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State of the Market. Have we been here before?. Bryan Kavanagh Land Values Research Group. Total Real Estate Sale Prices: Five Major Australian States. 80. New South Wales. 60. Queensland. billion dollars. Victoria. 40. Western Australia. 20. South

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slide1

State of the

Market

Have we been

here before?

Bryan Kavanagh

Land Values Research Group

slide2

Total Real Estate Sale Prices:

Five Major Australian States

80

New South

Wales

60

Queensland

billion dollars

Victoria

40

Western

Australia

20

South

Australia

0

1986

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

2005

Source: State government departments

slide3

Total Real Estate Sale Prices:

Tasmania, NT and the ACT

4

ACT

Tas

3

billion dollars

2

NT

1

0

1986

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

2005

Source: State & Territories

slide4

Total Australian real estate sale

prices (at current prices)

2004

$245.04 bn

bn

250

200

150

Increased 3 times since 1996

1989

$87.7 bn

100

1981

$26.90 bn

1996

$75.52 bn

1973

$10.65 bn

50

0

72

74

76

78

80

82

84

86

88

90

92

94

96

98

'00

'02

'05

slide5

Total Australian real estate sale

prices (in 2005$ bn)

2004

$251.1

1989

$140.6

1973

$77.501

72

74

76

78

80

82

84

86

88

90

92

94

96

98

'00

'02

'05

slide6

Total number of Australian

real estate sales

2003

766934

thousands

1988

694106

750

1973

651588

1994

579678

1984

579145

long increase

from 1996

interrupted

only in 2004

650

1981

556352

1976

501997

550

1986

508473

1990

486812

1983

483399

1996

475898

450

1974

406643

1978

382808

350

1972

74

76

78

80

82

84

86

88

90

92

94

96

98

'00

'02

'04

the economy s barometer
The Economy’s Barometer

total real estate sales prices divided by GDP

%

30

25

20

15

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide8

The Economy’s Barometer

total real estate sales prices divided by GDP

%

30

1973

comm/ind

peak

25

20

15

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide9

The Economy’s Barometer

total real estate sales prices divided by GDP

%

30

1973

comm/ind

peak

25

20

15

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide10

The Economy’s Barometer

total real estate sales prices divided by GDP

%

30

1973

comm/ind

peak

25

1981

residential

peak

20

15

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide11

The Economy’s Barometer

total real estate sales prices divided by GDP

%

30

1973

comm/ind

peak

25

1981

residential

peak

20

15

1982-'83

recession.

Fraser

government

defeated

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide12

The Economy’s Barometer

total real estate sales prices divided by GDP

%

1988/89

comm/ind

peak

30

1973

comm/ind

peak

25

1981

residential

peak

20

15

1982-'83

recession.

Fraser

government

defeated

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide13

The Economy’s Barometer

total real estate sales prices divided by GDP

%

1988/89

comm/ind

peak

30

1973

comm/ind

peak

25

1981

residential

peak

20

15

'91-92 recession.

Hewson-led

opposition loses

'unloseable'

1993 election

1982-'83

recession.

Fraser

government

defeated

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide14

The Economy’s Barometer

total real estate sales prices divided by GDP

%

1988/89

comm/ind

peak

30

1973

comm/ind

peak

Queensland boom,

and end of distress sales from late 1980s boom in other States

25

1981

residential

peak

20

*

15

'91-92 recession.

Hewson-led

opposition loses

'unloseable'

1993 election

1982-'83

recession.

Fraser

government

defeated

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide15

The Economy’s Barometer

total real estate sales prices divided by GDP

%

1988/89

comm/ind

peak

30

1973

comm/ind

peak

Queensland boom,

and end of distress sales from late 1980s boom in other States

25

1981

residential

peak

20

15

'91-92 recession.

Hewson-led

opposition loses

'unloseable'

1993 election

Keating federal

& Goss Q’land

governments

defeated in 1996. Queensland recession only

1982-'83

recession.

