Commonwealth Bank second to hike rates

As expected, the Commonwealth Bank is today the second bank to hike interest rates out of cycle, notching rates up 15 basis points. ANZ and NAB are expected to follow.

As did Westpac, the CBA blamed the rates decision on increased capital and regulatory requirements. (‘Banking regulator announces tighter capital adequacy requirements for residential mortgages’ – 21st July 2015)

On Monday, the government endorsed the banking regulator’s action in making the Australian banking system “unquestionably strong,” a recommendation from the Murray Financial System Inquiry.

Today Wayne Byres, chairman of Australia’s banking regulator – the Australian Prudential Regulation Authority, remarked some lending standards by the big banks were at “horribly low levels” and had lacked “common sense”. He said “With the benefit of hindsight, obviously we wish we got on to this a bit sooner, but we are where we are.”

It is also understood, Westpac has once again written to brokers informing them of a further crack down on loans to foreign property investors, effective next Monday. The bank will scrutinise visa and foreign-currency income, while abolishing low doc loans for immigrant mortgages. In July, the bank had written to brokers who were arranging a high percentage of mortgages to non-residents, informing them that applications must have an Australian residential address.

» Government backs APRA action on banks – The Sydney Morning Herald, 20th October 2015.
» Bank of Melbourne latest to crack down on foreign lending for property”> – The Australian Financial Review, 21st October 2015.
» Westpac tightens lending for foreign property investors – The Australia Financial Review, 26th July 2015.


  1. The fact that Byers has to take these measures at all is testament to what a free-for-all the mortgage market was before he got into the swivel chair.

    And because of that laxity, we’re now having to raise mortgage rates as we enter an accelerating cyclical downturn.

    Not going to end well.

  2. Great news for me. I’m very lucky to rent very cheap from family. Term deposits are great for someone like me or those that saved and worked hard plus those who inherited from people who died with ACTUAL cash and assets. Park REAL money somewhere where it earns a modest profit.

    Stuff this casino shit. I have zero debt and almost zero assets. Hopefully it takes hold and we get back to the days where debt free people have banks rent their savings. Not underwriting gamblers, vogue or not.

  3. And the whinging going on about it is hilarious!

    Another interesting development I’ve noticed where I work is people commenting about “ridiculous” prices paid for houses by Chinese. It wasn’t ridiculous when they could take out loans and push up prices with a view to greed and showmanship but now it is becoming affordable for the “property only ever goes up” spruikers how it makes all the difference. It was ridiculous a decade ago at least.

    Back to the thread, Westpac know that they are exposed to a nation of people who’ll toss their properties on the market or run without any qualms about not paying their debt off because the bank’s chances of catching them back in China is Buckleys.

  4. @average_bloke: Nice article on the stupidities of Real Estate trying to con everyone that 1.1 million to 1 million is a bargain. Aberfitch is a complete moron!

    I remember when the house prices dropped 3% and the media spruiked “House prices plummet 3%” please, they need a dictionary.

    I wonder where all these soothsaying spruikers will be when the fit hits the shan? They will probably crawl back to the hole they crawled out of but that’s okay: I’ve got a torch muahahahahahaha.

  5. “[People don’t want much,just], someone to love, somewhere to live, somewhere to work and something to hope for.” Norman Kirk.

  6. Next step for the Big 4 banking Cartel will be to push for the RBA to cut rates on Melbourne Cup Day to further increase their profits. It will be interesting to see how their influence grows under the new banker’s PM who has already mentioned that Australia needs a bigger financial sector. His new government’s first step was to repeal the Corporations Tax Transparency Act to avoid embarrassing the large corporations who pay no tax. It was passed in an empty senate with little or no press coverage. Welcome to the new Kleptocracy

  7. I’ve just spent the past few evening watching the BBC series, the Ascent of Money. It explains very well how money markets were created and how when mixed with human emotion, namely fear and greed, situations almost always go haywire. History repeats and we do have many examples of boom and bust cycles over time. Why don’t people pay attention? Oh that’s right, programs like the bachelor and biggest loser have dumbed the vast majority down.
    I’d estimate only 10% of the Aussie population truely understand how what’s going on & how much we’ve been conned.

  8. Jane, don’t forget that obnoxious show “The Block”! How cheap can they be: Get a camera and a handful of idiots, have a presenter make obnoxious comments over people bumbling around, stuffing up and bitching about everyone else and get your TV audience to vote for this crap!

    Thank God for Netflix and Youtube is all I can say.

  9. 56andoverit,

    That should be “people don’t NEED much.”

