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Out of darkness, light?
It might sound good when you hear that Tasmania has the nation’s ‘most affordable housing’. It’s the kind of thing real estate advertising would put positive spin on. But there are some underlying facts in that spinny backhander that need to be considered. During the real estate boom of just very recent years, houses around the state sold at unsustainable prices as mainlanders flocked to our state. If you bought in that period, chances are the value of your property has dropped since then. Housing affordability is calculated by taking the average house price and dividing by average household income. That means that if house values are now lower than they were recently, average household income has fallen – indicating tougher times. An underlying fact of lower property prices is that we’re no longer at the top of that price ‘hill’; we made it up there, and the view was great. Now we’re past that euphoric moment, with some ‘down-hilling’ ahead. Anyone selling now will find buyer resistance because decreasing values don’t attract buyers as does the promise of increasing values. Intending buyers are inclined to look towards the bottom of the slope to get even better value. Just look at the number of ‘for sale’ notices around!
Deficit shock
I must admit to being shocked by last week’s figures on the State’s deficit: from an unhealthy enough deficit target of negative $113m last June, to a breathtaking quarter of a billion dollars in the red announced last week. A few years back, Tasmania was being touted as the nation’s ‘tiger economy’ – just like Ireland was the ‘tiger economy’ of Europe. House prices were well and truly up; it was sensible to build instead of buy, so the building industry was booming. More than most other indicators, the state of the building industry is a measure of the health of the economy. A booming real estate market – when a drover’s dog could sell a house – is also hugely profitable for government, especially state government which has a swag of taxes and other charges in place to profit from property sales and development. That’s now declined savagely, creating a gaping hole in state revenue expectations. Coupled to that is the drastically reduced revenue from the GST – the less people spend, the less GST there is to share around. And while there’s nothing left in the state barrel, costs of running the state have blown out, particularly given the burgeoning use of consultants and middle management contracts. Savage spending cuts to save money have caused state services – particularly and most noticeably in health – to a level of destructiveness not seen for many years. Despite these cuts, Health came in $100m over the cut requirements, indicating that further cuts next year in the order of $150m will be the order of the day. Understandably, the undiluted anger of bloggers rang out with comments such as “The worst unemployment in the nation, the biggest per capita debt in the nation, the biggest per capita budget deficit in the nation, the largest per capita public service in the nation with over 40% of residents dependent on federal, state or local government for wages or welfare, conversely the smallest per capita private sector paying taxes in the nation, the worst school retention rate in the nation, the worst real estate sales figures in the nation. No it’s not bankrupt Greece, it’s Tasmania.”
Expert comments
Economist and forthright commentator Dr Bruce Felmingham will have alienated members of the health and education communities in advocating on ABC Radio that there should be a voluntary freeze on wages. “Any wage increase is another’s job,” he said. In measured support for the Premier, he pointed out that whenever a state government changes its budgetary settings, there’s a delay before the positive effects are felt. “Lara could still become a hero’” he said, commenting on recent cuts and the latest budgetary bad news. He also foresees a change of government – unsurprisingly – because of the growing unpopularity of Labor, and the unworkable nature of the Coalition. He also expects the proposed pulp mill to get all the money it needs, and for this to create very difficult conditions for the State government as it attempts to deal with even greater division within the community over the mill issue.
The opportunity of a poisoned chalice…
Waiting in the aisle is of course Will Hodgman, a much thwarted-in-waiting Premier-to-be. With mantras of ‘sustainable development’ and their ‘open for business’ slogan, the state’s Libs can’t wait to get their hands on what might finally be their big chance. Forestry is the ever-present development target they have in their sights, and for the first time in many years, there’s some daylight between the forestry aspirations of the two major parties who spent many years in lockstep on that matter. The need to ‘revise how government manages the economy’ and the ‘mindset change needed’ to bring about confidence in business and investment are much-used lines in Will Hodgman’s plans for budgetary savings of $200 million. Their intention to restore the year 12 tops in high schools sounds (to a former chalkie) like a return to unwanted parochialism in education. That aspiration of stepping back in time has been labelled the ‘magic pudding trick’ of expanding education without increasing costs. Another menu item will gladden the hearts of many sceptics with the Libs proposing to ‘wind back’ the fox eradication programme. That’s sure to give them a free kick, as will the tackling of consultancy fees and senior executive positions within the Public Service. It’s much to be hoped that out of the darkness presently facing the State, some light will emerge. The drop in the State’s Greens’ popularity from 25% to 18% in just 12 months is sure to have its own effect on election outcomes.