Fraser

government

defeated

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide16

The Economy’s Barometer

total real estate sales prices divided by GDP

2004

residential

peak

%

1988/89

comm/ind

peak

30

1973

comm/ind

peak

Queensland boom,

and end of distress sales from late 1980s boom in other States

25

1981

residential

peak

20

15

'91-92 recession.

Hewson-led

opposition loses

'unloseable'

1993 election

Keating federal

& Goss Q’land

governments

defeated in 1996. Queensland recession only

1982-'83

recession.

Fraser

government

defeated

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide17

The Economy’s Barometer

total real estate sales prices divided by GDP

2004

residential

peak

%

1988/89

comm/ind

peak

30

1973

comm/ind

peak

Queensland boom,

and end of distress sales from late 1980s boom in other States

25

1981

residential

peak

20

15

'91-92 recession.

Hewson-led

opposition loses

'unloseable'

1993 election

Keating federal

& Goss Q’land

governments

defeated in 1996. Queensland recession only

1982-'83

recession.

Fraser

government

defeated

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

let s define a bubble
Let’s define a bubble ...

2004

residential

peak

%

1988/89

comm/ind

peak

30

1973

comm/ind

peak

Queensland boom,

and end of distress sales from late 1980s boom in other States

25

1981

residential

peak

20

19%

'bubble' line

15

'91-92 recession.

Hewson-led

opposition loses

'unloseable'

1993 election

Keating federal

& Goss Q’land

governments

defeated in 1996. Queensland recession only

1982-'83

recession.

Fraser

government

defeated

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide19

The Economy’s Barometer

total real estate sales prices divided by GDP

2004

residential

peak

%

1988/89

comm/ind

peak

30

1973

comm/ind

peak

Queensland boom,

and end of distress sales from late 1980s boom in other States

25

1981

residential

peak

20

19%

'bubble' line

15

'91-92 recession.

Hewson-led

opposition loses

'unloseable'

1993 election

Keating federal

& Goss Q’land

governments

defeated in 1996. Queensland recession only

1982-'83

recession.

Fraser

government

defeated

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide20

The Economy’s Barometer

total real estate sales prices divided by GDP

2004

residential

peak

%

1988/89

comm/ind

peak

30

1973

comm/ind

peak

Queensland boom,

and end of distress sales from late 1980s boom in other States

25

1981

residential

peak

20

19%

'bubble' line

15

'91-92 recession.

Hewson-led

opposition loses

'unloseable'

1993 election

Keating federal

& Goss Q’land

governments

defeated in 1996. Queensland recession only

1982-'83

recession.

Fraser

government

defeated

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide21

The Economy’s Barometer

total real estate sales prices divided by GDP

2004

residential

peak

%

1988/89

comm/ind

peak

30

1973

comm/ind

peak

Queensland boom,

and end of distress sales from late 1980s boom in other States

25

1981

residential

peak

20

19%

'bubble' line

15

'91-92 recession.

Hewson-led

opposition loses

'unloseable'

1993 election

Keating federal

& Goss Q’land

governments

defeated in 1996. Queensland recession only

1982-'83

recession.

Fraser

government

defeated

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

stock markets don t drive economies
Stock markets don’t drive economies ....

