Why it really is different here - Part 2: Australia vs UK

[HomePage]

Shad,

Your "research" is simply about starting with your conclusion and working back from there. Hence the emphasis on data that you feel supports your underlying conclusion (there wont be a major correction in resi housing prices in Oz in the medium term) whilst ignoring data from the same sources that fails to support it.

And simply saying your objective is to identify "differences" is intellectually dishonest and your usual straw man approach.

No-one is saying the UK and Oz are the same.

Brits have poorer teeth, for a start.

And like their beer warm.

The key issue is: when looking at the global recession and the clear impact it is having on RE prices in many industrialised economies, what are the underlying and common causes, are those elements evident in Australia, and what countervailing forces are there that are significant enough to compensate.

In other words, is Australia different enough, given the UK wasn't different enough, Spain wasn't different enough, Ireland wasn't different enough etc. etc.

Simply listing differences might constitute a sufficient argument in People magazine or on ACA but to pretend it rises beyond that level of analysis is gilding the lilly.

Give me all the data in the world, allow me to highlight what I prefer and ignore what I don't, and I'll "prove" any argument you care to put.

Magnificant!

 

[plusnq]

Shad,



Brits have poorer teeth, for a start.

And like their beer warm.


Give me all the data in the world, allow me to highlight what I prefer and ignore what I don't, and I'll "prove" any argument you care to put.

Correlation!! Drinking your beer warm causes tooth decay.




Cheers

Shane

 

[Shadow]

Shad,

Your "research" is simply about starting with your conclusion and working back from there.

Toke, my post does not draw any conclusions at all, and deliberately so. It simply states several facts - several points of difference between the UK and Australia.

Hence the emphasis on data that you feel supports your underlying conclusion (there wont be a major correction in resi housing prices in Oz in the medium term) whilst ignoring data from the same sources that fails to support it.

The fact that you read my post and came to your own conclusion that the data I presented supports the notion that 'there won't be a major correction in resi housing prices in Oz in the medium term' says more about the strength of that data than you realise. It is very interesting to note that you yourself drew such a conclusion from those facts, when I made no such conclusion myself. Rather than trying to refute any of the facts I put forward, or indeed even trying to put forward some counter arguments yourself, you simply drew this conclusion from the facts and instead resorted to 'argumentum ad hominem' in response.

And simply saying your objective is to identify "differences" is intellectually dishonest and your usual straw man approach. No-one is saying the UK and Oz are the same.

Nonsense. The gloomers regularly state that we're just like the USA/UK/Japan/Spain etc. and that therefore we must follow their path inevitably towards a 40-50% decline in residential property prices. I can't believe you've missed these claims from the gloomers? They have been saying this for over a year now. You really should try to pay more attention to what is discussed, both here and also on the other forum.

Even the gloomer demigod Steve Keen has made this claim. He stated that prices in Japan fell by 42%, therefore that sounds 'about right' for Australia too (see below). Yeah, great analysis there Steve. Because we're just like Japan.

http://ourfinanceblogs.com/forums/index.php?topic=18.0
Japan also had a bubble economy in the 1980s, and its house prices have since fallen 42% in real terms, and more in nominal terms since consumer prices have fallen over the 90s and 00s courtesy of Japan's long-running Depression. That's the reason I give a 40% figure for a price decline in the press: our bubble was larger than Japan's in general (though much smaller than Tokyo's), and a fall of that magnitude would seem a good ball park estimate even though it would take a greater fall to restore the median house price to median income ratio to 3, which is Demographia's estimate of the peak level for affordability.

The key issue is: when looking at the global recession and the clear impact it is having on RE prices in many industrialised economies, what are the underlying and common causes, are those elements evident in Australia, and what countervailing forces are there that are significant enough to compensate.

Yes, yes, now we are getting somewhere. What are they? You, Dan and YM have all hinted that there are many many similarities, yet nobody seems able to list any of them for discussion here. I have discussed approximately ten differences. Please list all the similarities. That way we might actually get somewhere. But so far the response from the gloomers on this thread has been more like 'Ha - you're wrong, so there!' without actually providing any counter arguments or reasoning at all to back up your points of view.

