Unintended consequences are governments’ only consequences

Anyone who has previously met a human might be forgiven for reading the following quote and laughing like a drain:

There is no better time to rid the states of inefficient taxes that hold back economic growth and I am talking stamp duty and payroll taxes,” Mr Perrottet said.

“We are not going to tax our way back into prosperity. Increasing or decreasing taxes is not tax reform.”

When asked which state tax was at the top of his reform agenda Mr Perrottet replied: “Stamp duty. I’ve raised it before, I think we need to get rid of inefficient taxes.”

Stamp duty, also known as transfer duty, taxes the sale of all properties in NSW and last year raised $7.5 billion for the state’s coffers. After payroll tax, stamp duty is the biggest source of taxation revenue for the states.

If you listen very carefully, you can hear the sound of a thousand Estate Agents each unwrapping a shiny new razor blade and settling into a final warm bath, whilst cradling a single malt.

Bill’s Opinion

I can’t read Dominic Perrottet’s mind, but I’m assuming his motivation for foreshadowing the idea of a replacement of Stamp Duty was to show the public the government was actively pursuing ways to get the economy moving. After all, “something must be done” is all the encouragement politicians need to hear to get on with fiddling with complex systems they don’t fully comprehend.

A quick dekko at the CV of the NSW Treasurer, Dominic Perrottet, tells you everything you need to know; his last “real” job was when he was 28 years old. Saying that, the profession was lawyer, so one assumes he’d only managed to gain three of four years post graduation and law school before he was dropped into a safe seat.

Let’s face it, he’s a career politician with practically zero experience in the real world.

If he had even the mildest understanding of how humans make important life decisions such as buying property, he’d have kept his mouth firmly shut until the legislation had been drafted, agreed and had a good chance of being passed into law.

Instead, he’s just told everyone who was considering buying or selling property in NSW that a very expensive tax might be replaced or even removed at some point in the near future, so it might be regrettable to go ahead with the transaction until clarity has been provided.

In related news, the chart has been updated.

Does anyone want to make a prediction on what the next 6 months might look like?

Orange line down, flat or up?

The blue line has never dropped below 0.2% since the 1970s, by the way.

2 Replies to “Unintended consequences are governments’ only consequences”

  1. You’re going to need allow for both Orange and Blue to go negative simultaneously.

    Mass deleveraging and defaults reduces money supply and credit growth. That’s a fairly realistic scenario if the world lockdown creeps into July, August.

    Most politicians are trained lawyers before getting into politics, then they study marketing or behavioural economics experientially.

    I’m getting used to the style of market research they use. Put a policy idea in the media and gauge the reaction. Put an idea up the flag pole and see if they salute it.

    People may become worried if they think they’ll actually follow through

    1. “You’re going to need allow for both Orange and Blue to go negative simultaneously.”

      Do you really think CoreLogic is going to accurately record the downside?

      Low volumes are going to give them a massive “out”, as we’ve already seen with their ridiculous “Hedonic Daily” print (for uniformed readers, they publish “daily” house prices. No, really!).

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