    As I said a couple of weeks ago a lot of people want others to work to keep them in the lifestyle they’ve become accustomed to, without doing any work themselves. That’s how renting investment properties works.

    If you’re positively geared (you bought some years ago) then you only need an interest only loan to be making money off someone else’s labour.

  10. @ comment 11

    David C, whats you point? Everyone dreams of kicking back and living off smart investments, whats wrong with that? Realise that a rental property is the same as any other business, in that it is an entity that has to be managed , and hopefully if done so correctly will return a good yield. Sure it has capital gain, other have good will, others have share market exposure, all have different exposures to wealth increments or losses depending on the economic climate.

    Houses have not been a reasonable “investment” for a long time, but they will be once again. Do you really think people are going to stop being landlords because of your anti rent-seeker attitude?

    Right now it is pretty hard to substantially positively gear a property in most parts of Australia other than Syd/Melb. Take away negative gearing and there will be a mass exodus of rent-seekers, flooding the market with properties and devaluing them, and potentially triggering many loan defaults and bank losses, and thus tipping a crash. The banks dont want, the govt doesnt want that, the investors dont want that, the economy doesnt want that . So neg gearing is here to stay for the moment. Just deal with it. I don’t hear you complaining about stocks?

    And no, I dont own an investment property.

  11. @12 “The banks don’t want that, the govt doesnt want that, the investors dont want that, the economy doesn’t want that”

    Erm… let’s take these one by one shall we?

    The banks, well, let’s see now. Of course they don’t want that because their Ponzi scheme will collapse and all those white collar criminals may have to actually ‘work’ for a living. I have no sympathy for bankers.

    The government. It doesn’t matter what the government wants. Our elected members work for us, not the other way round, (as they seem to think). The fact that politicians all around the world have become corrupt, dishonest, unscrupulous, untrustworthy liars, might have something to do with the fact that what they WANT is totally and utterly irrelevant.

    Investors. Well in my opinion a home should NOT be, and should NEVER have been treated as an asset class for speculative investment. If the house of cards collapses leaving investors with assets worth less than they paid for them, then that is the price for dabbling with investments – whether it be property, stocks, bonds or fine wine and art. The small print says that the value of assets can go down as well as up, so suck it in.

    The economy? If you really, truly, looked beyond what the media and our LYING politicians and bankers are telling us, you’d realise that the economy NEEDS the housing market to collapse! The whole system needs a reboot and the economy will be the better for it. Affordable housing for all means more money going into the economy instead of lining the pockets of landlords and mortgage lenders. It’s very simple mathematics. The greater percentage of one’s income that goes on housing (rent/mortgage), the smaller percentage that goes into the economy. And without money going into the economy, you have under-employment and unemployment, and with people out of work, you not only have fewer people who can afford to rent or buy a home, you also have lower tax revenues, and with lower tax revenues, you have fewer options and less money in the Treasury to provide tax breaks for rent-seekers – like negative gearing. Do you want me to run you through it again?

    You may not own an investment property, and I mean this with no malice, but you really need to stop drinking the cool-aid. Property is going one way now – down! There is simply no more money in the system to prop it up any longer.

    And by the way, I don’t dream of kicking back and living off smart investments, that’s just foolish and lazy. I get immense satisfaction from woking hard and living off the fruits of my labour.


  12. Titty….you need to wake up….the banks know what’s going on and so does the government…where have you been? Does Santa still come to you at Christmas ?

  13. Unfortunately Titty (comment #12) is a perfect example of how majority of our society think, and I speak from my firsthand experience be it work colleagues, friends etc.
    It’s wide spread belief here in Australia (and not so long ago in “PIGS” aka Portugal, Ireland, Greece, Spain and let’s not forget what happened to Iceland!) the quickest, easiest and the safest way to get reach quick is through property investment.
    Hopefully (very soon) these people will learn what it means to get a real job and how to contribute to the economy other than by RE investments.

  14. There’s one way to send prices down: Stop buying. There’s no way investors will be able to fill the gap if first home owners stop buying. Within a month or two, the bubble will burst with a big bang.

  15. @14 Actually you need to wake up. Then you ‘d see I never said the banks didn’t know whats going on, of course they do. Please try to follow the conversation and READ if you can..

  16. Hey Titty let’s all be landlords and all kick back but who would rent from us ? Who would provide the goods and services we need? House investment is essence is non productive parasitical and a drain on the real economy (well at least the way it is now). Real estate is sucking the real economy , the real workers (the real heroes) dry!

