What do people mean when they say “Sydney is full”


The media in Sydney is currently full to the brim with stories about the fullness of Sydney.

Some people like former NSW Premier Mr Bob Carr reckon Sydney was full 20 years ago.

Others argue it started to overflow the lip of the teacup a couple of years ago after the rate of immigration into Australia – which means mostly Sydney and Melbourne – was given a massive boost by John Howard and Peter Costello in the early 2000’s with the tap left on full by successive governments.


Mr Howard explained the connection between being rough on boat arrivals to his desire to run a Big Australia immigration program as follows.

“Every country does have the right to decide the composition, the manner, and the timing of the flow of people. And that’s something the Australian people support…

One of the reasons why it is so important to maintain that policy is that the more people think our borders are being controlled, the more supportive they are in the long-term of higher levels of immigration.

Australia needs a high level of immigration. I’m a high immigration man. I practiced that in Government. And one of the ways that you maintain public support for that is to communicate to the Australian people a capacity to control our borders and decide who and what people and when they come to this country”

Then there are there the “Sydney is not full” motley crew, lead by business leaders like Gerry Harvey and a very strange alliance of Open Border enthusiasts like business friendly Liberal Party Federal Minister Peter Dutton, 3rd way Mr Bill Shorten & friends and Global Welfare Function loving Greens like NSW MP Ms Jenny Leong, who insist that Sydney is nowhere near full and certainly not Australia.


Sydney is not full:  More please!

They often insist or imply that if you do not agree with them you must be a nutty xenophobe or a racist or have a taste for Pauline’s brand of fish and chips.

So what does ‘Sydney is full’ mean?

One thing it cannot mean is that Sydney is literally full of people as we have all seen how high skyscapers can go and how small apartments in Hong Kong can be.

It also cannot mean a permanent state of affairs as attitudes can change as regards to what constitutes fullness.    One day we might all be perfectly happy to live in tiny atomised studio apartments in massive edifices designed by future Howard Roarks.   When that day comes the Sydney basin might be filled with tall spikes of residential housing from shiny sea to the sandstone bluffs of the great dividing range.

What “Sydney is full”  must mean in any meaningful sense is that the living standards and amenity of Sydney for its existing citizens will fall or are likely to fall as additional residents arrive or are born.

Falling living standards does not necessarily mean in an objective sense either, though in most cases the fall will be measurable in a large variety of ways.  It is sufficient that the residents of Sydney are of the opinion the living standard and amenity of their suburb and city is falling.   As they are voters that is all that really matters.

Even just a vibe that Sydney is full is sufficient.

And before all the opinion manipulators out there get too excited and start planning their next social medial campaign to brainwash people to a “Sydney is not full” vibe they should remember that the vibe is the result of hundreds of daily and weekly interactions as people go around their daily lives and businesses.

Two-thirds of Sydney think Sydney is full right now because that is their lived experience.

The “Sydney is not full” delusional thinking and cognitive dissonance.

One of the most common delusions of the “Sydney is not full” tribe is that we can easily accommodate all the new residents to Sydney without any fall in living standards or amenity if only we are ‘smarter’ or plan better or get ahead of the infrastructure requirements.

They have an endless list of magically buzzwords to express this promised land where millions of extra residents are shoehorned in without anyone feeling they are living in #SardineSydney.

  • Urban Consolidation
  • Repurposing industrial sites
  • Smarter cities
  • Intelligent densification

At the moment we have 350+ residential construction cranes in Sydney working flat out and yet prices of new and existing housing are sky high and residential vacancy rates in Sydney remain stuck at approximately 2%.    Across Australia there are almost 700 construction cranes.   That is remarkable considering that New York City has less than 30 and the city with the most in the USA – Seattle – has only 58.

Despite record levels of construction and the built environment of Sydney changing rapidly before our eyes it is still not enough.

The “Sydney is not full” tribe simply fail to appreciate that what we are seeing is not the usual post war immigration success story and all we need are just a few more 21st century terrace neighbourhoods near Penrith…… that garbage trucks can access.

We are living and breathing a radical experiment of mammoth proportions and it is no surprise that there is a rapidly growing and potential toxic reaction building.

Despite what Elizabeth Farrelly dreams Sydney might be like what we are getting looks more like this.


Opera Free Rhodes – ‘Urban consolidation’ in action.