In other words, is Australia different enough, given the UK wasn't different enough, Spain wasn't different enough, Ireland wasn't different enough etc. etc. Simply listing differences might constitute a sufficient argument in People magazine or on ACA but to pretend it rises beyond that level of analysis is gilding the lilly.

Yet what I have provided is vastly superior to anything that the gloomers could offer in response. I have provided facts, analysis, reasoning, charts, links to source data etc. The gloomers have provided what in response? Snide comments and character assassination. Typical.

Give me all the data in the world, allow me to highlight what I prefer and ignore what I don't, and I'll "prove" any argument you care to put.

Yes, please do this! Provide your 'data'. Bring out your big guns. Try to offer at least something in the way of evidence to prove your point. Surely you can do better than this? Or perhaps not.

Cheers,

Shadow.

 

[boz]

Another critical factor is interest rates. The UK banks have generally kept a larger slice of the official rate cuts for themselves, rather than passing it on to the consumer as has happened in Australia. Furthermore, the UK only started slashing official rates AFTER their house prices were falling sharply and the UK economy was in serious trouble. The RBA on the other hand has been much more proactive, cutting rates well in advance, ensuring that the rate cuts are passed on, and since they were starting from a higher official rate position to begin with, they have plenty more ammo left in the rate cut gun as well.

The chart below compares the reduction in official rates and mortgage rates across the UK, USA and Australia. It is clear that despite our official rate having fallen by the least amount (meaning we have much more scope for further official cuts), our fixed and variable mortgage rates have fallen by the greatest amount. The key difference here is that a much greater share of the cuts get passed on to the consumer in Australia.
Cheers,

Shadow

Interesting point,
I think K Rudd should promote economy teaching in school. Reality at least for the long term is that interest rates are not set by a click from RBA or any political will. This talking about rate passed in and banks keep rate cuts for themself is pointless. Reality is that now government is subsidising borrowers in backing their loans (and put taxpayer money at risk in case any banks will become insolvent), the difference with UK is that they did subsidising banks after they got in trouble and in australia they have done this before they got in trouble, it is not granted that the long term outcome will be different. Anyway it is very important to teach at school that loans are agreement between lender and borrower, the bottom line is that lender are the one that also have to agree about the interest rates and lender are not the one that print money but are the one that have wealth and have been saving. You can't just tell lender you are going to get less interest rate for political reason, if they don't like the rate they'll just say bugger you! I'll get my money (or better say wealth) somewhere else, I'm not going to take that deal! (they might say something different but with similar meaning)

 

[chilliaa]

Shadow the two main similarities are
1) Income to house asset value
2) servicing ratio under a climate of normalised interest rates.

 

[warmed_cockles]

<snip>

"Minutiae to save housing market!"

 

[Shadow]

"Minutiae to save housing market!"

Hahaha!

Population growth, demand, interest rates, credit availability, debt, the economy. All irrelevant minutiae say the gloomers!

 

[MichaelW]

OK,

I know the following is a bit of a long read, but it came in my John Mauldin newsletter today and is definately worth the time.

Europe on the ropes

If you're in a hurry then skip on down to charts 5a and 5b. Check out where the UK sits in comparison to say Australia and Canada...

I particularly liked this bit in relation to those charts:

Even if actual losses prove to be much, much smaller (and I sincerely hope so), the banking sector cannot, in the current environment at least, raise sufficient capital to stay afloat, so more, possibly a lot more, tax payers’ money will have to be put forward. This can only mean one thing. Public debt will rise and rise. The official estimate for the UK for next year is already approaching 10% of GDP, an estimate which will almost certainly rise further. We probably have to get used to running 10-15% deficits for a few years, a fact which seriously undermines the notion of government bonds being next to risk-free..

He closes by observing that reserve banks around the world are probably going to keep printing money and inflate us out of this mess given the Japanese alternative is unacceptable.

I've also read the following analysis which compares the UK with Australia and derides Gordon Brown.

Jim Rogers on Lateline

GEORGE NEGUS: What about the countries that are vital to the economic structure, the infrastructure of countries, like the US and the UK and even our own, that are too big for us to allow them to fail?