  17. @ comment 15 Captain Rex

    “Unfortunately Titty (comment #12) is a perfect example of how majority of our society think” … ” the quickest, easiest and the safest way to get reach quick is through property investment.”

    Oi Oi Captain, you’re another that cant read properly. I never said any of that. In fact I’ve personally never invested in property if you dont count my PPOR.

    It seems to me your another of the throng that lets their personal disgruntlement of the status quo get in the way of logical thinking, probably because you’re a failed investor? Ok then, think like a loser, but dont belittle people whom are more financially savvy than you ie, the property investors who cashed in on the boom.

    Maybe you should learn what it means to live in a free market capitalist economy. What on earth do you think goes on in the stock market? Same thing – herd mentality, false perception. Most stock market investors haven’t got a clue what they are doing or how to do proper research. The lucky ones have big mouths about how rich they got, the losers all clam up so you never hear about their mistakes. You do know the losers outnumber the winners, dont you?

  18. @Comment 13

    Rupert, my comment is not concerned with any sympathy you might have for anyone, including bankers. I’m just talking cold hard facts.

    “Our elected members work for us”
    Lol what was that you said about drinking cool aid? They work for themselves and their own interests (ie the perks they allow themselves when they leave office) whilst putting up a veneer that they are doing tireless public good (like Bronwyn Bishop). Like the banks, they are well aware of the perilous situation we are in, however they are not going to remove NG. At best they might dismantle it in small increments.

    “Well in my opinion a home should NOT be, and should NEVER have been treated as an asset class for speculative investment.”
    Thats fine and I agree, however there is the small concept of reality to deal with, so how about dealing with it? Whether it becomes a speculative class or not could only be controlled via legislation. You cant stop people speculating.

    “you’d realise that the economy NEEDS the housing market to collapse!”
    The portion of the economy that wants it are the house buyers (which is where it sounds your sour grapes are coming from), but many of the other parts of the economy do not want it to collapse. You do realise the economy is going to suffer enormously when it does crash? A large portion of the economy is invested in mortgages, hence the lever pullers are going to do everything to protect that to avoid (or stave off if you like) a crash. Just stating facts. They arent going to say “oh gee, this was a bad idea, lets undo it all in one fell swoop.”

    The rest of your post seems to axe grinding about the status quo. However you’re mixed up if you think I was supporting it.Again, I’m saying that’s just how it is.

    “Property is going one way now – down! ”
    lol evidence? Seems fairly static overall. Sydney median 1Mill+.

    “And by the way, I don’t dream of kicking back and living off smart investments, that’s just foolish and lazy.”
    LOL Nah mate, that’s being smart. As for enjoying the fruits of your labour, no problems, but I prefer to use my head, and do it the easy way. If you like working like a navvy, have no problem with that.

    Also, I’m financially ready for a big economic decline, and I don’t have a vested interested in the status quo staying as it is. I will personally find bigger opportunities if it actually does crash. It is all good!

  19. Titty….your more concerned with what others think….way too much detail explainng yourself…..funny though

  20. I can see you are tying to bring this blog to a new low level – sorry but I don’t fall in to this rabbit hole.
    But I have to say this, for a person who claims not to have any interests in RE you strangely act like a wounded:

    a) Property spruiker
    b) RE agent
    c) Developer
    d) Builder

    or you are just delusional.

    I know that truth can be at times very hurtful.
    Well… suck it up princess!

  21. @Titty “Houses have not been a reasonable “investment” for a long time, but they will be once again.”
    “Maybe you should learn what it means to live in a free market capitalist economy.”

    Yes, when markets go into a correction or a downturn the factors influencing whether the return on investment is worth the initial outlay improves. Oddly you seem to also suggest that the markets won’t go into correction or a downturn because they will be propped up by Banks, the Government or the majority who are already leveraged up, suggesting conditions *won’t* improve. I’m a little confused. Do you believe the property market is a free market capitalist economy or a Bank / Government controlled rort?

    Unless Banks, the Government, the Chinese and the majority who are already leveraged up in property plan to buy $1mil houses at a constant, ever increasing rate then I don’t see where the market can go except down. This is at a time when migration is low, we have an ageing population and the Chinese government is making it increasingly difficult to move large sums of money out of China.

    I guess if you believe in free markets and that the property market can go up, then by deduction you agree that the property market can also go down.

    I feel I’ve seen enough leading indicators to satisfy my belief the property market will turn down in the future in line with a cyclical correction. I believe that’s why the Banks are beefing themselves up now with extra cash reserves. But it isn’t my job to convince you.