1.25

ASX

GDP

2

1.20

1.8

1.6

1.15

ASX growth

1.4

1.10

1.2

1

1.05

GDP growth

0.8

0.6

1.00

86

88

90

92

94

96

98

'00

'02

'04

real estate markets do
... real estate markets do

1.25

1.7

real estate sales growth

1.20

1.5

1.3

1.15

1.1

1.10

0.9

1.05

GDP growth

0.7

1.00

1972

74

76

78

80

82

84

86

88

90

92

94

96

98

'00

'02

'04

gdp growth

The economy’s barometer

GDP growth

%

%

30

25

25

20

20

15

15

10

10

5

5

0

0

1972

1982

1992

2002

slide25

The economy’s barometer

GDP growth

%

%

30

25

25

20

20

15

15

10

10

5

5

0

0

1972

1982

1992

2002

slide26

Land value/GDP: Australia

Australia’s population increased 1.36 times

(from 15.0 million to 20.4 million) over the period 1984 to 2004

Real GDP increased 1.86 times

Real land values increased 3.2 times

2.5

2

1.5

1

0.5

0

1911

1924

1932

1944

1953

1972

1976

1989

2004

From Terry Dwyer’s The Taxable Capacity of Australian Land and Resources

Australian Tax Forum, Vol 18 No. 1, 2003

the charter of the reserve bank of australia is to ensure
The charter of the Reserve Bank of Australia is to ensure ...
  • (a) ... the stability of the Australian currency;
  • (b) ...the maintenance of full employment in Australia; and
  • (c) ...the economic prosperity and welfare of Australians
  • It breaches its charter each time it permits a bubble, such as the recent housing bubble, to develop
slide29

So our barometer

is indicating that

“Mr Housing

Bubble” is

about to mock

the RBA once

again

slide31

If cartoonists can joke about it ....

... Can’t the RBA or APRA fix it?

slide32

If cartoonists can joke about it ....

... Can’t the RBA or APRA fix it?

APPARENTLY NOT!

slide36

Neo-classical economics a scandal?

  • "Land-based revenue systems are inappropriate because we are no longer agricultural economies”
  • There is a general ignorance of the dynamics between the annual value of land and the economy - and the amount of economic rent is usually grossly understated, eg. ...
  • “Henry George’s ...theory still has it adherents, likeable and mainly older people who overlook the fact that land rent forms such a small percentage of national income: that 2% is nothing compared to the present tax percentages, which are around 30.” - Jan Pen (Groningen Uni) in Income Distribution
slide37

The heartening story of growth of

publicly-created resource rents ....

100%

9%

Resource rents

31%

80%

60%

32%

85%

40%

20%

Based upon Dr Terry Dwyer,The Taxable Capacity of Australian Land and Resources

in Australian Tax Forum, Vol 18 No. 1, 2003

0%

1911

1924

1934

1944

1954

1964

1974

1984

1994

2004

Land Values Research Group 2004

slide38

... degenerated into the privatisation of rents

and the levying of taxes to such an extent ...

100%

9%

Resource rents

6%

31%

80%

taxes

60%

31%

85%

40%

20%

Based upon Dr Terry Dwyer,The Taxable Capacity of Australian Land and Resources

in Australian Tax Forum, Vol 18 No. 1, 2003

0%

1911

1924

1934

1944

1954

1964

1974

1984

1994

2004

Land Values Research Group 2004

slide39

... that the legacy is a sad tale of declining

after-tax incomes

100%

9%

Resource rents

6%

31%

80%

taxes

60%

31%

85%

40%

NET Incomes OF

Labour & Capital

38%

20%

Based upon Dr Terry Dwyer,The Taxable Capacity of Australian Land and Resources

in Australian Tax Forum, Vol 18 No. 1, 2003

0%

1911

1924

1934

1944

1954

1964

1974

1984

1994

2004

Land Values Research Group 2004

slide40

How we distribute the GDP ‘pie’ now

  • Less than $30 billion (12%) of Australia's publicly-created $245 billion in resource rents was collected to the public purse in 2004
  • 99.9% of those in BRW’s “Richest 200” list are rentiers
  • As rentiers and homeowners were allowed to privatise $215 billion in publicly-created resource rents, it was necessary to tax incomes and goods and services to that extent
  • Consequently, household debt has risen from $289bn in 1996 to $818bn in 2004 ($41,000 for every man woman and child)
  • The bottom line is that as a proportion of GDP since 1972:
    • net incomes have declined by 40%
    • taxes have grown by 28%
    • annual land values (resource rents) have grown by 150%!
slide41

Land-based revenues cannot be

passed on in prices?

