016, down from 1.75 to 1.5%.
I have a real job, i.e. I’m not an economist, so whether or not the RBA is taking the correct course of action is not really something I’m qualified to comment on. However, I am able to spot blatant special pleading when I see it:
The “Kouk” is lining himself up for a job as an advisor in the next Federal government, assuming the current incumbents lose the election. This is likely to be a nice final job before his retirement. An ongoing house price crash in the two biggest cities of Australia will make this semi-retirement gig far more stressful than he’d appreciate.
The “Doc” was recently the “Chief Economist” (whatever that means; how many do they have to employ to need a chief?) at Domain, the only profitable arm of Fairfax…. until it was sold off. He was fired last year and is now pitching himself as “Chief Economist” of a company called My Property Market. The website of this esteemed company is still under construction, but I’m sure it’ll be finished soon. After all, they’ve got at least one employee now…..
One imagines the Doc is personally very heavily invested in property.
One of the unusual quirks of the Australian property market is that there is a tax incentive to run your investment properties at a slight revenue loss.
There are, of course, two minor problems with this; firstly, you’re accepting an operating loss today in the hope of a capital gain tomorrow, and secondly, the tax benefit only works while you’re drawing a salary or other income at a level that attracts the higher marginal tax rates to offset the negative gearing. Amateur property investors who get fired from their regular job are clobbered with a double whammy, in other words. Ouch.
In the words of Upton Sinclair,
It is difficult to get a man to understand something when his salary depends upon his not understanding it.