Sydney is not full but my postcode is very full

One of the oddest bits of cognitive dissonance is the tendency of very well meaning people to insist that Sydney is not full but their post code is definitely packed to the rafters.

They generally have perfectly reasonable arguments as to why their suburb is already full.

Some of the common ones include:

  • Our suburb is a heritage suburb and we simply cannot knock down anything.  They seem to assume that other suburbs don’t feel similarly about their crumbling bits of late 19th and early 20th century architecture.   In any event this ‘heritage’ argument is like a piece of string as now there are keen supporters of 1960’s brutalism, red brick post war units, colour tiled roofs and Public Housing Towers (presumably in a conversation with their cousins in East London) and the classic Western Sydney “Fibro” – okay perhaps not the fibro…..yet.
  • Our suburb does not have enough schools, hospitals, open spaces, community health centres, public transport etc.   In their imagination the rest of Sydney’s suburbs are simply dripping with those goodies sitting idle.

All of these arguments are perfectly fine as local people should have the right to have a large say in the living standards and amenity of where they live.

What they don’t get to do is remain paid up members of the “Sydney is not full” tribe.

If they wish to stay in that tribe they should lead by example and campaign for the relaxation of land zoning in their postcode so that lots of medium rise or high rise apartments can be built and plenty more people can share their wonderful living standards and amenity.

Why shouldn’t the inner west, south, north and east of Sydney all look like high rise Potts Point if that is such a fantastic, vibrant “lifestyle” suburb for the modern rootless cosmopolitan?

Balmain – A good example of the issue

Balmain is a lovely part of Sydney and packed to the rafters with “heritage” but it is literally a very short boat ride from the CBD and for the reasonably fit it is within walking distance.  It ticks every urban consolidation box.  Particularly as the population now is less than 50% of what it was in the 1920s.

All those terraces packed with large families are now being used by ageing couples and singles.

Year – 1910; Population – 31,500
Year – 1915; Population – 33,000
Year – 1920; Population – 33,540 

Year – 1986; Population – 10,239
Year – 1991; Population – 10,915
Year – 1996; Population – 10,978
Year – 2001; Population – 13,892

But is anyone in Balmain proposing that the planning be relaxed so that the suburb can experience what happened to Potts Point in the early years of the 20th century when most of Potts Point’s heritage was bulldozed and replaced with high rise apartments?

Nope  – not even the developers who live in Balmain and love the quaint ‘village’ atmosphere.

And good luck to them but they don’t get to preach that Sydney is not full when they think their suburb, right next to the CBD of Sydney, is full and sorry you should try further west.

So what should the “Sydney is not full” crowd be arguing?

As noted above the “Sydney is not full”  bed has a very diverse bunch of bed mates.

There is Gerry Harvey and Penny Leong discussing 19th century English literature and there is Bill Shorten cuddling up to Peter “Ponzi Population” Dutton.

There are bunches of open border globalists and global welfare function enthusiasts stealing the doona and heaps of  mortgage peddlers, bankers, land bankers, developers and assorted other members of the finance, real estate and insurance industries all kicking each other for a bit of the electric blanket.

Snug as bugs in a rug.

If they really want to convince the general public that Australia is not full and that Sydney in particular is not full they need to start explaining:

  • How they plan to stop the living standards and amenity of existing residents from falling.
  • Even better explain exactly how they plan to increase the living standards and amenity of existing residents as that is really the only way to win solid support.   Flowery and surprisingly cranky prose from Elizabeth Farrelly extolling the opportunities for more opera and elevated sensibilities just does not cut it.

And most important of all explain WHO IS GOING TO PAY FOR IT and when and how.

Sydneysiders are quickly cottoning on to the fact that nothing comes for free, especially huge chunks of concrete infrastructure.

They are asking the obvious questions.

“Why do I have to now pay $50 per week to drive on a road that was paid off (the M4) and is only being widened and extended because some bright sparks in the “Sydney is not full” coalition reckon Sydney needs to be pumped full of immigration at a massive rate of knots.”


“Why did we sell off our major public assets to private companies that now gouge the hell out of us every quarter, just so the government has money to build infrastructure that does little more than slow the rate that our living standards and amenity fall under the weight of record levels of immigration”

They understand that accelerating the rate of immigration has a high price and they are being expected to pay it each and every day in a multitude of ways.