“Pure rent is in the nature of a ‘surplus’ which can be taxed without affecting production incentives”

- Samuelson Hancock and Wallace, Economics, 2nd Australian ed., p. 623

slide42

Land-based revenues cannot be

passed on in prices

  • The case of the Poor Widow is always trotted out when increased land value charges are proposed
  • Even when she’s a pensioner, the “Poor Widow” pays for food, clothing and shelter, much of the price of which is the accumulation of cascading taxes
  • She would be greatly advantaged by substantially cheaper prices under a land value charge, provided other taxes are reduced accordingly
  • Any landholders with real payment problems, can defer the charge against their estate
as is
“As is”

Tax

31.0%

Rent

31.0%

Net incomes (L&C)

38.0%

if we captured land values
If we captured land values

Rent

31.0%

Net incomes (L&C)

69.0%

slide45

The Australian GDP pie since 1972....

100%

12%

Resource rents

31%

$250 bn

80%

25%

taxes

31%

$250 bn

60%

40%

63%

38%

of $811 bn

or

$308 bn

NET Incomes OF

Labour & Capital

20%

0%

1974

1984

1994

2004

Land Values Research Group 2004

slide46

.... could have looked like this had we taken more resource rents to eliminate real estate bubbles

100%

12.5%

$250 bn

12%

Resource rents

12.5%

$250 bn

15%

80%

taxes

60%

75%

of $2000 bn

or

$1500 bn

40%

NET Incomes OF

Labour & Capital

73%

20%

0%

1974

1984

1994

2004

Land Values Research Group 2004

australia s actual and repaired gdp
Australia’s actual and ‘repaired’ GDP

$2005 million

2500

$2050

2000

Effect of doubling charges on land in the early 1970s and then graduating land value

capture up to 50% in 2004

1500

1000

$830

actual

500

$302

$302

0

1972

1982

1992

2002

gdp growth current prices australia
GDP growth (current prices): Australia

%

25

1975

20

15

growth off

low base

10

5

0

1952

1962

1972

1982

1992

2002

gdp growth current prices australia49
GDP growth (current prices): Australia

%

25

“Property taxes are

out of control !”

1975

20

15

growth off

low base

10

5

0

1952

1962

1972

1982

1992

2002

slide50

GDP growth (current prices): Australia

%

25

1975

20

15

growth off

low base

10

5

0

1952

1962

1972

1982

1992

2002

slide51

GDP growth (current prices): Australia

%

25

1975

20

15

growth off

low base

10

5

0

1952

1962

1972

1982

1992

2002

slide52

GDP growth (current prices): USA

%

16

14

growth off

low base

1978

12

10

8

6

4

2

0

1952

1962

1972

1982

1992

2002

slide53

GDP growth (current prices): USA

%

16

“Property taxes are

out of control !”

14

growth off

low base

1978

12

10

8

6

4

2

0

1952

1962

1972

1982

1992

2002

slide54

GDP growth (current prices): USA

%

16

14

growth off

low base

1978

12

10

8

6

4

2

0

1952

1962

1972

1982

1992

2002

slide55

GDP growth (current prices): USA

%

16

14

growth off

low base

1978

12

10

8

6

4

2

0

1952

1962

1972

1982

1992

2002

slide56

GDP growth (current prices): UK

%

30

1975

25

20

15

growth off

low base

10

5

0

1952

1962

1972

1982

1992

2000

slide57

GDP growth (current prices): UK

%

30

“Property taxes are

out of control !”

1975

25

20

15

growth off

low base

10

5

0

1952

1962

1972

1982

1992

2000

slide58

GDP growth (current prices): UK

%

30

1975

25

20

15

growth off

low base

10

5

0

1952

1962

1972

1982

1992

2000

slide59

GDP growth (current prices): UK

%

30

1975

25

20

15

growth off

low base

10

5

0

1952

1962

1972

1982

1992

2000

slide60

State of the Market:

have we been here before?

