Monthly Archives: April 2020

Australian Politics 2020-04-28 15:11:00


Solely digital learning isn’t fair or sustainable

If the best that can be said for digital education is that it’s useful for some months during an unprecedented pandemic, then there probably isn’t much to be said for it normally.

While it’s generally good to look on the bright side, it would be incredibly naïve to think the current situation for Australian schools presents more opportunities than threats.

The research on the efficacy of education technology is inconsistent.

Even in normal times, it is not clear that tech helps students to learn – and these are not normal times. It may benefit some highly motivated learners, but others will be worse off.

Making the transition for millions of Australian students to digital learning is arguably necessary as a temporary, emergency measure. But there is no strong evidence it is more effective than face-to-face classes.


Ban on GM crops set to go in South Australia

The South Australian parliament is set to pass legislation to lift a ban on genetically-modified crops on the state's mainland

Legislation to lift the ban on genetically modified crops on the South Australian mainland is set to pass state parliament after negotiations between the Liberal government and the Labor opposition.

Primary Industries Minister Tim Whetstone says under proposed amendments local councils will have six months to apply to remain GM-free, though a final decision will still rest with the minister.

Kangaroo Island will also remain GM-free.

"This agreement is a great outcome for South Australian farmers who will have the opportunity to reap the benefits of growing GM where that is best for their business," Mr Whetstone said.


Top medical authority says Australia in ‘the same position as New Zealand’

Although Australia has been less strict

Australia’s top medical official has claimed Australia was seeing similar results to New Zealand despite not pursuing the country’s “elimination” strategy.

Australia’s chief medical officer Brendan Murphy said Australia was in a similar place to New Zealand where PM Jacinda Ardern says they’ve made significant strides towards eliminating coronavirus.

“There’s not a great difference between the aggressive suppression we are seeking, and elimination,” Prof Murphy told ABC’s 7.30 on Monday night.

Ms Ardern yesterday declared the country had “won the battle” against widespread community transmission of coronavirus, as the country eased some of its lockdown measures.

The country’s elimination strategy was enacted through lockdowns, with only essential services operating for more than four weeks and residents urged not to leave home.

But Prof Murphy said he was pleased with the results Australia were getting and said there was very little difference in the outcomes between Australia and New Zealand.

“The sort of numbers we’re getting at the moment … are pretty good, and if we can continue them as we expand our testing … that’s as good as elimination in many respects,” Prof Murphy said. “Elimination just means you’re not detecting any cases. It doesn’t mean you can relax.”

In New Zealand, a country with a population of five million, they’ve recorded a total 1122 cases of coronavirus. Of those infected, 19 have died.

Australia has recorded more than 6700 cases of coronavirus and 83 people have died from a population of 25 million.

Prof Murphy explained there could still be undetected coronavirus cases in the community, or asymptomatic carriers transmitting the virus.

“There’s not a great difference between the aggressive suppression we are seeking, and elimination.

“In fact we’re in pretty much the same position as New Zealand who have stated their claim to be one of elimination.” “We’re in a very similar place.”


‘A terrible tax’: Is it time to abolish stamp duty?

Stamp duty is back in the spotlight as the federal government draws up a raft of emergency plans and structural reforms to get the economy back on track after the devastation wrought by COVID-19.

Many key figures are urging the government to abolish stamp tax as an unwieldy weight on both the property market and people’s flexibility, making homes unaffordable for first-time buyers, and creating barriers for those wanting to move closer to work, upsize or downsize.

However, others argue that now isn’t the time for such sweeping change, when state governments are using stamp duty revenue for a major series of funding measures to soften the blow of the pandemic.

“Stamp duty is a terrible tax, it should be repealed and this is the perfect time to do it,” said Dr Shane Oliver, AMP Capital chief economist.

“It will have to be a gradual removal and replacement with some kind of land tax so later buyers aren’t unfairly affected.

“The problem with stamp duty is that it’s a massive impost on a single transaction which inhibits economic decision-making in a less-than-optimal way. But land tax would be levied on the value of land and applied to all landholders equally and be done in a much fairer way.”

The critical issue is the timing. With the Reserve Bank predicting the economy will shrink up to 10 per cent in the first half of this year, hours worked to plummet by 20 per cent and unemployment to remain over 6 per cent for the next couple of years, the danger is that stamp duty’s abolition could prove a deflationary move.