And they want to know why.

What is the immediate action required?

The immediate action required is obvious.

We must slow the rate of immigration significantly.

Not stop it altogether.

Not ban immigrants from particular regions, races and faiths.

Just reduce the rate while we have a debate about a higher rate, why it is a good thing and how we plan to do it in a way that works and the cost is shared fairly.

Rather than 200,000+ per year it should be reduced, effective immediately, to a rate of approximately 70,000 per year – the historic long term average – at the very least until the infrastructure to support a higher rate has been built.

So that there is no mistake that this has anything to do with our obligations with regard to refugees, the intake of refugees should double to 30,000 per year – assuming we have the support services available to ensure that their settlement and integration into the Australian community is successful.

Once the rate has slowed the “Sydney is not Full” tribe can make their case for a higher rate.

The Glass Pyramid suspects that at the end of their eloquent speeches and golden promises we will find that a reasonable and sustainable rate of population growth may involve little more than:

  •  returning to appropriate levels of support for reproduction by locals (i.e. lower housing costs, parental leave, more support for child raising etc) as our current household debt driven asset price ponzi economic model is a very powerful contraceptive and,
  • modest levels (approx 70,000 per year) of immigration from the four corners of the planet.

And most important of all, reform our banking and monetary system that is driving the insane concentration of our population towards the cores of 2 or 3 major cities instead of supporting the development and expansion of our regions and their larger towns.


What is at risk

What many of the nicer members of the “Sydney is not full” coalition fail to understand is that there is an awful lot at risk if we do not take this issue seriously

The remarkable success of immigration to Australia during the post war period was because people understood it was a serious undertaking and took it seriously. And even then it was not smooth sailing.  Very few countries in the world even bother to try to do what immigrant countries like Australia have done.  Bring people from many many countries and cultures together to live, work and play peacefully.

The “Sydney is not full” tribe, both the big business and extreme left wing members, are complacent and just assume that vastly increasing the rate of immigration over an extended period requires little more than simply shouting down anyone who does not agree with them.

But then the consequences of this recklessness are unlikely to be felt in their carefully curated and preserved ‘heritage’ postcodes and comfortable upper middle class enclaves.

For more excellent reading on this issue see below


Fixing politics:  How to get rid of political hacks and vote for change in Australia

Are you completely fed up with Australian politics?   

Fed up with career politicians who can’t even read the constitution and renounce claims to privileges granted to them by foreign powers?

Fed up with politicians who seem more interested in rorting perks and entitlements?

Fed up with politicians who seem more interested in what some large corporaion or foreign donor want than what the people who elected them want?

Fed up with politicians working hard to sell off Australia to foreign buyers bit by bit?

Fed up with Free Trade Agreements that close down our factories and make it easier for foreigners to buy what our politicians are eager to sell.

Fed up with politicians who resign and the next day take big fat jobs working for the outfits who were lobbying them the day before they resigned?

But don’t know how you can make a real difference?


You must change how you vote 

If you really want to make a difference you must still vote but change how you vote. 

Australians just make it too easy for career politicians from the major parties to cruise back in. 

You must always put the ALP, Liberals, National Party last on your ballot in the house of reps and the senate / upper house.

It’s up to you which one you dislike the most and give them the final spot on your ballot and the order you give to the other two in the other bottom 2 spots but you must put ALL three of them in the bottom three spots of your ballot.

If you want better candidates stop voting for whatever party insiders and hacks the Big 3 dish up.

Give your top preferences to ANYONE other than the main parties – even if you don’t know who they are or even if they sound a bit weird.  Naturally try to put the best of the Non-Big 3 candidates at the top.  Many Non-Big 3 candidates are decent reasonable people and if voters stop voting for Big 3 party hacks a lot more decent and reasonable people will start standing for election.  

The point is not that you necessarily want some ‘other’ candidate to win the election but that you want whichever of the Big 3 parties who do win to have sweated it out waiting for preferences to be distributed and to understand that you voted for ANYONE other than the Big 3 parties.

However, if enough people follow this strategy a few Non-Big 3 candidates will start getting elected and that is what the career political hacks from the major parties fear like a vampire fears a wooden stake.   People in politics who are not party hacks and who owe the party hacks and ‘numbers’ people nothing.

Chances are the major parties will start taking voters more seriously when voters start making it clear they are sick of being taken for granted.