JIM ROGERS: What do you mean too big to fail? There's no such thing as too big to fail. Listen, there are plenty of banks in Australia, America and other places who have been doing what they were supposed to, minding their manners, not going doing crazy things, waiting for these moments to come so that they could come in and expand their market share and grow and prosper. Now, these people are being held back by all these "banks that are too big to fail" because the governments are giving them free money and saying, "OK, now you compete with the competent people." I mean, George, this is horrible economics and it is outrageous morality. Not that politicians care about morality.

GEORGE NEGUS: Jim, why shouldn't we see you as yet another doomsayer?

JIM ROGERS: I am not a doomsayer. I am very optimistic about a lot of things.

GEORGE NEGUS: Make me feel better then, Jim, because you are painting a pretty bleak picture.

JIM ROGERS: Listen, we have to face reality, George. I have. If you don't face reality and you sit there and twiddle along and believe Mr Bernanke that everything is OK, you are going to get hit by a two-by-four and it's going to hurt very, very, very badly, so I would urge you to be prepared. But some parts of the world's economy are going to boom. George, you should become a farmer. Agriculture is about to become one of the most exciting industries in the world for the next 20 or 30 years. There are plenty of people in the world who are going to do extremely well in the times that are coming up, but it's not Wall Street, it's not the City of London - the people who have been driving Lamborghinis for the past 10 years are suddenly going to have to drive taxis. Maybe they will learn to drive tractors so they can work for the farmers who will now have the Lamborghinis.

GEORGE NEGUS: Gordon Brown wasn't exactly impressed when you told him that Britain was finished, and that you will pulling out your sterling and told everybody else to do the same. It had a big impact in the UK. What are you doing with your American dollars?

JIM ROGERS: Well, I do own US dollars but I plan some time this year to get rid of the rest of my US dollars and my few remaining US shares.

GEORGE NEGUS: Seriously? And invest where, Jim? Where are you going to put your money?

JIM ROGERS: Ah, George, that is a brilliant question. I don't know right now but it looks as though I will probably wind up putting a lot of it into real assets such as cotton or zinc or gold or oil or whatever it happens to be.

GEORGE NEGUS: Into the real economy, Jim, I can say, into the real economy, not the unreal economy of the finance world.

JIM ROGERS:Absolutely, I'm talking about real products which people use every day.

Did I mention that the Australian economy is largely a resource driven one?...

Cheers,
Michael

 

[HiEquity]

What has not been covered to such a degree is Australia vs UK. Are we 'just like the UK?' Let's discuss.

Well, I can think of one difference that may be relevant to the discussion.

Property prices in the UK have crashed.

In Australia they haven't.

As for the future, your guess is as good as mine!

 

[Sunfish]

Well, I can think of one difference that may be relevant to the discussion.

Property prices in the UK have crashed.

In Australia they haven't.

As for the future, your guess is as good as mine!

That is seriously stupid HE, akin to saying you're immortal because you haven't stopped breathing yet.

 

[andrew_de_a]

its not stupid at all, i would call it a fundamental difference at this stage

 

[HiEquity]

That is seriously stupid HE, akin to saying you're immortal because you haven't stopped breathing yet.

Hi SF

You must have missed the bit where I said I have no idea about the future...

 

[warmed_cockles]

Hahaha!

Population growth, demand, interest rates, credit availability, debt, the economy. All irrelevant minutiae say the gloomers!

Your first half aren't holding up and your second half are countervailing forces. Better stick to stalking, mate. You're better at it.

 

[warmed_cockles]

That is seriously stupid HE, akin to saying you're immortal because you haven't stopped breathing yet.

That's a bit harsh. I think HE was being tongue in cheek!

 

[Shadow]

Your first half aren't holding up and your second half are countervailing forces. Better stick to stalking, mate. You're better at it.

Once again, you fail to understand even the basics.

The first half continue to hold up as key differences between the UK and Australia, as do the second half. These points of difference are very real - they have not changed. If you have anything to add (I mean in the way of facts, data, analysis, reasoning etc - not just petty snipes and character assassination) then please do so. But so far you have provided nothing of substance. It would be best if you just went away, if you've got nothing to add to the debate. Here are your last few posts on this forum...

"Minutiae to save housing market!"

I suppose he might feel a bit nervous given that there are weirdo stalkers on this board.

The next move is definitely up for mortgage rates.

Better stick to stalking, mate. You're better at it.

