A Robin Hood budget? Hardly

Some temptations are so great, according to a British wit, that it is actually sinful not to give into them.

And a sub-editor’s caprice, in predicting today that the Rudd government  is planning a Robin Hood budget, certainly  comes into that class.

The Sydney Morning Herald’s reporter, Phillip Coorey,  did have a genuine budget break.

He persuaded the Treasurer, Wayne Swan, to confess that the government is planning to close what Swan called a “loophole” that presently permits some tax minimisation on share options.

And that will hit the wealthy, very lightly.

The total amount involved is small.  Barely $80 million a year, at best.  But Swan’s assertion, that a loophole exists, is certainly arguable.

Moving from that premise, though, to asserting that the government is planning to rob the rich, to help the poor, is, undoubtedly, one giant step,  for that  newspaper.

The SMH is on firmer ground, though, in saying that the government plans to look after workers, in this year’s budget.

Mr Swan, himself, confirmed that in a radio interview this morning.

“This will be the first time they have received a fair go, by way of tax cuts,”  Swan said, like a good Labor man.

That could hardly have been avoided.

Labor promised $31 billion worth of staged tax cuts, before last year’s election, almost matching a promise the coalition had made.

The first tranche of those tax cuts will be due – and paid – in this year’s budget.

For a while there, with inflation hitting a new peak, that looked distinctly like a bad idea.

But like a good sheriff, in an old Western movie, the US rode up at just the right time, with a slowing economy.

That made the proposed tax cuts – more or less – respectable again.

Related stories:

1. 3,000 Federal public service job cuts predicted
2. Pre-budget scare stories – what to make of them

House prices in the US collapse:so what will happen here?

US house prices are in freefall., plunging 13.6 per cent over the past year.

House prices are declining in Britain too, falling 1.1 per cent in April, the sixth successive monthly easing, there.

Recent reports show that house prices have eased in most Australian capitals, too.

These development pose an uncomfortable question?

Could the housing market collapse here, too?

The answer, clearly, is yes.

The more important question, perhaps, is will it do so?

That depends. It depends, largely, on the behaviour of Australia’s banks.

American banks caused the problem, in their country, first by lending recklessly, to people who had no real chance of repaying. Then the US banks panicked and refused to lend, at all.

Australian banks don’t have a spotless record, in this regard, either. Some of their so-called low-doc loans were, undoubtedly, beyond the bounds of normal, commercial risk.

But the scale of reckless lending in Australia was certainly much lower than what occurred in the United States. But there has been no comparable collapse in lending activity in Australia.
Reserve bank figures, certainly, do show that growth in home lending, has eased, both to. private buyers and investors.

But that’s all.

And Australia’s major banks are still in a strong financial position. We have the word of the Reserve Bank on that. And it does watch these things, very closely.

Australia’s banks have, certainly, annoyed the Federal government, by raising their interest rates to cover the higher costs they are incurring, on the money they borrow. But that is a normal, commercial response.
They have, quietly, tightened their lending standards, too.
Potential homebuyers are becoming more cautious, too. But bargain hunters are still looking.

These developments were to be expected after the Reserve Bank raised Australia’s official interest rates no less than twelve times, in swift succession.

A survey by the Housing Industry Association shows the impact. The HIA reported yesterday that sales of new, detached homes fell by 6.3 per cent in Australia during March, with activity in New South Wales being hit particularly hard. The fall, in that State was 19.7 per cent.

The official housing figures for March, which the Australian Bureau of Statistics is due to release today, are expected to reflect a similar picture.

So will house prices collapse, in Australia, as they already have in the United States?

They would, certainly, if Australia’s banks followed the lead of their US counterparts, and rushed, like Gadarene Swine, towards disaster, refusing to lend, in many cases, to clients who would usually be regarded as good prospects.

So far, though, that has not happened.
House prices, in Australia, are likely to keep easing, for some months yet.

So far, though, there has been little sign of outright panic, in Australia. And an outright collapse in the market seems unlikely. That is if the banks – and homebuyers – keep their nerve,.

Related stories:

1. Americans blue:will it happen here, too?
2. Property prices:what now?