Do not move your least disliked major party above the third from bottom spot UNTIL they act like they deserve it.


Say there are 7 candidates in your electorate. 

4 Non-Big 3 candidates and a Liberal Party, ALP & National Party candidate.

And of the three major parties you least dislike the National Party and most dislike the Liberal Party.  As for the ALP you like them less than the National Party but more than the Liberal Party.

Complete your ballot as follows

1.  Non-Big 3 candidate

2.  Non-Big 3 candidate

3.  Non-Big 3 candidate

4.  Non-Big 3 candidate

5. National Party

6. ALP

7. Liberal Party

This ballot makes it clear you are fed up with the lot of them. It will force every seat to be decided on preferences and will make the results unpredictable. It may help drive cynical career politicians out of parliament as it introduces more uncertainty and risk for their ‘career’ planning.

When the votes are counted your first preference vote initially goes to Non-Big 3 candidate No 1.  The election officials will then work out which candidate got the least votes and then move each of those votes to the 2nd preference on each of the ballots received by the candidate with the least number of votes.

Usually this process continues until a candidate has more than 50% of the votes.

Usually this means one of the big 3 parties after all the Non-Big 3 candidates have been knocked out and their votes are been allocated to the next preference.

But not necessarily if enough people are putting the major parties in the bottom 3 spots on their ballot.  If that happens a candidate who is not from one of the big three will be elected.

If the three major parties want you to give them a spot above the bottom three make them EARN it.

Voting strategically costs nothing and EVERYONE can do it.


A 3 Step Plan to drain the Australian economic swamp

The Bank of American Merrill Lynch reportedly thinks the RBA monetary policy lever might be broken, while many other are concerned that the rising levels of interest bearing public debt incurred by Mr Scott Morrison may soon be reaching its limits.

Monetary policy exhausted and fiscal policy not far behind?

Fancy that.

Guess we are all out of options then and should just curl up and sob in a corner.

10 years after the Great Financial Crises and we are still reading brain dead statements of the bleeding obvious because it is all too hard to discuss alternatives to the status quo.

The lack of imagination amongst our economic chattering classes and their rigid adherence to bad ideas is impressive.

No wonder it took so long to convince folk that the earth revolves around the sun.

Here once more is the Glass Pyramid “3 Step Plan” to drain the Australian economic swamp.


1. Reintroduce private bank credit creation regulations that restrict lending by reference to the purpose of the loan ….not the category of the borrower.

In other words loans with a high risk of encouraging speculation in the prices of existing assets will be rationed.  Loans directed to building more productive capacity will be encouraged.

This is largely how we ran our banking system until the bankers managed to fool the public into believing that the ‘discipline’ of the free market would force them to allocate capital / credit productively.   Well we now have 30 years of evidence that deregulated private bank credit creation means one thing:  Asset price bubbles and more wealth for wealthy pockets.

2. Unproductive capital inflows will also be heavily restricted – starting with the three key forms of unproductive capital inflows

  • Mere transfer of title to existing Australian assets to offshore owners
  • Mortgage operations of private banks, secured by existing property, supported by capital inflows
  • Sale of government securities to offshore parties.

The features of these three forms of unproductive capital inflows have been discussed at length by the Glass Pyramid so we will not go over that ground here.

A completely unrestricted capital account is yet another ‘reform’ recommended by the bankers and their finance mates back in the 1980s.  It was a mistake but do not expect any of them – even now – to admit that.

3. Start funding a modest portion of the fiscal budget with the sale of 0% non transferable bonds to the RBA.

The budget is about $420B so $20B is about 5%. That is enough to start with.

This amount will make little difference overall but we need to start somewhere and it  will allow all the sound money loonies and private Bank apologists to exhaust themselves for 12 months announcing the end of times and the onset of totalitarianism.

Over time as the hysteria reduces, the proportion of the budget / deficit funded by selling interest free bonds direct to the RBA can increase, though a limit will be reached soon enough as inflation will remain a policy constraint.

The effect of these 3 steps will be as follows.

The AUD will start to soften as unproductive capital inflows are restricted. Ultimately the level of the AUD will reflect our trading performance rather than the capacity of our banking and financial sector to sell off Australian assets and claims on our future income.

This will allow our businesses to better compete against imports and on the world market.  Good for business and good for jobs.