Seriously mate, your irrelevant and off-topic posts on this and other threads are nothing more than an attempt at derailment. If you want to make pointless petty jibes about 'stalking' etc. then it would be better for you to stay on your own forum. OK?

Cheers,

Shadow.

 

[warmed_cockles]

Once again, you fail to understand even the basics.

The first half continue to hold up as key differences between the UK and Australia, as do the second half. These points of difference are very real - they have not changed. If you have anything to add (I mean in the way of facts, data, analysis, reasoning etc - not just petty snipes and character assassination) then please do so. But so far you have provided nothing of substance. It would be best if you just went away, if you've got nothing to add to the debate. Here are your last few posts on this forum...






Seriously mate, your irrelevant and off-topic posts on this and other threads are nothing more than an attempt at derailment. If you want to make pointless petty jibes about 'stalking' etc. then it would be better for you to stay on your own forum. OK?

Cheers,

Shadow.

Australia's growth just fell. Another pillar down.

 

[Shadow]

Australia's growth just fell. Another pillar down.

Wow - great comeback.

This thread is about the differences between the UK and Australia. The fact that Australia's economy contracted in Q4 does not change the fact that our economy is relatively stronger than the UK economy and that we are not in technical recession, unlike the UK.

Once again, you demonstrate that you have nothing to add here.

 

[Witzl]

That is seriously stupid HE, akin to saying you're immortal because you haven't stopped breathing yet.

NO, it's more akin to saying that you are still alive because you are still breathing.

 

[yieldmatters]

Indeed. I was hoping someone would be able to list all the similarities. No luck so far.

Sorry Shadow - I've been too busy earning money - no easy capital gain for me (well, not anymore). I found a good list elsewhere though that I will paraphrase:

• Large rise in real house prices (i.e. the amount of cans of coke needed to buy a typical house is up by a lot)
• Securitised mortgages and new lending products
• Belief that competition and free markets in finance avoided the need for regulation. Marginal players turned up such as wizard, rams, northern rock etc with a higher risk profile basically lending to anybody.
• Low (or negative) saving rates - financing for ever increasing debt therefore comes from offshore
• Trade deficits (flip side of the point above)
• Wealth effect from rising house prices leading to equity loans etc and booming private consumption
• GDP moving towards services (large financial sector relative to other sectors)
• Flippers / speculators dominating auctions during the boom - also saw a boom in "off the plan" sales also for speculative reasons.
• Rationalisation of high prices was common across both countries - i.e. housing shortage, "underlying" demand, it's different here - "home is his castle" or "great Australian dream".
• Tax system where capital gains is taxed less than income
• Cultural belief that house prices always go up and renting is dead money - phrases like "get on the ladder", "don't miss the boat" became common across all the boom countries including Australia.
• Houses seen primarily as an investment with the true utility (i.e. home or shelter) coming a distant second
• Many TV shows about profits made from realestate (I can still get UK re-runs on cable!)
• Both share markets in the UK and Australia have crashed.
• Interest rates cut in both the UK and Australia.
• Securitised mortgages dead.
• Construction and turnover of existing houses plummeted (ing)
• Belief in both countries that the solution is to take on more debt and re-inflate house prices.
• People in both countries got more and more into debt borrowing money from overseas to bid up assets, felt good about it and thought it was a ticket to riches.

This doesn't mean some of your differences aren't valid. It's just far easier to see the similarities. Basically a big debt boom, bidding up the price of existing housing stock and then pretending we are wealthier as a result.

One major difference is our commodities boom won't truly be over until later in 2009 as the contract price cuts come through. It buys us some time relative to other countries but other than that the fundamentals look the same to me.

 

[Shadow]

Sorry Shadow - I've been too busy earning money - no easy capital gain for me (well, not anymore). I found a good list elsewhere though that I will paraphrase:

Pass my thanks on to HiredGoon for the list. What took you guys so long? He started that thread on the other forum ages ago in an attempt to counter my thread here. (Why doesn't HG post here himself any more?).

This doesn't mean some of your differences aren't valid.

Cheers. Tell that to Gravy/WangPoon/WarmedCockles or whatever he's calling himself these days. He reckons they are all irrelevant minutiae.

One major difference is our commodities boom won't truly be over until later in 2009 as the contract price cuts come through. It buys us some time relative to other countries but other than that the fundamentals look the same to me.

The same, only different!