Yet Reserve Bank governor Philip Lowe this week said, in planning the recovery, the first on the list of reform measures was “the way we tax income generation, consumption and land”.

It’s widely believed Dr Lowe was referring to a series of reports commissioned over the years with proposals to raise less money from state conveyancing duties on property transactions and income tax in the future, and more from state land taxes and GST.

Domain Group economist Trent Wiltshire co-authored a Grattan Institute report in 2018 on how to improve housing affordability, and recommended axing stamp duty in favour of a broad-based property tax.

He said removing stamp duty had the almost unanimous support of economists, academics, the Productivity Commission, Infrastructure Australia and government tax reviews.

Now, he still feels the same, but has doubts about the timing of such a move.

“Long term, reform will create benefits for the economy and boost the Gross Domestic Product significantly,” he said. “But those benefits take a while to accrue and whether now is a good time to do it … It’s not something that will provide a short-term boost to the market.

“Abolishing stamp duty and replacing it with a broad-based, flat-rate land tax is a policy that should be pursued and could be part of a whole bunch of reforms once we emerge from this, but it isn’t a policy that will help the market rebound over the next few months, and that’s what we need.”

The arguments for axing stamp duty include that it’s an inefficient tax, levied only on those buying property in any particular year, and makes property more expensive for both purchasers and then, by association, renters. It thus also becomes an obstacle for people – and businesses – wanting to move and is also expensive to collect, costing 70 cents for each dollar raised, according to Treasury modelling.

On the plus side, it raises a great deal of revenue for state governments which they now have never been more in need of, to arrest some of the economic fall-out from the pandemic.

But that sum does rise and fall, sometimes quite dramatically, according to the number of property transactions taking place, and the strength of the property market, making planning difficult.

State budget papers show that in NSW, for instance, stamp duty revenue in 2018-19 was $7.4 billion, down 24 per cent from 2016-17’s $9.7 billion. In Victoria, it slumped by 13 per cent over the same period to $6 billion in 2018-19.

Ken Morrison, chief executive of The Property Council of Australia, pulls no punches.

“There’s a consensus among economists and policy-makers that stamp duty is the worst thing in Australia,” he said. “It distorts behaviour, cripples job creation, lowers growth, and locks people into housing that might not be appropriate for their needs.

“Really, by anyone’s standards, it’s a terrible tax. There’s a lot of debate at the moment about corporate tax, but stamp duty is two times worse for the economy than company taxes and sets a new economic benchmark for worst taxes.

“We need to get the economy going and facilitate construction growth, and getting rid of stamp duty will help.”

However, he doesn’t like the idea of replacing it with a land tax as he says the rate would have to be too high to replace the revenue raised by stamp duty.

“Let’s rewind the decision to five to six years ago when we had GST being put on the table as the centrepiece for reform and getting rid of some of our worst taxes,” he said. “That’s what we would encourage governments to do as they move into reformist mode.”

Economic and policy consultants Urbanised Advisory Services is also advocating for the abolition of stamp duty. Managing director Stephen Albin says the whole system of property taxation needs urgent attention, and the time is ripe.

“It’s a bit of a mess at the moment and we should take the opportunity in the existing circumstances to really review the tax system and create different ways or securing revenue,” he said. “There should be more stable sources of revenue so the ebbs and flows don’t have such a major impact on budgets, and ways of making housing more affordable.

“There are good arguments for land tax to replace stamp duty and the Productivity Commission and Treasury are now looking at how they are going to levy taxes in the future. This is the perfect time for reform.” 

Stamp duty is certainly becoming an ever-greater cost of buying homes. According to Domain figures, stamp duty paid on a median-priced home went up between 2004 and 2019 by 102 per cent in NSW to a high of $42,269, 183 per cent in Melbourne to $44,164, and 189 per cent in Brisbane to $11,013.

“It’s an awful tax,” said Adrian Kelly, national president of the Real Estate Institute of Australia. “It’s most particularly a drag on first-home buyers, with the ANZ ceasing to offer mortgage insurance products – which I suspect the other banks will follow – which means they’re have to raise a 20 per cent deposit plus stamp duty.

