The election thread - Two middle-late aged white men trying to be blokey and convincing..., same old shit, FFS.

[Oddjob]

I’m not convinced it would work like you think. I’m no economist, but people are rational enough that if you’re well off you won’t flat out skip your holiday or car, you might just buy a slightly cheaper one. So demand for more reasonably priced goods could actually increase rather than decrease.

interested to know if such a policy has been used effectively anywhere.

The Euro zone. The ECB sets one interest rate for the whole euro zone area, and yet each country could set it's own budget. Lo and behold inflation for each Euro country was different.

The second part of the question relates to the progressivity of income taxes and their impacts on consumption.

If you look up Google scholar, there was a whole flurry of papers in the 2000s looking at the Euro. Also a big cluster of papers looking at taxes and consumption patterns in the 80s and 90s, this followed on from the oil shocks and stagflation of the 70s.

NB essential goods by their very nature are price inelastic, i.e. the demand doesn't change much with price. Discretionary purchases are much more elastic. E.g. a trip to the Whitsundays could replace a trip to the Maldives much more easily than trying to cut back from 3 to 2 meals a day.





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[Oddjob]

@pink poodle - I mean “relatively” cheaper than their usual expensive car/holiday/etc.

So your usual boutique frame/bike buyers are now buying relatively cheaper frames/bikes. But the tax increase didn’t affect the low/middle income people so they keep buying the same number of bikes. And overall the demand for those bikes (and so pressure on their prices) increases.

Bikes like most capital purchases are discretionary.

For essentials think food, utilities, housing etc. You can't really put these purchases off. You can change the quality of the food, but you still need to eat.

At the top end of the market, you can eat caviar every meal, but there's only so many calories you can stuff in your gullet every day. And to be honest, rich people tend to have a much better diet than poor people, in the sense that there are less junk calories and more macros.



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[dirtdad]

Cheers. Will do some reading about euro stuff over a few beers. I don’t think we’re disagreeing on the technical side (discretionary vs essential, elastic/inelastic) just the way all us snot buckets will react en masse to such changes in todays world.

Also, this has been far too civil for a political thread on the internet... What I meant to say was - You all suck. I’m right and you can’t convince me otherwise!

 

[PJO]

but there's only so many calories you can stuff in your gullet every day

Mr Creosote begs to differ

 

[rangersac]

A single average salary is a bloody good comparison. It's a number the average person understands.
I don't see a lie, just a representation of something not liked by the few people that stand to benefit from the deductions.

You want a better comparison? Try the median annual salary rather than the mean (average) annual salary, which is $65,000.

 

[Flow-Rider]

 

[pink poodle]

@pink poodle - I mean “relatively” cheaper than their usual expensive car/holiday/etc.

So your usual boutique frame/bike buyers are now buying relatively cheaper frames/bikes. But the tax increase didn’t affect the low/middle income people so they keep buying the same number of bikes. And overall the demand for those bikes (and so pressure on their prices) increases.

But less is the goal...and it may only be 10%, but across the board 10% less on (say a holiday) is actually pretty big when you look at Australia's tourism/recreation spending.

 

[Flow-Rider]

The govt is too gutless to implement policy to cap prices on goods and services, so the only thing that can happen is for the official cash rate to go up. It's high inflation or high interest rates, take your pick. The normalising of credit is the worst thing that the first world countries could have done.
There's no easy fix here, most first world nations moved with the OCR before us and we still have one of the lowest globally.

Diesel prices high - adds to the transport sector, adds to business costs

commercial rents high - adds to business costs

Insurance high - adds to business cost, and accommodation cost

electricity high - adds to business cost and cost of living

interest rates high - adds to the business costs, accommodation costs and cost of living

Etc, ect, ect.

 

[Haakon]

And yet house prices are climbing again... I dont get it!

 

[Flow-Rider]

And yet house prices are climbing again... I dont get it!

Mass immigration and a housing shortage, and then people will hold until the last minute. Mortgage cliff loans are like 5~10% of the whole market, it'll bearly make a dent. The current OCR is nothing, most people have room to adjust their spending.

 

[Freediver]

The govt is too gutless to implement policy to cap prices on goods and services, so the only thing that can happen is for the official cash rate to go up. It's high inflation or high interest rates, take your pick. The normalising of credit is the worst thing that the first world countries could have done.
There's no easy fix here, most first world nations moved with the OCR before us and we still have one of the lowest globally.

It's not a case of being gutless, it just wouldn't work. What happens when cost of production goes up but prices can't?
If I'm farming cabbages and it buckets down when my cabbages are needing to be harvested and I can't get the tractor in the paddocks to bring them in. I can rely on the price going up because of a shortage of supply. If I put up prices I can afford to pay a team to carry them in by hand or I can let them rot.
Does a cap on a loaf of bread include artisan wholemeal soudough or just the bowel cancer in a bag stuff?

