Welcome to Finance and Fury, the Furious Friday edition

A reminder of how lucky we are and why we are called the lucky country. Also, what we have to lose if we neglect to remember this

Some perspective:

  • You don’t know what you have until you have lost it
  • Taking things for granted like our power, because blackouts suck
  • What about the billions of people who don’t have power or deal with rolling blackouts daily?
  • Who would value having power more?
  • The hatred of the rich shows the lack of gratitude by those who do it
  • Countries with the highest number of millionaires/billionaires per capita have the highest GDP per capita and quality of life
    • They are wealthy (some exceptions) because they provide more value to our lives
  • We are lucky to have “rich people

But why are we called the lucky country?

  • First used in 1964 by Donald Horne – The Lucky Country
  • The origin of the phrase was negative in the context of the book
  • “Australia is a lucky country run by second rate people who share its luck”

Where did we come from?

  • Few places on earth better suited for middle-class prosperity than Australia
  • British convicts and free settlers – first government in 1788 were autocratically governed by a British Governor (mini-dictatorship)
  • Considerable unhappiness with the way some colonies were run
  • The monopoly of Rum used as currency and Australia has a history of a beer economy
  • English common law was introduced, the rights of Magna Carta and the Bill of Rights 1689 were introduced.
  • The number of settlers increased and they were given resources and land from the government. Convicts were used as Laborers
  • Land assigned back then as “Liberty Plains” is now Homebush and Strathfield in Sydney
  • Then had the gold rush and entrepreneurs came flocking in
  • Given the freedom and vast resource-rich country Australia is, it provides an ideal environment for upward mobility
  • From the pioneering ranches of the nineteenth century to the middle-class suburbs of the late twentieth

 

Has our luck actually changed?

  • Or did we change our luck?
  • Became a socially divided society like most first world countries
  • The political influence will either make it or break it
  • Bob Hawke – Legendary figure for Labour, 1983 – 1991. Did you know the Hawke Government implemented financial deregulation and reform?
  • Australian dollar float, dismantled the tariff system, privatized state sector industries, ended the subsidisation of loss-making industries and introduced full dividend imputation.
  • Did also have some popular ALP policies, with tax system reforms and introduction of Fringe benefits tax as well as capital gains tax
  • He would be considered moderate these days, if not closer to the LNP
  • A political party for the working class is now dominated by those operating outside the tangible economy
  • Some people are focused on achieving one thing and will do whatever it takes to do it
  • Pushing for climate change mitigation programs will further deindustrialise Australia
  • What about all of the people who will lose their jobs? Or those in other countries that rely on our Coal for energy?

What has changed our economy?

  • Gradual deindistrialisation stems directly from policies imposed by local governments in NSW, VIC, and QLD
  • Sydney’s manufacturing employment is down 50% in the last 2 decades
  • Politics was slowly transformed into an instrument of the bureaucracy and “progressive” gentry
  • Why are the yellow vests protesting?
  • We are sabotaging our economy, dependent on resources sales to China
  • Our commitment to renewable energy dwarfs EU, US, and China. Per capita, we have 5 times the number of renewables
  • Our energy costs are now among the highest in the world
  • ALP want to boost renewables from 20% to 50% in 2030 and the Greens want 100%
  • Ironically just as Australia is to replace Qatar as the world’s largest producer of natural gas, industrial enterprises in Australia are under pressure from high energy prices
  • Imports are replacing the closing Australian producers
  • With more taxes, energy prices, fuel, and super payments, there is less disposable income to you
  • OECD households were considered middle class, but this has dropped 1% per decade since the 1980s and now ranks below the OECD average

 

How policy affects our market?

  • How our luck may have run out?
  • Decline in Australia’s middle class resulting in the regulation of land and expenditure to promote urban density
  • 1981 to 2016 – property-ownership rates fell from 60% to 45% for 25 – 34-year-olds
  • UK has only 6% of the land urbanised
  • US has 3% and Canada has 2.1% urbanised
  • 3% of Australia is urbanised
  • Major cities in the first world have a “smart growth” model
  • Helping turn once affordable cities into some of the world’s costliest
  • According to the RBA, planning regulations are a major addition to this cost
  • Inner core of Brisbane, Sydney, and Melbourne represents 11%, 7% and 13% of the greater metro population (31%)
  • More than four-fifths of families living in single-family homes in suburban areas
  • Market manipulation can leave limited choices
  • Not enough supply to keep up with the demand adds to increased prices
  • Projections show 50% of Sydney’s dwellings will be apartments by 2050
  • 40% of Sydney 35-49 year old’s live in townhomes or apartments, which is double the rest of Australia
  • This is a market-distorting approach that doesn’t let supply free and restricts demand choices
  • The threat of a financial meltdown as urban-core property prices decline is real

 

This process is not unstoppable:

  • The issues reflect policy decisions and not our economic or social fundamentals
  • Unless something changes, we may have a bleak future
  • Urged to settle where supply is allowed, making it unaffordable and congested
  • An ever-increasing demand for government revenues
  • With a little direction, this can be undone which is what will be tackled in next Friday’s episode

 

Be honest about what got us into this problem:

  • We are a lucky country, but luck can run out when you take it for granted
  • Next episode will talk about some cautionary tales

 

Thanks for listening, if you want to get in contact you can do so here.

Also, I am doing the St Vinnies CEO sleepout in June. If you could help support that would be greatly appreciated.

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