“So it’s becoming an even bigger problem in the current climate. It also reduces the mobility of everyone else with the housing stock, including older people wanting to downsize to a smaller home, and people wanting to change jobs. We need a broader tax base, and one that doesn’t provide so many impediments to buying a home.” 


 Posted by John J. Ray (M.A.; Ph.D.).    For a daily critique of Leftist activities,  see DISSECTING LEFTISM.  To keep up with attacks on free speech see Tongue Tied. Also, don't forget your daily roundup  of pro-environment but anti-Greenie  news and commentary at GREENIE WATCH .  Email me  here

U.S. New Home Sales, Before the Coronavirus Lockdowns

Housing sales are something of a slow motion economic indicator, where March 2020's recently released data is only beginning to show the effects on new home sales, which for the month, were primarily affected in the U.S. Census Bureau's West region.

That makes sense when you consider that the states of Washington and California were among the first to report confirmed coronavirus cases within the U.S. At the national level however, the impact within these states is comparatively small with respect to how we anticipate it will be affected in upcoming data releases, which will show the impact of the statewide lockdowns that were implemented in the latter weeks of March 2020.

For now, we can provide a picture of what the U.S. market for new home sales looked like before the response to the coronavirus pandemic shut down large sectors of the nation's economy. The following chart shows the trailing twelve month average market cap for the U.S. new home market, from January 1976 through March 2020, which spans all the available monthly data for it:

Trailing Twelve Month Average New Home Sales Market Capitalization, Not Adjusted for Inflation and Adjusted for Inflation, January 1976 - March 2020

Going into the coronavirus recession, the U.S. new home market was already experiencing a dip in its market capitalization, having recently reached its last peak in September 2019.

The new home market cap is the product of the number of sales and the average sale price of new homes sold in the U.S., where both component factors have fallen in recent months. The following chart shows median and average new home sale prices from January 2000 through March 2020:

Median and Average Monthly U.S. New Home Sale Prices, January 2000 through March 2020

At this time, we can expect the volume of housing sales will fall when the data for April 2020 becomes available next month. What's less clear is what will happen with median and average new home sale prices, where we can see two possible likely scenarios:

  1. Both median and average new home sale prices decline along with number of sales, but not as steeply because most homebuilders are simply on pause until their local markets can reopen, which would reflect supply being matched as best as possible to the available demand.
  2. Both median and average new home sale prices rise sharply, because only sales at the high end of the real estate market are able to proceed in the current economic environment.

That latter scenario reflects the disruption from the coronavirus-related job layoffs, which have disproportionately impacted Americans in lower income earning occupations. Americans at the higher end of the income spectrum have been less affected by employment disruptions, where new home sales that are completed will reflect the higher relative proportion of these sales within the nation than would have occurred if not for the coronavirus lockdowns.

Which of these options do you see as being more likely? Or is there another option that better describes what we can expect to see when the sales data for April is released late next month?

And what scenario explains Florida Man Tom Brady's recent housing escapade? We don't even know where to begin with that one!...

Australian Politics 2020-04-27 15:44:00

New rules for pubs and clubs

Widespread social distancing measures will have to be implemented at pubs, public transport, cinemas and local sporting ovals before they can re-open once Australia begins to ease its coronavirus lockdown measures.

Pub bosses are discussing a raft of rules to minimise social contact - including bans on communal items like pub buzzers, water jugs and plastic laminated menus.

A leading tourist board has also warned hotel buffets will not be open for service - with guests turning to in-room dining during the first phase of restriction easing.

'I think there will be a lot more in-room dining. People won’t be as keen to eat in the restaurant,' Tourism Accommodation Australia CEO Michael Johnson told the Sunday Telegraph.

It comes as the federal government, health experts and state leaders work on plans to restart sport and get Australians back to work ahead of a review of coronavirus restrictions on May 11.

With a vaccine yet to be developed, the Australian Hotels Association said a 'new world order' should be expected when pubs open their doors again.

'They [pub owners] are thinking about anything that people touch – water jars at the end of the bar, those laminated menus, the buzzer,' the association's NSW chief executive officer John Whelan said.

'Live music is a real difficult one. Possibly seated. A lot of hotels are giving real consideration to everything. They all accept social distancing is here to stay for a while.'

