Friday, June 03, 2016

Friday Snippets - mainly political

Snippets tonight after a fairly torrid week.

A little while ago, we were talking about deflation. Recently, I have been spending time with spreadsheets largely concerned with real estate developments. They are all fairly standard, including assumptions about capital appreciation and the rate of rent increase. The assumptions used are quite modest, essentially little more than the projected rate of inflation.

As a matter of curiosity. I altered the assumptions to fit with a deflationary world. I didn't go the whole hog, just took appreciation and rent increases to zero over the ten and twenty year time horizons being used. The results went a little crazy. They would have gone crazier still if I had reduced rents over time by an assumed rate of deflation.

I didn't have time to define the interest rate that would restore the results to investment level, but it was well below current long term rates. As you would expect.

I am not making any profound point here, just the need to test things by very specific example.

 Australia remains in the grip of its remarkably long election campaign. There are some 30 days to go!

The opinion polls suggest a gradual erosion in Government support. Most Australians still expect it to be returned, a significant electoral advantage, but the numbers are dropping.

One feature of the campaign has been the continued strength of forces outside the major parties.
Nationally, Australia has a two house Parliament, a lower house (the House of Representatives) plus an Upper House (the Senate). The Government, with the support of the Greens, forced though changes to the way Australians vote for the Senate intended to reduce the influence of micro-parties. It appears to have had quite perverse results.

The argument for the change was that preference swaps and indeed preference gaming in a complex proportional representation system allowed the election of unrepresentative minor parties attracting a minuscule percentage of the vote. One outcome was an unstable Senate making governing more difficult.

It is not clear to me that that the resulting cross-bench was in any way unrepresentative of the Australian population. If anything, they were more representative than the politicians selected by the major parties from an increasingly narrow slice of the Australian population. In any event, whoever forms government following the election is going to have to deal with a complex Senate whose final composition looks very uncertain.

At least some of the current cross-bench are likely to get back in this double dissolution election with its lower Senate voting quotas. In South Australia, the newly created Nick Xenophon Team could get three seats. In Tasmania, it appears the Jacqui Lambie Network is certain of least one. In Queensland, the final two Senate seats could go anywhere, with Pauline Hanson a distinct possibility to return to the Australian Parliament. There is something odd about Pauline Hanson's web site. It is full of ALP ads! This is the party web site.  

At this point, I think that the only thing one can say with certainty is that both Green and Liberal Party numbers will be lower in the new Senate. Perhaps there is a certain justice in that.                    


Winton Bates said...

Bill Shorten must be slightly worried that he will be blamed for any subsequent slump in house prices if he wins the election and introduces hiis promised changes to negative gearing and capital gains tax. i wonder what he will do if house prices begin to fall before he has introduced the legislation.

Jim Belshaw said...

That, a fall in prices, is quite possible, Winton. Apartment prices are down, I think. I'm not sure that he will be too worried if he winds!

Winton Bates said...

He would rather have that problem than not to be prime minister, but I still wonder what he might do.

Jim Belshaw said...

I really have a lot of typos at the moment. I am glad that could read wind as win!

I think that his response will depend on the size of the outcome. If it's really significant, you will get some modifications to policy. This is one of those cases where we have two very polar projected outcomes, both claiming to be based on economic analysis.