2004

residential

peak

%

1988/89

comm/ind

peak

30

1973

comm/ind

peak

Queensland boom,

and end of distress sales from late 1980s boom in other States

25

1981

residential

peak

20

19%

'bubble' line

15

'91-92 recession.

Hewson-led

opposition loses

'unloseable'

1993 election

Keating federal

& Goss Q’land

governments

defeated in 1996. Queensland recession only

1982-'83

recession.

Fraser

government

defeated

1974-'75

recession.

Whitlam

government

dismissed

10

5

0

1972

75

77

79

81

83

85

87

89

91

93

95

97

99

'01

'03

'05

slide62

Have we shattered some shibboleths?

  • Repetitive cycles of boom and bust are NOT natural
  • Land values DO constitute an adequate revenue base
  • High taxation and land prices are NOT inevitable
  • A revenue switch to resource rents WILL create sustainable economic growth
  • The poor widow will NOT lose out if we capture land values
  • There IS a natural growth fund we can tap for the provision of quality public education, health and infrastructure
  • Untaxing labour and its products and capturing more land value FREES labour and CONSERVES the environment
slide63

State of the

Market

Have we been

here before?

Bryan Kavanagh

Land Values Research Group

slide64

State of the

Market

Have we been

here before?

Bryan Kavanagh

Land Values Research Group

slide65

State of the

Market

Have we been

here before?

Bryan Kavanagh

Land Values Research Group

slide66

In the 1845 parliamentary Corn Law debates,

Richard Cobden (1804-1865) noted how the people

had been “cheated, robbed and bamboozled” :

“For a period of 150 years after the conquest, the whole of the revenue of the country was derived from the land. During the next 150 years it yielded 19/20ths of the revenue. For the next century, down to the reign of Richard III it was 9/10ths. During the next 70 years to the time of Mary it fell to about 3/4ths. From this time, to the end of the Commonwealth, land appeared to have yielded one half the revenue. Down to the reign of Anne it was 1/4th. In her reign it was 1/6th. For the first 30 years of the reign of George III the land yielded 1/7th of the revenue. From 1793 to 1816 (during the period of the land tax) land contributed 1/9th. From which time to the present 1/25th only of the revenue had been derived directly from the land.“

slide67

In the 1845 parliamentary Corn Law debates,

Richard Cobden (1804-1865) noted how the people

had been “cheated, robbed and bamboozled” :

“For a period of 150 years after the conquest, the whole of the revenue of the country was derived from the land. During the next 150 years it yielded 19/20ths of the revenue. For the next century, down to the reign of Richard III it was 9/10ths. During the next 70 years to the time of Mary it fell to about 3/4ths. From this time, to the end of the Commonwealth, land appeared to have yielded one half the revenue. Down to the reign of Anne it was 1/4th. In her reign it was 1/6th. For the first 30 years of the reign of George III the land yielded 1/7th of the revenue. From 1793 to 1816 (during the period of the land tax) land contributed 1/9th. From which time to the present 1/25th only of the revenue had been derived directly from the land.

Thus the land, which anciently paid the whole of taxation, paid now only a fraction ... notwithstanding the immense increase that had taken place in the value of rentals. The people had fared better under despotic monarchs than when the power of the State had fallen into the hands of a landed oligarchy, who had first exempted themselves from taxation, and next claimed compensation for themselves by a Corn Law for their heavy and peculiar burdens.”

slide68

UK revenue base over six centuries

%

Revenue & Cost of Living = 100

100

80

60

LAND REVENUES

TAXES

40

20

Derived from Richard Cobden’s

parliamentary Corn Laws debate (1845)

0

1290

1390

1490

1590

1690

1790

1890

1215 Magna Carta

Land Values Research Group 2005

thorold rogers 1823 1890 wages decline when people are denied cheap access to land
Thorold Rogers (1823-1890): wages decline when people are denied cheap access to land

“The 15th century and the first quarter of the 16th were the golden age of the English labourer, if we are to interpret the wages which he earned by the cost of the necessaries of life. At no time were wages, relatively speaking, so high, and at no time was food so cheap ....