Australian National University microbiologist Peter Collignon last week told Daily Mail Australia pubs and hotels may not return to normal until September - although they could re-open under strict conditions in July.

Sign-in and sign-out procedures to maintain contact tracing and a 50 per cent capacity limit at venues are among those measures being discussed by hospitality industry leaders.

The implementation of a staggered return to work could also reduce the risk of transmission on buses - accompanied by a ban on standing and preventing passengers from sitting next to each other.

Temperature checks of customers and staff may also become the norm in leagues clubs and cinemas. ClubsNSW, which represents 1,200 member venues, said patrons could be tested on arrival under a plan set to be reviewed by an infectious disease expert and then submitted to the state government for approval.

Spectators at community sports games may also have to socially-distance and keep a safe distance away from each other.

Hoyts CEO Damian Keogh is meanwhile overseeing the creation of a checklist ahead of a tentative plan to return to business for July. The 20-point checklist features a chequerboard-based seating plan in the chain's theatres and online payment being the only way to buy a ticket.


New school rules

Strict new rules have been introduced as children return to classrooms amid the coronavirus pandemic.

Students in New South Wales will be banned from using playground equipment and bubblers when they return to their classrooms for term two next month.

They will also be banned from sharing food or pens, according to Department of Education rules.

Schools will also have to post any new COVID-19 cases that affect their school to their Facebook page to keep parents and caregivers informed, the Daily Telegraph reported.

Teachers will have to watch young students wash their hands to ensure they are doing it properly.

Hand sanitiser will be available in all classrooms and provisions are in place for at-risk teachers to work from home.

Drop off, pick up, recess and lunchtimes will also be staggered to ensure social distancing.

NSW Premier Gladys Berejiklian announced this week the plan for children to gradually return to schools from May 11.

The plan will see students return for one day a week to ensure they comply with social distancing measures.

The education department plans to increase the number of days students are at school in a staged way and hope to have all children back at school full-time by Term 3.

During the first stage of on-campus learning, parents will be encouraged to keep their children home except on their allocated day of face-to-face learning. Initially, about a quarter of a school’s students are expected to be on site at any one time. 

Classes will be split across schools, allowing schools to appropriately social distance students and teachers.

'We are grateful to all families who kept their children home from school at the end of Term 1 and to teachers who worked tirelessly to deliver education online,' Ms Berejiklian said.

'This allowed us critical time to prepare our schools to develop better online learning options and for considering additional hygiene measures to allow schools to return.

'We know that nothing is more important than a child’s education, and we must begin to return our students to their classrooms in a considered way.'

Most students began remote learning in March after the Premier asked parents to keep their children at home.


UBI still an unbelievably bad idea

Opportunists across the political spectrum have been emboldened by the current crisis to propose all manner of terrible ideas.

And among the worst is the universal basic income (UBI) —  a payment to all citizens, unconditional on income or wealth, without any obligation to be in work or study.

Supporters have seized on the government’s pandemic JobKeeper scheme as evidence we’re finally ready to embrace a UBI.

Of course, fans see it as panacea in good and bad times alike.

In good times, it’s the supposed solution to virtually all economic, ecological, and social ills. And in the current crisis, they argue a UBI is uniquely suited to deal with the surge of unemployed, the strain on the welfare system, and the apparent fiscal willingness to spend.

But not only are they wrong to equate JobKeeper with a UBI, they’re also mistaken that the coronanomics support their case anyway.

The JobKeeper payment imposes an effective wage floor for those employed in businesses facing an immediate, massive fall in revenue. These extraordinary circumstances are expected to be temporary, and when the crisis eventually ends, so does the payment. The worker is expected to go back to work, or to seek work on Newstart.

That’s a far cry from the UBI, which is not only permanent, but also is designed to remove the obligation to seek work.

Moreover, UBI proponents fundamentally misunderstand the nature of the economic conditions and today’s world of work.

Rather than a permanent reduction in the demand for labour, the present shutdown is a temporary contraction in labour demand due to forced closures and social distancing (with related reductions in short run supply).

Moreover, if economic life under social distancing has taught us anything, it’s that work has been supported, not threatened, by technology (exactly the opposite of what UBI supporters have been claiming). Indeed, technological integration into work — and study for that matter — has been a lifeline, saving jobs and livelihoods for many.