    Let’s leave the personal attacks at the door.

  22. Titty Surprise,

    In a productive business you have to do something to make money (produce widgets, create a service). Whey you stop doing that your business goes broke.

    So yes, rent-seeking is the laziest and least productive of investments. That’s why it should be taxed and not subsidised.

    This blog is primarily about banking and financing of housing, so of course I didn’t say anything about stocks. But if you want me to, sure they’re over priced. Hell you only have to search for “margin loans” online to workout that most of the banks up to their eyeballs in a speculative frenzy in that arena.

    Maybe you should learn what it means to live in a free market capitalist economy.

    What, you think what we’ve got is a free market, where the government subsidies speculation through tax incentives and laxed regulation of banking and finance.

    One of the primary purposes of government is to smooth out the booms and busts not to make them bigger. Booms always go bust and governments who stoke them try to claim that they’re economic geniuses, whey it’s quite obvious that they’re not.

    For some reason you seem to be a bit touchy about criticizing people in our society who are parasites, as if it is something that we should all aspire to be ourselves. Maybe you should consider doing some study on the topic of ethics.

  23. Sorry that didn’t come out right.

    Sure laxed regulation of the banking and finance sector is probably a “free market” except when it is bailed out because of a collapse.

  24. @ comment #14 Capitan Rex

    Correcting your misreadings doesn’t amount to bringing anything to a new low – its just a correction. As for being wounded, hardly, zero financial hardship here, Ive made smart investments and I’m sitting pretty. Sorry if that rustles your jimmies. Some people are successful, so as you yourself say, suck it up Princess.

    @comment #25, S

    Where did I say things wont improve? Propping up is going on right now, the same way America wont accept its debt ceiling, and money printing (QE) is happening in Europe. Australia will quite likely go along and be part of this sham for a while yet. Of course its unsustainable, that’s the nature of Ponzi, so of course it will correct.

    Seriously, if you have to ask whether property is or isnt a free market asset, you shouldn’t be commenting. Just because banks have loans policies and interest rate schemes doesn’t mean you have to use them either does it? You have a choice – rent or buy. Take a loan, don’t take a loan. Get a job, don’t get a job.It’s largely a free market, if you want to split hairs you could say our economy is not a free market because the RBA fiddles with interest rates which pretty well affects everything. So it’s your call.

    No disagreement with your post generally.

    @ comment #26
    David C

    “rent-seeking is the laziest and least productive of investments. That’s why it should be taxed and not subsidised.”

    Lol you comment to the exclusion of all the other tax subsidised rorts going on. Whilst there is nothing wrong with your premise of removing subsidisation, don’t you think we should do it on super too? And franked share dividends? Why should you get tax breaks that way either?

    You lot remind me of those people who dont like millionaires minimising their tax. Nothing wrong with that if it is legal. But according to you, its lazy, and we should wipe them out, right? Lol Tall poppy syndrome. I wasnt aware that being a member of this forum meant falling in line with the pitch-fork wielding yokels and shouting “death to the rich!” because they have a chip on their shoulder about being poor. I’ll call a spade a spade where I see fit. Seems to me this maligning of property investors is done because you’re all so angry that you missed out on your share of the property market!

    Calling property investors parasites is silly, they are just taking advantage of an opportunity, and its no lazier than most other forms of investment. Say, do you approach immigrants/refugees and call them parasites too, because they are taking advantage of an opportunity in a country where there are 5 times more unemployed than there are job vacancies? Landlords are are just small business owners. The true parasites are at the top of the corporate ladder, if you had any idea of how these people micro manipulate our economies and get subsidised by the taxpayer you wouldnt waste your time talking about landlords. I bet most of you didnt complain about the huge subsidies that Holden were getting before they tanked. Why do businesses take advantage of subsidies? Because the govt has decided to stimulate the economy that way throught that incentive. Myself, Ive also picked up free home insulation, water tanks and pumps, solar panels, etc all worth thousands of dollars. So I guess I’m a parasite too? Do you actually knwo about the amount of subsidies that many industries get? Get real and direct your anger to the politicians who create these scenarios, not at the people who are merely taking advantage of it. Did you see the crap on 4 Corners on Mon 26th Oct? Case in point.

    “Maybe you should consider doing some study on the topic of ethics.”
    What a ridiculous statement. Take a look around you, ethics goes by the wayside in a market system where people try to make money by hook or by crook. I bet the company you work for employs trickery to get business, just like 99.9% of them do. Watch some adverts on TV, its all spruiked lies, convincing you to buy things you do not need. Ethics? lol…where? Its a dog eat dog world, so harden up Princess.