Existing asset prices will soften as unproductive credit creation by our private banks slows and productive credit creation expands.  Banks will lend to create new productive capacity – new houses and new factories – rather than simply lend to speculators in the price of existing housing.

The amount of interest accruing debt issued by the government will stop rising and start to fall as it is replaced with zero interest accruing money created explicitly by the RBA.

Inflation will continue to be monitored and reported on by the Australian Bureau of Statistics and the RBA and will remain a limiting factor on fiscal policy and the fiscal deficit.

There is nothing complicated or difficult about the above – except if we simply refuse to discuss it.


Don’t expect economists or public relations people from our banking and finance sector to discuss the above or even admit that these options exist.

If they do they will run a bunch of wild “sky is falling” scare stories to divert attention.

From the perspective of the banks and finance industry the above plan will weaken the stranglehold they have had on the economy since financial deregulation in the 1980s.

A Productive Banking system? A job for RBA and APRA.

Macrobusiness ran a post today about a suggestion that Central Banks like The Reserve Bank of Australia should target nominal GDP growth.  The article was critical of the proposal and identified the central failing of the Australian economy over the few decades as too little productive investment.

As regular readers of The Glass Pyramid would know, this is a topic close to the furry heart of TGP Head of Research.

The failure to distinguish between productive investment and unproductive #FakeInvestment is the core weakness of the Australian economic model yet it is ignored by most of the great and mighty mainstream economic chatterers.

Head of Research

Ross, Jessica, Michael, David, George etc ….yes we are talking about you!

And of central importance to the distinction between productive investment and #FakeInvestment is the performance of the private banks and how they exercise their privilege with regard to credit creation.

Private bank credit creation is very very different to credit extended by any other private individual or organisation.  It is what makes a bank a bank in our monetary system.

It is of massive economic importance and if it is misused its consequences for the long term health of the economy are profound.

Ensuring productive credit creation by the banks is the issue.

Unless an economy makes substantial investments to create new and renew existing productive capacity its future economic prospects are dismal.

It is certainly possible to delay the day of reckoning and maintain a standard of living by selling off assets or claims on your future income (borrowing) but this strategy – the current Australian economic model – simply increases the pain when the unavoidable reality beckons.  Without ongoing productive investment the ability to change course becomes harder and harder.

Since the mid 1980’s, as our banking system was deregulated, the banks have increasingly directed their credit creation privileges to pumping up one existing asset bubble after another.

Now we are in the situation where the private bank balance sheets are largely built on credit extended to speculators in existing asset prices, households are buried in debt as they try to secure a home for their families and potential productive investors find Australia no place to invest due to weak ‘income drained’ consumer markets and an AUD bloated on capital inflows to our private banks who use the capital flows to pump the asset bubbles even larger.

Targeting nominal GDP growth

Having the RBA target GDP would be even more of a disaster than the current state of affairs where they try to run the economy on the fumes of a debt driven asset prices ponzi scheme.

Asset prices Ponzi schemes are great for GDP.

Amend the RBA and APRA Charters now.

What the RBA and APRA must immediately do is demand that the government amend their governing legislation to insert a requirement that the encouragement of PRODUCTIVE credit creation by the private banks is their top priority.

This is not difficult as it simply requires APRA to direct the banks to restrict new credit where the security is an existing asset rather than a new asset.

Ultimately our current debt driven Ponzi economy is the expected consequence of deregulated private bank credit creation being allowed to be squandered on unproductive speculative purposes.

  • Easy cheap credit for existing asset price speculators.
  • Harder to get and more expensive credit for new productive investment.
  • While the hundreds of billions of dollars of external liabilities clocked up by our banking system when gorging on offshore predatory ZIRP/NIRP capital flows driving our AUD up and our local industries out of business.

A higher than it should be AUD AND higher priced and less available credit creation for productive purposes

Technically this state of affairs is known as the Dinkum Double Crap Sandwich.

Note; This is not a Dinkum Double Crap Sandwich

At least the Irish made a buck out of their neoliberal gourmet creation – Double Irish with a Dutch Sandwich.


So what if the RBA and APRA refuse or are unable to force the banks to massively reduce unproductive credit creation?

Remove the private bank credit creation privilege completely.   Removing the privilege will turn our banks into what most people think they already are…..mere intermediaries between savers and borrowers.

