Special pleaders gonna plead specially

For those not following the Australian economy (and judging by the readership statistics of this blog, that’s most of you), there’s some huge fun to be had in observing the logical knots people are currently tying for themselves.


The problem is that the Reserve Bank of Australia has again, not lowered interest rates. The last time the RBA moved rates was in August 2016, down from 1.75 to 1.5%.


I have a real job, i.e. I’m not an economist, so whether or not the RBA is taking the correct course of action is not really something I’m qualified to comment on. However, I am able to spot blatant special pleading when I see it:


The “Kouk is lining himself up for a job as an advisor in the next Federal government, assuming the current incumbents lose the election. This is likely to be a nice final job before his retirement. An ongoing house price crash in the two biggest cities of Australia will make this semi-retirement gig far more stressful than he’d appreciate.



The “Doc” was recently the “Chief Economist” (whatever that means; how many do they have to employ to need a chief?) at Domain, the only profitable arm of Fairfax…. until it was sold off. He was fired last year and is now pitching himself as “Chief Economist” of a company called My Property Market. The website of this esteemed company is still under construction, but I’m sure it’ll be finished soon. After all, they’ve got at least one employee now….. 


One imagines the Doc is personally very heavily invested in property.

One of the unusual quirks of the Australian property market is that there is a tax incentive to run your investment properties at a slight revenue loss.

There are, of course, two minor problems with this; firstly, you’re accepting an operating loss today in the hope of a capital gain tomorrow, and secondly, the tax benefit only works while you’re drawing a salary or other income at a level that attracts the higher marginal tax rates to offset the negative gearing. Amateur property investors who get fired from their regular job are clobbered with a double whammy, in other words. Ouch.

Bill’s Opinion


In the words of Upton Sinclair,




8 Replies to “Special pleaders gonna plead specially”

  1. What is it with Australia and its kooks? We have the Cook who cooked the books on global warming, and now there’s a Kouk who says that free market is not the way to go unless house prices are rising, viva Venezuela. OK so economics is more voodoo than science but by and large its precepts seem to hold true. Negative real interest rates obviously fail. QE obviously failed even before it was tried and now we have a decade of proof.

  2. I would tend to agree anyone that calls themselves and economist and isn’t on the Forbes rich list is telling porkies.

    The Kouk et al, you got to hand it to them, people follow him around both pro and anti but at the end of the day he is pulling a wage doing it, I am sure if I met him he would say it’s a good craic though and I would probably agree with him.

    On negative gearing it is actually quite a misunderstood arrangement. It is only the income loss that you can offset against other income if say it was you as an individual that owned the investment property (unlike the US you can’t do it for your own mortgaged family home) had a mortgage and the rental income didn’t cover all outgoings including interest, that loss can be offset against other income and say your wages and effectively lower your marginal tax rate, which in many cases for those on the top bracket is a significant refund.. But if they abolished it then you would be entitled to carry the loss forward in perpetuity until the income surplus from the house eventually wiped out previous losses and then became cash flow positive, the income profit being taxed at your marginal rate. So abolishing negative gearing doesn’t mean that you cannot offset a loss it just means that you have to carry it forward so the tax situation has not changed. What has changed is that your holding costs are far higher due to the inability to in my case half your loss by reducing your income tax by 47%. Many investors are cash flow neutral or positive and therefore don’t need to negative gear, most dont that have owned and have significant equity over the years.

    The other point that is not taken into consideration is that you can negative gear shares, exactly the same as property, yet the lefties don’t complain about that, and Labor have no plan to abolish it or grandfather it.

    So, abolishing it means that your holding costs increase if it is not cash flow positive, but the treatment of a loss is not changed, and yes it will have a significant impact on the market if it were abolished. No one really knows what impact it would have but my money is on rents increasing faster if they did.

    I am now and always have been a massive negative gearer, get some big nice houses that are on say a 3% yield, on 105% LVR, on IO, offset against your large income and half your holding loss. As you get older and rents increase and your borrowings don’t, the properties eventually become cash flow neutral and then turn positive. This tends to coincide with retirement and the point in your investing lifecycle when you are on the dash for cash phase, your growth assets were planted 30 years ago and you become income hungry as you no longer work and earn. So, it is a very neat concept for the boomers that have surfed this baby all the way up and are now all heading into retirement at the same time, and at least Labor have said that they won’t change it for existing owners and only for new ones.

    I have told my son to hold off on buying his first one until after the election to see what way the pendulum swings, if Labor get in which is looking highly likely and abolish it, the impact whatever way it goes will present opportunity especially during the early stages.

    But the real scam in the Labor policy, the real fucking thieving bastard ploy, that nobody is talking about and in fact the only small commentary that is being made is that it deserves them right, is that they are going to half the Capital Gain Discount, which really means they will double the tax on a capital gain. Why, the fuck, is no one talking about this what seems very much like, and I stand corrected if there has been another bigger one, the biggest tax grab ever since they introduced income tax 100 years ago.

    1. I didn’t want to try to complicate things by talking about Labor’s plan to abolish negative gearing.

      The point I’m trying to make is that Wilson, without a salary, is in cash flow trouble with his extensive property investments.

      Oh, and the Kouk is a troll.

      1. Troll is an overused term these days. Some other terms may be feeling a little left out in this new Information Age, such as shit stirrer, lying cunt, cockhead and fuckwit, the overuse of the word troll has devalued the meaning of dickheadery.

        1. I think for Kouky, it’s the original usage; he’s putting stuff out there which he doesn’t actually believe to get a reaction.

          One of his classics this week was that supply and demand had nothing to do with the availability of credit.

          1. Yes but if winding up dudes is your profession and you are being paid for it then it’s work and not trolling. Trolling is only trolling when you do it for pleasure and non-financial benefit.

  3. By the way arrived in Sydney town late tonight, doing a bit of international work time zone stuff so I am caffeinated, working over the night period from the hotel and and heading up to the Hunter Valley and have an English speaking driver prick me up at sparrows fart and drive me up for a client meeting at 10am. So I thought I would go out for a bit and stretch the legs. Everywhere is dead, really dead, and its a Thursday night. I am a Sydneysider from way back and yes I know they have cleaned up the cross, changed opening times and all that, but the entire inner city makes downtown Brisbane seem like Las Vegas in comparison. I was down here with the missus just before Christmas and stayed down the rocks and had a good time, the rocks being what it is, but yes this place is is coming like a ghost town. All the clubs have been closed down, this place is coming like a ghost town, bands won’t play no more, too much fighting on the dance floor.

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