  25. @Titty “Seriously, if you have to ask whether property is or isnt a free market asset, you shouldn’t be commenting.”

    lol… read my question again: “Do you believe the property market is a free market capitalist economy or a Bank / Government controlled rort?”

    I was asking YOU whether YOU believe property is a free market. I already have pretty strong opinions thanks, I was probing you to work out how your conflicting beliefs that ‘its a free market!’ and ‘government won’t let it fall!’ can actually exist in your world simultaneously. No government has been able to stop a free capitalist market crash to date, not even Communist China.

  26. @S

    I agree with you that the Leverage in the system will cause its collapse. All fiat currencies are credit that depend on the confidence in the people issuing it. Most Real Estate is bought on credit, hence most RE is just credit. If the faith in the system is lost or the supply of currency slows, RE prices implode. In reality it is just a house of cards built on quicksands because there is no real money involved.

  27. @ Cooment 30. S

    Ok maybe I should have said “government will do all they can to prop it up so that it doesn’t fall till the last possible moment!” Also dont forget govt contributes to high home prices through their building red tape, and restrictive land release policies.

    Of course its a free market, sellers essentially set the price. And please dont come back by stating the market interventions that govt exercises, like interest rates, tax concessions, etc. Sure those things affect how people make investment decisions, but sellers essentially still dictate the price in a flat or rising market. Buyers control it more when its a declining market. That’s a free market working right there.

  28. A house is a home. Greed ruined that dream for many.

    The sad truth? it won’t be the elites that will pay. it will be mummies & daddies duped in by fear.

    we failed as a nation. i blame this govt. banks and what ever buyers can easily be stopped by just saying “NO, Not for sale”.

    Like i said, we failed as a nation. So heres to a future of being a world puppet.

  29. @ 35
    Not sellers dictating the price.
    Availability of credit does.
    No market is ‘free’ otherwise we’d end in same position as every game of Monopoly (co-incidentally exactly what it was designed to demonstrate) – one player bankrupting everyone else and ending the game.
    Banks post GFC allocated capital to get best return and with re-weighted returns favouring housing, most has flowed here.
    Assisted by below-GFC emergency interest rates (increases amount they can push to consumers and they can get from international markets seeking better returns) they’ve been blowing bigger and bigger bubbles.
    First hike of interest rates in US will suck capital back to America like there’s a Giant Vampire Squid living there.
    It won’t end with a bang but a pop.
    Nouriel Roubini warned this was bigger than 28 and look at the measures FDR had to take to sort that out. Note, we didn’t follow NR’s advice so we’ve actually made it worse than it was eight years ago.
    It’s going to go off like a thermobaric if not thermonuclear weapon. Just try and stay out of the blast radius 🙂
    On a brighter note it was nice sunny day and tomorrow will probably be too and in comparison to the environmental collapse the housing one really doesn’t matter.

  30. Bob Katter . Parliament House Canberra 29 October 2015: ” You are living in a country that is going broke at 100 miles per hour.You cannot buy everything from overseas when you have nothing to sell overseas.The people in this place with their market fundamentalism,their fanaticism,have imposed upon Australia a regime that no other country on earth has to suffer under.Every other farmer on earth gets 40 percent of his income from the government.Our poor farmer gets 6 percent.I conclude on that note.So much for your free trade.”

  31. @38

    You are correct about capital flying back to USA under rate rises. Except there will be no rate rises (of significance) over the next few years. Their bond market has dictated that.

    What is more likely is the entire world continues to drop rates, or even inverse them. Even German bonds flipped their yield curve the other day.

    Is it worse than 28? Hard to compare the two, with the advances in technology, a highly flexible currency base and global trade. What we do know, is that after quadroupling the USA currency base, in only 5 years, the average USA citizen is still poorer than 10 years ago, in many cases 15 years.

    The wife and I watch the ‘maker’ and freelance space. Millions upon millions of people are making a living (often not a very good one) by being self employed. They just can’t find paid work. the cost of business, the cost of employees, the cost of insurance, energy etc is just to high for businesses to expand their workforce.

    But on the other hand what is cheap? Finance. Overheard a car salesman the other day, it was just like watching a doco post Lehmann’s collapse: “Oh, it’s great! I’m getting $700 per car, and selling heaps of them. This 1% finance is awesome, people can’t get enough of it: Everyone’s getting new cars!”

    Anyone feel like they’ve seen this movie before?