The other claim is that the government’s unprecedented spending allegedly reflects a willingness for meeting a UBI’s exorbitant price tag. But the government’s big-spending economic rescue package has been forced by a temporary crisis; there is no evidence of a commitment to permanently bigger government.

Moreover, when the costs are being counted, there’ll surely be little left in the piggy bank to fund a UBI.

Good policy options in this crisis are hard to come by and there’s no shortage of terrible ones being prosecuted. Despite what the economic illiterates say, a UBI remains an unbelievably bad idea.


'Ready to go': Drought's end in sight after rains and more to come

Garry Hall, a cattle breeder, has had more rain since February than for all of 2018 and 2019, and the Macquarie River is flowing past his property at the rate of a billion litres a day.

And yet, as welcoming as the rains have been, they are well short of drought-breaking for his farm in northern NSW and the nearby Ramsar-listed wetlands. Both have struggled through a once-in-a-century dry spell.

"A large area of the Macquarie Marshes hasn't seen water yet," Mr Hall said. "It's pretty important to get it in there to start the long journey back".

That journey, though, has begun after widespread rain over NSW and other eastern states this year. Catchments have become wetter so follow-up falls will be more likely to create run-off and reach dams across the Murray Darling Basin. Odds for such rainfall have also improved for coming months.

Bureau of Meteorology charts show moisture level in the top 100 centimetres of soil improved sharply between last December and last month. NSW shows some of the biggest changes.

Still, Matthew Coulton, the bureau's acting general manager for water, said "drought means something different to everyone you talk to ... I don't think it's over for anyone yet". "It's important to remember that long droughts can have periods of green. It was 36 months of very hot and dry weather that led to the conditions we saw at Christmas," he said.

"It will take a lot more than two or three wet months to fill dams and get regional communities back on their feet."

Little of the rain has reached the big dams on the western slopes of the Great Dividing Range. Burrendong Dam, which supplies much of the water for the Macquarie River, remains at 16.4 per cent full, while Keepit Dam on the Namoi is at just 13.7 per cent.

WaterNSW data shows catchment inflows of major rivers so far lag the most big flows in 2016-17.

Those dams and rivers, though, could be in for a relative wet winter and even into spring, as climatic conditions favouring above-average rains set in, according to the latest bureau outlook.

Waters in the Indian Ocean off north-western Western Australia are warmer than usual, a set-up that typically produces clouds that deliver moisture across Australia's centre and south-east, said Andrew Watkins, head of the bureau's long-range forecasting.

"If one of those north-west cloudbands interacts with a cold front or a cut-off low − that's when we get some big rainfall totals over a large area," Dr Watkins said.

With higher soil moisture levels and more cloud cover, overnight temperatures across most of Australia will also likely be milder than normal, he said. Days will be closer to average warmth.

"The drought's broken when Burrendong is full," said Mr Hall, adding the outlook for the Macquarie catchment is promising.

"Orange and Bathurst haven't had much rain − you wouldn't say it's oozing water," he said. Still, "it's primed, it's wet and ready to go".


 Posted by John J. Ray (M.A.; Ph.D.).    For a daily critique of Leftist activities,  see DISSECTING LEFTISM.  To keep up with attacks on free speech see Tongue Tied. Also, don't forget your daily roundup  of pro-environment but anti-Greenie  news and commentary at GREENIE WATCH .  Email me  here

Pace of 2020-Q2 Dividend Cuts Accelerates

The pace of dividend cuts in the U.S. surged during the past week and a half, where we've added an additional 44 distressed firms either reducing their dividends or suspending payments to our ongoing tally for April 2020.

To put that number in perspective, when recessionary conditions are present in the U.S. economy, we'll see firms announce dividend cuts at a rate of 25 or more during the course of a single month. We now anticipate triple that figure by the time April 2020 is over.

The following chart compares the current pace of dividend cuts during 2020-Q2 to the same quarter in the years 2017, 2018, and 2019, which is the stock market equivalent to those excess mortality charts illustrating the full impact of the COVID-19 coronavirus pandemic.

