Cartoons of the Past few Weeks

International House Prices: Australia Compared

The Economist has just released the latest version of its interactive global house price graphic. They explain it this way:

The Economist has been publishing data on global house prices since 2002. The interactive tool above enables you to compare nominal and real house prices across 20 markets over time. And to get a sense of whether buying a property is becoming more or less affordable, you can also look at the changing relationships between house prices and rents, and between house prices and incomes.

Whichever way you look at it - and it's worth moving the dates around to get a good idea of the changes - Australia has done 'better' than nearly anywhere else. But we too are now in decline.

If you push the date to start at Q1 2007, you get a real insight into how house prices have fallen in the rest of the developed world.

Going back to 2000, Australia has done well - if you think rising house prices is necessarily a good thing (and I don't). Japan has done particularly poorly (falling prices are not a good thing either)

Going back even further to 1990 and the country that stands out the most is South Africa with an amazing rise in house prices. Australia still stands out, but the most interesting figure is the gradual rise in house prices in Germany - no boom there, just a gradual orderly rise (the best of all outcomes in my view). And look at that fall in the Celtic 'tiger' - financialisation not looking like such a great idea now.

The Economist has been a long-time bear on Australian house prices arguing that:

SOME four years after house prices peaked in much of the rich world, housing remains over-valued, when compared to its long-run relationship with housing rents and income per person. Housing prices in Australia, Canada and France, which had only a slight wobble in 2008 before climbing to new highs, look particularly frothy. In contrast, prices in America have fallen so far that they now look cheap when compared against both rents and income. But given the huge stock of foreclosed homes that is yet to come on to the market, the chances are that they could yet fall further.

From this accompanying article The Economist reports:

Never before had house prices risen so fast, for so long, in so many countries. Yet the bust has been much less widespread than the boom. Home prices tumbled by 34% in America from 2006 to their low point earlier this year; in Ireland they plunged by an even more painful 45% from their peak in 2007; and prices have fallen by around 15% in Spain and Denmark.

The suggestions from the overvalued nature of house prices against income increases and rent changes is particularly bracing.

The ABS and other private sector organisations argue that house prices have fallen further than the 2.2 per cent listed here.

Superannuation (Pensions)

Ever wondered why Australians are so obsessed by the economy?

There are lots of reasons given, including these in a recent speech by former Reserve Bank governor Ian Macfarlane.

I think it's got a lot to do with the fact that Australians have a higher percentage of variable rate mortgages than most countries. meaning that decisions by the RBA (a key piece of economic news) matter more to Australians than those people in countries where mortgages are fixed. According to the RBA:

In some countries, including Australia and the United Kingdom, variable-rate loans predominate, whereas in New Zealand and Canada, fixed-rate loans of between two and five years are more common; in the United States and some European countries long-term fixed-rate mortgages predominate. The features offered on housing loans also differ significantly across countries; for example, loans with redraw facilities and flexible repayment structures are relatively uncommon in many continental European countries.

It's also got something to do with the globalisation of the economy and the efforts by the Labor governments of the 1980s and 1990s, particularly Paul Keating to 'educate' - persuade and coerce - Australians about the need for change.

But it might also have something to do with the fact that more Australians have their super tied up in shares than anywhere else. This graph from the OECD was reproduced on MacroBusiness:

The Indian and Chinese Diasporas

From The Economist:

The major question is what is the significance of these external communities for the future development of their economies and international relations? 1.3 million Chinese in Peru?

US Troop Deployments Around the World

From The Economist:

Three significant events that changed troop deployments: World War II, Vietnam and post-September 11th.

According to The Economist:

THE American government is keen to show its commitment to security in Asia by putting boots on the ground there. As this analysis shows, the number of American troops (Army, Navy, Marines and Air Force active duty personnel) in Asia is only slightly smaller than the number in Europe, where Americans in uniform are largely a hangover from the carve-up of the continent at the Yalta conference in 1945. Indeed, the one lesson that can be drawn from the data is that today's strategic priorities can shape deployments for decades to come, long after the original reason for putting G.I.s in a particular region has gone. Another is that American forces do not pay much attention to Africa, despite the number of active or dormant conflicts there. The methodology used for this analysis has changed slightly from 2006 as the Department of Defence reports deployments in Iraq and Afghanistan based on contributing troops rather than actual boots on the ground, but that does not seem to make a huge difference, at least to this chart

Equal Pay, Housing, Employment and Bonuses

Equal Pay

Good news for workers in the ‘care’ sector – mostly women http://www.pm.gov.au/press-office/gillard-government-deliver-historic-payrise-social-and-community-workers.

Now for childcare workers because there’s probably no more important job than looking after very young children.  Childcare in lower socio-economic areas should have subsidized teachers to increase educational opportunities and outcomes for families that don’t have the time or inclination to read to and stimulate their kids. But what to do about those that don’t work and don’t care?

Housing

Information on owners and renters from http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/946A456AE7DA949DCA25773700169C7B?opendocument

“The proportion of households [i.e. outright owners] without a mortgage has declined from 42% to 33%, while the proportion with a mortgage has risen from 30% to 35% in 2007-08. The decline in outright home ownership may reflect increasing uptake of flexible low-cost financing options which allow households to extend their existing home mortgages for purposes other than the original home purchase”

“Australia's preference for a free-standing house on its own block of land is most evident among home owners. Of the 5.5 million households that owned their home in 2007-08, 88% lived in separate houses (graph 10.8). Over a half (56%) of all renter households lived in separate houses; 30% lived in flats, units or apartments; and 14% lived in semi-detached dwellings.”

“At the 1966 Census of Population and Housing, 71% of all occupied private dwellings were either owned outright or owned with a mortgage by their occupants. Following the 1967 Referendum and changes to the Census Indigenous question in 1971, the Indigenous count increased 45%. Lower average Indigenous home ownership rates at that time, compared to the population as a whole, contributed in part to the decrease, to 69%, in average home ownership recorded in the 1971 Census. Since then the rate of home ownership in Australia, as measured in the Census, has ranged between 68% and 70%”.

Employment

The ABS has a very revealing interactive graphic on employment, showing the growth of mining sector employment and the decline of manufacturing jobs.

See http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6202.0Main%20Features2Oct%202011?opendocument&tabname=Summary&prodno=6202.0&issue=Oct%202011&num=&view=
For specific figures on employment by industry see http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6291.0.55.003Aug%202011?OpenDocument

For a primer on understanding labour force figures see http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/6202.0main+features999Oct%202011

No Bonuses

From Nicholas Taleb in the New York Times

“Consider that we trust military and homeland security personnel with our lives, yet we don’t give them lavish bonuses. They get promotions and the honor of a job well done if they succeed, and the severe disincentive of shame if they fail. For bankers, it is the opposite: a bonus if they make short-term profits and a bailout if they go bust.”

“Banning bonuses addresses the principal-agent problem in economics: the separation between an agent’s interests and those of the client, or principal, he is supposed to represent.”