    Avoid excessive debt, avoid pumped up assets, avoid income volatility. You’re friends may look at you funny now, but give it time, and they will look upon you with envy and sickeningly tell you “you were lucky you didn’t get tied down with debt”: No, you were smarter.

    It’s why 5% will always have 95%. Human psychology. Get control of yours now.

  32. @ comment #38

    “No market is ‘free’ otherwise we’d end in same position as every game of Monopoly – one player bankrupting everyone else and ending the game.”

    Lol terrible analogy. Bankrupting happens all the time but its not the end of the game. No modern economy has ever totally imploded where the lights go out and people die. Businesses close, but something new starts in its wake. Parts of the economy wax and wane. People trade at a price they feel is fair. Thats what a free market is.

    Go and live in China or if you want to see what a more restricted economy is like, or North Korea where the gubmint controls everything.

    Really discussing “free market economy” is just semantics. We are in one – get over it.

  33. What really pisses me off with people like Titty is that they seem to be arguing that because unethical behaviour has always existed we shouldn’t endeavour to reduce the opportunities for unethical and exploitative behavior in the future. It’s really is a nasty little argument made by the loony libertarians.

    I don’t believe we need a nanny state, but people who are deceiving for financial gain are committing fraud and should be prosecuted for it. As with other profit from crime laws all proceeds of fraud should be forfeited and jail time served. Simple

  34. @ comment #42 DavidC

    Where did I say we shouldn’t endeavour to reduce unethical and exploitative behaviour? Lol There’s you making things up again.

    Most of you don’t seem to understand a few important points,

    1. The Hawke Govt abolished NG for two years in the mid eighties, with the result that private investment rental stock went down, and rents skyrocketed because demand outstripped supply. This is why they reintroduced it two years later.

    2.The Australian govt is not interested in public housing, and I know in Qld they have severely sold off their stock over the last decade. This is another reason why NG remains as an investment incentive.

    3. About a quarter of the population rent, that’s an enormous amount of people that investors are responsible for housing. Don’t forget that next time you call them parasites.

    4. Any investment can be NG’d , NOT JUST PROPERTY. This is essentially why your tall poppy whining about it is so laughable. If you remove tax deductability for one asset class, investors will shift to another. See point 1.

    As for deceptions Google the Dunning Kruger effect – this exemplifies your typical investor. As I said before, most of them are failures waiting to happen, because they are too lazy to educate themselves. For example, placing trust in someone who wants you to part with your money for a service they provide, is the very first lesson you learn when you’re out in the real world after you leave school and home. Sadly many people do not ever learn this lesson.

  35. Just repeating the obvious. Average trademan wage,in 1985, 40k per year net. Typical Sydney 3 bed house on 700sq.m land around 200k. In 2015 that wage earner still makes an average of 40k per year. Today that 3 bed bungalow is around 2 million. In real numbers wages have remained constant for 30 years (With inflation the workers buying power has diminished). At the same time houses, in Sydney, have gone up by 1000 percent. If you could borrow the amount that’s 3000 percent. That is 125 years of total net income to pay of a house in Sydney! This is beyond slavery.

  36. Not wishing to let facts ruin a good story but……

    1. The Hawke Government did not abolish negative gearing it only quarantined the deductibility of losses to the income from the property. (Normal business practice)
    2. Rents did not rise in Adelaide and Brisbane, Melbourne stayed the same & other cyclical rises at the time affected Sydney & Perth.
    3.NG is a form of tax apartheid and only favours those with large disposable incomes. Ordinary workers get no deductions.
    4.NG destroys an economy by diverting investment capital into non-productive housing instead of businesses that employ labour.
    5.It discriminates against other businesses in that the Capital Gains Tax after sale of assets is reduced and deferred.
    6.Tax deductions amounted to $12 billion which have to be raised elsewhere. (Claimed by only 1.2 million investors)
    7.It increases cost of housing for owner occupiers who cannot compete with unlimited funding from investors.

    I am not advocating the abolition of NG, but lets level the playing field by making the deductions only claimable against the real estate investment profit/loss. (Not other sources of income)

  37. Negative Gearing is FREE MONEY for RICH PEOPLE, and negative gearing investors are essentially dole bludgers living on government welfare.

  38. Titty:

    Take a look around you, ethics goes by the wayside in a market system where people try to make money by hook or by crook…

    …Its a dog eat dog world, so harden up Princess.

    That pretty much seems to me that you are saying that unethical behaviour is something that we should accept as part of a market system.

    Am I wrong? If so maybe you should explain your nuance a bit better.

    About a quarter of the population rent, that’s an enormous amount of people that investors are responsible for housing. Don’t forget that next time you call them parasites.