And yet house prices are climbing again... I dont get it!

I suspect it's a dead cat bouncing.

 

[Flow-Rider]

It's not a case of being gutless, it just wouldn't work. What happens when cost of production goes up but prices can't?
If I'm farming cabbages and it buckets down when my cabbages are needing to be harvested and I can't get the tractor in the paddocks to bring them in. I can rely on the price going up because of a shortage of supply. If I put up prices I can afford to pay a team to carry them in by hand or I can let them rot.
Does a cap on a loaf of bread include artisan wholemeal soudough or just the bowel cancer in a bag stuff?


I suspect it's a dead cat bouncing.

The cost of production is going up because of all the base costs are so high.

 

[Oddjob]

The govt is too gutless to implement policy to cap prices on goods and services, so the only thing that can happen is for the official cash rate to go up. It's high inflation or high interest rates, take your pick. The normalising of credit is the worst thing that the first world countries could have done.
There's no easy fix here, most first world nations moved with the OCR before us and we still have one of the lowest globally.

Diesel prices high - adds to the transport sector, adds to business costs

commercial rents high - adds to business costs

Insurance high - adds to business cost, and accommodation cost

electricity high - adds to business cost and cost of living

interest rates high - adds to the business costs, accommodation costs and cost of living

Etc, ect, ect.

Price caps don't work, it just leads to shortages. See Cuba and Venezuela.

The best thing to do is targeted income support to stop people falling through the cracks and encouraging supply.

The supply part is the biggest problem with housing. The current NIMBY clusterfuck around DAs means that we chronically underbuild housing of all sorts every year. We really should take planning off councils and leave them to focus purely on service delivery.

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[Flow-Rider]

Price caps don't work, it just leads to shortages. See Cuba and Venezuela.

The best thing to do is targeted income support to stop people falling through the cracks and encouraging supply.

The supply part is the biggest problem with housing. The current NIMBY clusterfuck around DAs means that we chronically underbuild housing of all sorts every year. We really should take planning off councils and leave them to focus purely on service delivery.

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Companies are making record profits when they shouldn't be in this economic climate. This is exactly the problem with people that push for wage growth, all retailers do is put their profit margins up and this works like a large pyramid scheme. It was the same with the first homeowner grants, it didn't make housing any cheaper or affordable.

The problem with the building industry right now is the rising costs are bankrupting builders that have been in the game for over 50 years, and there's a labour shortage in the industry. They just can't build them fast enough and then add the stupid levels of immigration.

 

[pink poodle]

And yet house prices are climbing again... I dont get it!

Well if any random person can own a house, how am I supposed to know I'm rich?

 

[Asininedrivel]

They just can't build them fast enough and then add the stupid levels of immigration.

I think the immigration bonanza isn't playing well. I get why they're doing it given we're an economy that's masked GDP growth with importing more people for years and the one off surge is to make up for the population deficit during COVID, but to the average person who doesn't have time to read analysis of policy it's never going to pass the pub test when cost of living pressures are crazy and there are no houses.

 

[pink poodle]

I passengered through Maitland a few days ago. If you don't know - it's a shitty town near Newcastle known for being shit, having a wierd smell, and flooding badly a long time ago. Anyway the amount of new houses jammed in on tight blocks, row after row after row was quite a surprise to me. I hadn't been there for a long time. Something that would help with pumping up the housing shortfall might be to give up on the big house bullshit. Better urban planning and denser living may see things grow faster.

I also saw fuck all sar panels and fuck all public transport.

 

[Freediver]

I'm not sure there is a housing shortage. On the night of the last census about 10% of houses were empty.
You then have lot's of people like my Mum, she spent her last dozen years living alone in a 4 bedroom house with a large garden that was nothing more than a pain because she couldn't look after it herself.

 

[pink poodle]

I'm not sure there is a housing shortage. On the night of the last census about 10% of houses were empty.

The last census fell during lockdown, which may make that a little more accurate than usual. I had not been on a census as an adult prior, my house was always empty on "census night".

The shortage may be on areas of high competition for accommodation.

Around here there is a lot of empty apartments along the waterfront. A few friends of mine that live in there propose that their neighbours are generally older and wealthy people spending most of their spare time on vacation, mostly overseas or cruise.

 

[Freediver]

I'll throw this in as well.
I've bought bit of land to do the seachange thing. The town I've bought in a has a shocking shortage of workers. Houses that were once rented out to families now make the owners as much money on the Airbnb holiday market as they did on the rental housing market but when it's on airbnb they get to use it a bit through the year.