The M Society

The Age (22/2/2008):

Families skip meals to pay rent

Act on negative gearing, say experts 

by Sunanda Creagh (Sydney) and Tim Colebatch (Canberra)

RISING rents are forcing thousands of Australians to skip meals and deny their children school excursions, according to new research.

This came as another study showed there will be a massive increase in the number of renters over the next 40 years as housing becomes increasingly unafforable to low-income earners.

Research by the Australian Housing and Urban Research Institute, based on surveys and interviews with 1400 renter households and 400 recent home purchasers, found that 26% of low-income renters surveyed sometimes go without food and 42% can’t afford school excursions.  Forty-seven per cent said that, even with improved income, rents would still be too high.

“Despite the government obsession with home ownership, private rental is the problem sector,” institute researcher Terry Burke told the National Housing Conference in Sydney.

Many home owners pay their mortgage by taking second jobs, but Professor Burke said: “Any economic slowdown means they could lose those jobs and then you have thousands who are going to be in trouble.  I suspect we are approaching that situation.”

He criticised negative gearing, the first home owners’ grant, capital gains tax and rent assistance as measures that add to demand for housing without boosting supply, but said he doubted the Federal Government would drop the policies.

A separate study presented at the conference, headed by hosing analyst Judith Yates of Sydney University, projects taht over the next 40 years, the number of households will increase by 50%, but the number of renters will almost double.

“In the future, as in the past, the majority of Australians will have affordable, secure housing over their lives,” the study said.  “(But) it will increasingly difficult for low and moderate-income households who have deferred home purchase to become home owners.”  The number of lower-income households in housing stress in the private rental market is expected to increase by 120%.

The study points out that home ownership rates are already falling among younger households.  Between 1981 and 2006, the proportion of householders aged 35 to 44 who do not own their home has risen from 25% to 32%.  The proportion aged 25 to 34 who are renting has swollen from 39% to 49%.

The Housing Industry Associatiation forecast that in 2007-08 there would be hardly any growth in housing starts.

Housing Industry Association director Chris Lamont said hosuing starts had stalled at a level providing about 20,000 fewer homes a year that Australia needed.  New rate rises would further restrict supply, putting more pressure on house prices and rents.

Popularity: 56% [?]

Inflation is up and you best watch the wages

– David James

Inflation is getting uncomfortably high, and it is just as well that we have not also had a wages breakout.  Goodness, if people start getting paid more, then we will all be worse off.  Especially if you happen to be a starving chief executive living from hand to mouth to stock option to annual bonus.  Clearly, the working poor will have to remain the working poor, otherwise we will not be able to ignore them at relevant social occasions.  Here are some pretty poor words.

AAA.  A measure to indicate that an investment possesses the lowest level of risk.  It once meant something, until ratings agencies started to get a bad case of the stutters.  They began to say things like “This is a… a… a dog”, which would be interpreted as “Triple A”.  Then everyone involved would leave planet Earth for a little trip around the outer reaches of the solar system accompanied by a subprime mortgage.

Compensation.  An opportunity to prove that when something is more important than money, it’s definitely about the money.

Investment bankers.  Masters of the universe.  Who cannot fail to be impressed by their love affairs with calculators?  Their intimate knowledge of when to wear yellow tie and when to wear pink?  Their wholehearted efforts to destroy what’s left of Western civilisation?

Sorry.  A word that is very much in vogue.  We suggest economists apologise for being right half of the time, but neve knowing which half.  Kevin Rudd should apologise for bring the only Kevin Rudd available.  Brendan Nelson should apologise for not having the decency to stay in bed.

David James is investment editor for BRW magazine and author of The Business Devil’s Dictionary.

Read this from 18 Feb 2008 The Age.

Popularity: 24% [?]

The Sydney Morning Herald

A Bangladeshi student I saw recently attempted suicide after failing to pay his tuition fees. On closer questioning it turned out his parents had sold off almost all their land and taken out a sizeable loan from a moneylender at an extortionate rate. They were banking their future upon him completing his degree in Australia and gaining permanent residency.

Universities and colleges are really big ground for earning money.

To be success doesn’t only take lucks and chances, you need to have strong will and depress-tolerance. There is no point pursuing something others are pursuing, but you are not capable of doing it. That will only bring you disastrous result.

Popularity: 14% [?]