    If housing costs were not so high many of those people could own themselves. They would be working toward independence from the rent seekers. It’s a zero sum game. Houses that are not rented are houses that are owned by owner-occupiers.

    Let’s not forget that investors are adding little to the supply of housing. Rent seekers are not providing a service they’re taking advantage (you’ve stated as much above).

    The cost of housing has been driven by government subsidies to investors (see Max D. Leverage’s point 3 above). You’ve also unwittingly acknowledged that in what you’ve just said. Governments use to subsidise housing for needy (it was a direct subsidy to them). Now they subsidise the rent seekers. It has been an intentional ploy to favor one segment of society over another.

    There are so many other things I could take issue with in what you’ve stated but I’m done with arguing with you because you hold some very conflicting points of view, or you are not very good at expressing them, or you have not educated yourself well enough on the topics under discussion to make a coherent argument.

  39. Just to be clear,

    If you think that investors stepped in to fill the gap left by government, you’ve got it all ass about. It was intentional, through policy, to drive up housing costs and at the same time remove support via government housing programs. That’s exactly how you create an environment ripe for exploitation by rent seekers.

    You only have to look at other aspects of the neo-liberal free market to see how this works. Tax payers money wasted on the most shameless scams. So much for the efficiency of private enterprise.

  40. @ 45 Max D. Leverage
    “Not wishing to let facts ruin a good story but……”
    Really, so you get your facts from Wikipedia, as its soooo obvious you went there for all your info. Straight off the page. lol Now to correct your points

    1. The Hawke Government …quarantined the deductibility of losses to the income from the property. Yes, which effectively removed the main NG attraction for it, hence the exodus of property investors.

    2. False. Too bad you didnt read ALL the Wiki article, as it quite clearly challenges the notion the rents did not rise nationally. It states rents did rise nationally according to the ABS in those 2 yrs of quarantining, so dont just pick and choose what you like to suit your narrative. I remember personally at the time, rents were on the rise. Were you even alive then, old son?

    3.NG is a form of tax apartheid lol what rubbish. You can do it in any tax bracket. the higher your tax bracket, the more you pay, and the more you are entitled to cliam back. Makes sense. Only those in the higher tax brackets can afford to avail themselves of tax breaks to make a business work. It also depends what idiotic scheme your beloved govt brings in, like film investment of 133% deduction. Again, I didnt hear the lower classes moan about that when it was in and they were ripping it off.

    4. destroy labour? You think every capital investment is about creating labour? Please learn about how economics works. Only NEW housing is about creating labour. you cannot stop investment or speculation in older houses because the market does not make a huge difference in their asset price (ie old old home is worth almost as much as a new one) Crazy, but thats how it works.

    5.It discriminates against other businesses – well yeah, its has a slight, but not large advantage, but as you have already been told, this is what the govt want because it is not interested in public housing itself, So what would you expect?

    6.You might as well argue all deductions be abolished so that there is more money for the main pool – thats just stupid. Deductions are there for a reason. No one would run a business if there were no deductions. Please think before writing.

    7.NG has little to do with capital gains. Many areas of Australia were flat for many years in the 80s and 90s. Many have been for the last 5 years . PLease stop making wild unsubstantiated claims to support your narrative. also Wikipedia does not do much for your credibility, please try something else.

  41. @ comment # 47 David C Says:

    PLease re read all the comments, your points have already been raised and answered. Its no good just banging your head because of sour grapes. Understand the system, and lobby the govt to change their idiotic policies if you dont like it.

  42. @Tittie

    Point six, if not for deductions no one would run a business. OMG. A business is supposed to be a wealth creation asset. Taxation should be a by product. It should never be the be all and end all of investment.

    If you’re doing stuff only for the tax deduction. You’re doing it wrong.

  43. @51 Matty,

    Totally agree with that. However a business that is employing people should be given some slack. People who sit on their fat lazy arse shouldn’t.


    Personal experience counts for nothing. Numbers and facts do.

    If it was true that the abolition of negative gearing caused rents to rise, as the REIA claims, shouldn’t rents have risen Australia-wide since negative gearing affects all rental markets equally?

    Obviously there was no pattern and to claim so is dishonest.

    …and you said…

    you cannot stop investment or speculation in older houses because the market does not make a huge difference in their asset price (ie old old home is worth almost as much as a new one)

    It’s called land speculation not house speculation. In reality the house has little value to the speculator. If there was no speculative value in land then the property owner would have to develop (you know – employ someone to renovate or rebuild, to make money).