Those outcomes might be seen sooner rather than later…
John Fleming
It might sound good when you hear that Tasmania has the nation’s ‘most affordable housing’. It’s the kind of thing real estate advertising would put positive spin on. But there are some underlying facts in that spinny backhander that need to be considered. During the real estate boom of just very recent years, houses around the state sold at unsustainable prices as mainlanders flocked to our state. If you bought in that period, chances are the value of your property has dropped since then. Housing affordability is calculated by taking the average house price and dividing by average household income. That means that if house values are now lower than they were recently, average household income has fallen – indicating tougher times. An underlying fact of lower property prices is that we’re no longer at the top of that price ‘hill’; we made it up there, and the view was great. Now we’re past that euphoric moment, with some ‘down-hilling’ ahead. Anyone selling now will find buyer resistance because decreasing values don’t attract buyers as does the promise of increasing values. Intending buyers are inclined to look towards the bottom of the slope to get even better value. Just look at the number of ‘for sale’ notices around!
Deficit shock
I must admit to being shocked by last week’s figures on the State’s deficit: from an unhealthy enough deficit target of negative $113m last June, to a breathtaking quarter of a billion dollars in the red announced last week. A few years back, Tasmania was being touted as the nation’s ‘tiger economy’ – just like Ireland was the ‘tiger economy’ of Europe. House prices were well and truly up; it was sensible to build instead of buy, so the building industry was booming. More than most other indicators, the state of the building industry is a measure of the health of the economy. A booming real estate market – when a drover’s dog could sell a house – is also hugely profitable for government, especially state government which has a swag of taxes and other charges in place to profit from property sales and development. That’s now declined savagely, creating a gaping hole in state revenue expectations. Coupled to that is the drastically reduced revenue from the GST – the less people spend, the less GST there is to share around. And while there’s nothing left in the state barrel, costs of running the state have blown out, particularly given the burgeoning use of consultants and middle management contracts. Savage spending cuts to save money have caused state services – particularly and most noticeably in health – to a level of destructiveness not seen for many years. Despite these cuts, Health came in $100m over the cut requirements, indicating that further cuts next year in the order of $150m will be the order of the day. Understandably, the undiluted anger of bloggers rang out with comments such as “The worst unemployment in the nation, the biggest per capita debt in the nation, the biggest per capita budget deficit in the nation, the largest per capita public service in the nation with over 40% of residents dependent on federal, state or local government for wages or welfare, conversely the smallest per capita private sector paying taxes in the nation, the worst school retention rate in the nation, the worst real estate sales figures in the nation. No it’s not bankrupt Greece, it’s Tasmania.”
Expert comments
Economist and forthright commentator Dr Bruce Felmingham will have alienated members of the health and education communities in advocating on ABC Radio that there should be a voluntary freeze on wages. “Any wage increase is another’s job,” he said. In measured support for the Premier, he pointed out that whenever a state government changes its budgetary settings, there’s a delay before the positive effects are felt. “Lara could still become a hero’” he said, commenting on recent cuts and the latest budgetary bad news. He also foresees a change of government – unsurprisingly – because of the growing unpopularity of Labor, and the unworkable nature of the Coalition. He also expects the proposed pulp mill to get all the money it needs, and for this to create very difficult conditions for the State government as it attempts to deal with even greater division within the community over the mill issue.
The opportunity of a poisoned chalice…
Waiting in the aisle is of course Will Hodgman, a much thwarted-in-waiting Premier-to-be. With mantras of ‘sustainable development’ and their ‘open for business’ slogan, the state’s Libs can’t wait to get their hands on what might finally be their big chance. Forestry is the ever-present development target they have in their sights, and for the first time in many years, there’s some daylight between the forestry aspirations of the two major parties who spent many years in lockstep on that matter. The need to ‘revise how government manages the economy’ and the ‘mindset change needed’ to bring about confidence in business and investment are much-used lines in Will Hodgman’s plans for budgetary savings of $200 million. Their intention to restore the year 12 tops in high schools sounds (to a former chalkie) like a return to unwanted parochialism in education. That aspiration of stepping back in time has been labelled the ‘magic pudding trick’ of expanding education without increasing costs. Another menu item will gladden the hearts of many sceptics with the Libs proposing to ‘wind back’ the fox eradication programme. That’s sure to give them a free kick, as will the tackling of consultancy fees and senior executive positions within the Public Service. It’s much to be hoped that out of the darkness presently facing the State, some light will emerge. The drop in the State’s Greens’ popularity from 25% to 18% in just 12 months is sure to have its own effect on election outcomes.
Those outcomes might be seen sooner rather than later…
John Fleming