It is possible that as the distribution of land became more general, and the tenancy for a term of years became habitual, the phenomenon which has often been noticed of peasant proprietorship, a high rate of wages paid to the free labourer, may have been exhibited in the period”

James Edwin Thorold Rogers, “Six Centuries of Work and Wages”, 11th edition, 1912, p.326

slide70

Disposable income of English Labourer

(family of five)

%

Revenue & Cost of Living = 100

300

280%

'Merrie

England'

250

HIGH

DISPOSABLE

INCOMES

Chart by Rev WDP Bliss, based on Thorold Rogers

200

150

LOW DISPOSABLE INCOMES

cost of living line

100

50

0

1290

1390

1490

1590

1690

1790

1890

slide71

Disposable income of English Carpenter

(family of five)

%

Revenue & Cost of Living = 100

400

380%

'Merrie

England'

Chart by Rev WDP Bliss, based on Thorold Rogers’

“Six Centuries of Work andWages”

HIGH

DISPOSABLE

INCOMES

300

LOWER DISPOSABLE INCOMES

200

cost of living line

100

0

1290

1390

1490

1590

1690

1790

1890

slide72

Disposable income of English Labourer

and Carpenter (families of five)

%

Revenue & Cost of Living = 100

400

380%

'Merrie

England'

Chart by Rev WDP Bliss, based on Thorold Rogers’

“Six Centuries of Work andWages”

HIGH

DISPOSABLE

INCOMES

300

LOWER DISPOSABLE INCOMES

200

cost of living line

100

0

1290

1390

1490

1590

1690

1790

1890

slide73

Labourer’s disposable income

against revenue base

%

Revenue & Cost of Living = 100

300

280%

'Merrie

England'

Chart by Rev WDP Bliss, based on Thorold Rogers’

“Six Centuries of Work andWages”

250

HIGH

DISPOSABLE

INCOMES

200

150

LOWER DISPOSABLE INCOMES

100

cost of living line

50

land rents

taxes

0

1290

1390

1490

1590

1690

1790

1890

slide74

Disposable income of English Labourer

(family of five)

%

Revenue & Cost of Living = 100

300

280%

'Merrie

England'

250

HIGH

DISPOSABLE

INCOMES

Chart by Rev WDP Bliss, based on Thorold Rogers

200

150

LOW DISPOSABLE INCOMES

cost of living line

100

taxes

50

land rents

Chart based on Richard Cobden 1845

0

1290

1390

1490

1590

1690

1790

1890

slide75

Carpenter’s disposable income

against revenue base

%

Revenue & Cost of Living = 100

400

380%

'Merrie

England'

Chart by Rev WDP Bliss, based on Thorold Rogers’

“Six Centuries of Work andWages”

HIGH

DISPOSABLE

INCOMES

300

LOWER DISPOSABLE INCOMES

200

cost of living line

100

land rents

taxes

0

1290

1390

1490

1590

1690

1790

1890

slide76

Homer Hoyt: the bursting of land price

bubbles precede financial collapse -

including Wall Street’s in 1929

Real estate peak 1925

1929 stock market collapse

slide77

We remember that the OPEC

oil crisis in October 1973

created worldwide recession?

slide78

We remember that the OPEC

oil crisis in October 1973

created worldwide recession?

Do we?

slide79

We remember that the OPEC

oil crisis in October 1973

created worldwide recession?

Do we?

Can we remember the land boom

that preceded the OPEC crisis?

slide80

We remember that the OPEC

oil crisis in October 1973

created worldwide recession?

Do we?

Can we remember the land boom

that preceded the OPEC crisis?

Usually not. As with the 1925

land boom, it’s almost as though

it has been written out of history

slide81

We remember that the OPEC

oil crisis in October 1973

created worldwide recession?

Do we?