    Have you not heard of a land tax?

    As far as I’m concerned land speculation is as much of a business as buying gold and sitting on it is.

    So what other “businesses” are there where you can just sit back and do nothing and make a profit? I’m yet to think of one.

    Let’s put aside negative gearing for a moment (as I did in my original argument). If you purchase an investment property with a loan and you have minimal capital (let’s say you got an inheritance), at a time when you don’t need to negatively gear it, what work are you doing to pay it off? How is this a business? How is any other business like this where you provide little capital, you do no work, produce nothing and someone else works to pay off your debt (build your capital).

    And it’s not a matter of sour grapes. Life is relatively easy for me. I don’t have a mortgage (and the stress associated with that) and pay only a small amount of my income in rent.

    I’m just trying to highlight how pernicious this attitude of entitlement by property speculators is. We need to either change the rules or change the language in Australia (to make the people who are being shafted by this scam see it for what it is). Since I’ve got Buckley’s chance of changing the rules directly, highlighting how nasty this attitude is, is the best that I can do.

    Meanwhile, you seem to be in the business of excusing this sort of behaviour by claiming it’s adding some sort of value to the economy (it’s a real business), it’s a free market or “life’s tough” or something.

    Really this time I’m done.

  44. @ comment 52 Matty

    Almost Correct, but the fact is in this world most businesses arent Ebay or Google, and dont make a massive profit. Margins are tight if they have competition, and tax deductions help their business from sinking. you do relaise that a tax deduction doesnt return the full cost of the expense, dont you? Just the tax that would be paid on it. The owner still incurs the cost. you cannot avoid costs.

    Wealth creation? Mate, most small businesses owners are happy to just make an average wage. Do you really think absolutely everyone self employed is rolling it it? No, they aren’t.

  45. @ comment 52 David C

    Do you ever use any reputable sources to back up your claims? First it is Wikipedia, then its a bunch of bloggers at Macro Business whose mission is “to bridge the gulf between the Australian business media and reality.” lol

    Unfortunately just stating “source: ABS” without an actual link gives them pretty well zero credibility.ABS dont actually keep stats on rent, so Macro Business is telling porkies to suit their narrative. the REIA has all the rent rolls in Australia on their books, they would be more credible than most on rent levels.

    FYI, not just land, houses themselves increase in value, labour, materials have all shot through the roof, and people pay more for those poorly built old colonials than they do for a modern home. Ridiculous, but it proves architectural aesthetic itself, is an investment. I my self have relocated a colonil home once, rather than build new. Kachink!

    A business where you sit back and do nothing? Again,you’re showing your ignorance of how any business works, no business works like that. Even a rental requires supervision of the tenants and the property which landlords pay agents to do (in case it escaped you), there is also regular bookwork, repairs, inspections, etc. But to answer your question to some way, one such business where the players are true leeches is the stock market, which is built on nothing more than speculation. so you have the leeches like Soros making more in one transaction that the annual GDP of some countries! But I guess that’s ok by you, because you probably dabble in the ASX like many Australians.

    The rest of your post is the usual sour grapes and tall poppy syndrome we see here, you’re quite ok with playing the stock market I bet, but with not house investors having a go. That’s just hypocrisy. No one has a sense of entitlement, because if take on a business you take on risk, meaning you can lose or win. The entitlement seems to be projection on your part, because you missed out. Well, tough.

  46. Even a rental requires supervision of the tenants and the property which landlords pay agents to do (in case it escaped you)

    The rent-seeker still ain’t doing any work and the rent’s paying for it. What’s the rent – unearned income.

    How dare costs eat into the profits… It’s like talking to a brick wall.

    you’re quite ok with playing the stock market I bet

    I haven’t held shares since AMP was floated (and only then because I was an insurance policy holder). So no I’m not.

    the REIA has all the rent rolls in Australia on their books, they would be more credible than most on rent levels

    I don’t have time to look through the ABS web site to verify your claim, but who am I going to believe?
    This guy and the ABC.


    You, Joe Hockey and the REIA.

    because if take on a business you take on risk

    But the government won’t let the housing market fail, will it.

  47. @ comment 55 Davith Cuckold

    “The rent-seeker still ain’t doing any work and the rent’s paying for it”
    Blah blah, you’re a fool if you think everyone who earns money actually expends calories. As you’ve ben told, some are smart, other s like you have tall poppy syndrome. It’s like talking to a brick wall.

    “I don’t have time to look through the ABS web site”
    One looks at Wiki, the other couldnt be bothered. True armchair non experts here.

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