Cumulative Total of Dividend Cuts in U.S. by Day of Quarter, 2019-Q2 vs 2020-Q2, Snapshot 15 April 2020

We confirm the number of dividend cuts and suspensions announced in the quarter to date for our 2020-Q2 sampling is elevated well above the comparatively healthy quarters of 2017-Q2 and 2018-Q2, and is also considerably higher than the year ago quarter of 2019-Q2, when the oil and gas sector of the U.S. economy experienced a relatively short period of distress.

Here is the list of U.S. firms announcing dividend cuts or omitting dividend cuts in the seven trading days since our previous report:

The oil and gas sector makes up 20 of the 44 firms above, an outcome of the fall in demand and oil prices that has taken place since with the global coronavirus pandemic. The finance sector, including real estate investment trusts, accounts for another 10 firms, with the remainder split among 11 other industrial sectors, confirming the broad impact of the coronavirus recession.

The distribution of these dividend cuts among industries is a consequence of both the degree of distress they are facing and also of the calendar, with many companies following their regular schedule for declaring dividends, with the past seven trading days being heavily loaded with firms in the oil and gas sector. We'll have a more complete analysis after the end of the month with the next installment of our monthly Dividends By The Numbers series.


Seeking Alpha Market Currents Dividend News. [Online Database]. Accessed 24 April 2020.

Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 24 April 2020.

S&P 500 Continues Defying Gravity in Upside Down Market

The S&P 500 (Index: SPX) continues to defy gravity in the upside down market the Fed has wrought, closing the trading week ending on 24 April 2020 at 2,836.74, 599.34 points (21.1%) above its 23 March 2020 coronavirus recession low, and 549.10 points (16.2%) below its 19 February 2020 pre-coronavirus recession high, giving an indication of the extreme volatility that has characterized the stock market during the last two months.

The alternative futures forecast chart shows the level of the S&P 500 is consistent with an amplification factor m in the dividend futures-based model being equal to -1 following the Fed's last action to backstop the liquidity of the commercial bond market.

Alternative Futures - S&P 500 - 2020Q1 and 2020Q2 - Standard Model - Snapshot on 24 Apr 2020

Dividend futures have also been rebounding, which in today's upside down market, means that the expected future level of the S&P 500's quarterly dividends per share won't be as low as they were projected a month ago when the market hit bottom.

Past and Projected Quarterly Dividends Futures for the S&P 500, 2019-Q2 through 2021-Q2, Snapshot on  24 April 2020

Here's the wrap-up of the market-moving news headlines we tracked during the past week.

Monday, 20 April 2020
Tuesday, 21 April 2020
Wednesday, 22 April 2020
Thursday, 23 April 2020
Friday, 24 April 2020

But wait, there's more! Barry Ritholtz listed the positive and negative news he picked out of the week's news stream to provide a bigger picture than what we've presented!

Unlike the weeks preceding it, the trading week ending on Friday, 24 April 2020 was relatively subdued. So much so that unless we see daily volatility rise to an interesting level, which we define as a greater than 2% change in either direction from the previous day's closing value, we'll discontinue appending daily updates throughout the week to this article. If the market should change by more that 2% from one day to the next in the trading week ending Friday, 1 May 2020, please follow this link for our unscheduled 'below the line' coverage the following morning.

S&P 500 Rises 2.7% As The Fed Works Its Mojo

Update 29 April 2020, 6:30 PM Eastern: The S&P 500 (Index: SPX) climbed 2.7% to close at 2,939.51 as all eyes were on the Fed and what signal it would send for providing relief for coronavirus-stricken markets.

And they signal they sent was that the Fed will be "committed to using every tool", which is to say they are going to continue doing what they have been doing, and more of it.

In addition to sending stock prices higher, that message also sent dividend futures higher. Here are the latest versions of the S&P 500's dividend futures and the alternative futures chart, where we find the trajectory of the S&P 500 is following the new upside-down order the Fed has created in the stock market.

Past and Projected Quarterly Dividends Futures for the S&P 500, 2019-Q2 through 2021-Q2, Snapshot on 26 April 2020
Alternative Futures - S&P 500 - 2020Q1 and 2020Q2 - Standard Model - Snapshot on 26 April 2020

In other news, the coronavirus recession crashed U.S. GDP by at least 4.2% in the first quarter, with virtually all of it in March 2020, and U.S. firms are cutting or suspending dividend payments at never-before-seen rates. How long do you suppose the Fed will need to keep working its monetary mojo?