Who remembers the land boom

that preceded the OPEC crisis?

Usually not. As with the 1925

land boom, it’s almost as though

it has been written out of history

sir william petty 1623 1687
Sir William Petty (1623-1687)
  • The first thing Oliver Cromwell did after he conquered Ireland (1649-1652) was to have it valued
  • William Petty won the contract using cheap labour
  • Physician, inventor, economist .... duellist
  • Completed his ‘Down Survey’ in an amazing 13 months
  • Understood theory of rent before Ricardo: in 1661 he said Ireland was “worth but 7 years’ purchase” (of its rents), or a yield of 14.3%!
slide83

John Locke

apostle of freedom

1632-1704

“It is in vain in a country whose great fund is land to hope to lay the public charge on anything else; there at last it will terminate. The merchant (do what you can) will not bear it, the laborer cannot, and therefore the landholder must: and whether he were best to do it by laying it directly where it will at last settle ... let him consider.”

-Some Considerations of the Lowering of Interest

in the beginning
In the beginning ...

- “ Put to the vote: as many are of the opinion that a public tax upon the land ought to be raised to defray the public charge say ‘yea’. “

- “ Yea! “

- “ Carried in the affirmative - none dissenting. ”

[Philadelphia's first tax law 30 January 1693]

average weekly wages usa
Average Weekly Wages: USA

workers on non-farm payrolls

Constant 1982 $ per week

350

$315.44

(1972)

-13.8%

300

$271.96

-19.2%

250

$254.87

(1993)

Second half of Kondratieff Wave

First half of Kondratieff Wave

200

$196.47

150

1947

1950

1960

1970

1980

1990

2000

Source: US Bureau of Labor Statistics

average weekly wages australia
Average Weekly Wages: Australia

Constant 1983 $ per week

350

$318.40

2004

$312.60

1983

300

$285 .00

1991

250

Second half of Kondratieff Wave

First half of Kondratieff Wave

200

150

1947

1950

1960

1970

1980

1990

2000

Source: Australian Bureau of Statistics

slide87

Kondratieff Long Wave Cycles

Nikolai Kondratieff

1892-1938

1814

1873

1920

First Wave

Third Wave

Second Wave

1849

1896

1789

Smoothed - Diagrammatic only

slide88

Kondratieff Long Wave Cycles

- the seasons

Nikolai Kondratieff

1892-1938

slide89

Kondratieff Long Wave Cycles

- the seasons

Nikolai Kondratieff

1892-1938

slide90

Kondratieff Long Wave Cycles

- the seasons

Nikolai Kondratieff

1892-1938

slide91

Kondratieff Long Wave Cycles

Nikolai Kondratieff

1892-1938

an impending kondratieff winter could be allayed by switching the revenue emphasis
An impending Kondratieff ‘winter’ could be allayed by switching therevenue emphasis:
  • ....from tax imposts upon people and businesses who are doing productive work ...
  • ....to revenues based upon the value of privately held lands
slide93

THE

RICHES

OF OZ

The Economic

Consequences

of Bubbles

Australia: A Case Study

slide94

Burst bubbles and rising unemployment

%

35

30

total real estate sale

prices divided by GDP

25

?

20

15

?

10

5

unemployment

0

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

slide95

Australian Land Price Indices

Five major States

3

WA

Q'ld

2.5

Vic

NSW

2

SA

1.5

1

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

Commonwealth Grants Commission

sir george edward gibbon grey v wakefield
Sir George Edward GibbonGrey v. Wakefield
  • Characterise both sides of the battle to privatise rent
  • Grey: soldier, explorer of WA, public administrator
  • Wakefield: brat, sociopath, devised ‘Wakefield Plan’
  • Wakefield: England, Canada, New Zealand
  • Grey: Ireland, South Australia, New Zealand, Cape Town
  • Grey won the battle but Wakefield has won the war - because we have come to accept high land prices and taxation as the natural order of things

1812-1898 1796-1862