Large tax cuts on low income earners directly monetised by the RBA, by buying 0% bonds from Treasury, combined with strict restrictions on unproductive capital inflows will fix the problem.

Sure existing asset prices will soften and sag as they lose the benefit of the out of control private bank credit creation inflation that is bloating them and the AUD will soften as the capital inflows to the private banks slow but all of this is EXACTLY what needs to happen.

An economy dependent on the sugar hit of #FakeInvestment is heading for the rocks.

Mr Pascoe: Only two mistakes…….provided we don’t talk about the big one.

Columns by Mr Pascoe are always entertaining and fun to read, and when the drive to catch eye balls is in harmony with talking sense they can be powerful medicine.

In his most recent outing, Mr Pascoe took us on a trip down memory lane to pay a visit to two of his most cherished mistakes as a financial prognosticator.  Though if you read closely he barely concedes the second.

Rather than deny you the pleasure, by providing a potted summary, click this link and settle back with a cup of finest cocoa.

The article ended with

“..Keeping perspective on both the doom and boom remains a lonely pursuit – but it’s the only one worth pursuing, even with the occasional bad call….”

A double serving of LOLs please.

The problem is that Mr Pascoe rarely talks about what has driven the bubbling Australian asset prices of the last 30 years and especially since the GFC.

According to Mr Pascoe the GFC proved to be no disaster for Australia because some levers were pulled by brilliant economic wizards at the RBA, APRA and Treasury.

“… I wasn’t entirely wrong, Australia was all right. A brilliant fiscal and monetary response did kick in, helped by China hitting the stimulus button. ..”

The truth of the matter is that along with China’s economic expansion, little more than the deregulation of credit creation by our private banks and a growing dependence on external capital inflows to those banks, supported by an implicit taxpayer guarantee, has been keeping our economy bubbling since the mid 1990s.  The response to the GFC was nothing more than to double down and dish up more of the same with even more of the taxpayer’s full faith and credit on the line.

Provided that the private banks are free to create credit and direct it towards asset price speculation and we have the RBA and APRA bending over backwards to ensure that predatory ZIRP inflows from our trade rivals keep the price of that credit is as low as possible, the bubbles keep on bubbling and with the taxpayer going guarantor may bubble for some yet.   We still have a lot of real and financial assets to sell off.

Now this “brilliant” magic pudding economics applauded by Mr Pascoe is not cost free.

When the process depends on massive capital inflows from trading partners eager to manipulate exchange rates the price is a higher AUD and a loss of competitiveness…in short we are gutting the productive capacity of the economy as we pursue bubble’o’nomics.

At this point it important to note some of the other “brilliant” levers that were pulled.   

Massive increases in the sale of Australian capital assets offshore, assisted by Free Trade Agreements which more accurately should be called “Sell Off Australia Fast Agreements” SOAFA, and increases in government bond sales (recorded or concealed) to foreign buyers to fund recurrent fiscal expenditure. 

Remember when Rudd’s government opened the door wide to foreign buyers of existing housing just to prop up houses prices that the banking sector had inflated with hundreds of billions of household debt as simple folk chased Howard’s Capital Gains Tax discounts?  Yep that was one of those “brilliant” levers.

Remember when the Australian Office of Financial Management bought up the private Residential Mortgage Backed Security market to stop it imploding and driving down debt bloated house prices?  Yep that was another “brilliant” lever.

Mr Pascoe rarely mentions that there are real costs of asset bubbles built on borrowed offshore capital. 

It is all just ‘investment’  when #FakeInvestment is closer to the mark.

The “brilliant” thinking is that if foreign central banks want to drive cheap capital towards Australia’s taxpayer guaranteed banking system, we should grab as much as we can and as fast as we can but it is what we do with that cheap capital that really matters.

Shutting down factories and industries with a high AUD, buying imported cars and other imports and driving up existing asset prices is not the mark of a clever country.

At the moment most of the new asset construction going on in our largest cities consists of construction to support a larger population not a larger productive economy.  Nothing brilliant about that.  

But on all of this Mr Pascoe is a real Silent Bob.

Why so silent Michael?

If readers feel the above is unfair and have links where Mr Pascoe explains any or all of the above ugly secrets of Australia’s “brilliant” economic management, the Glass Pyramid will be most grateful and shall give them the star billing they deserve.

South Australia pays the price of the LNP obsession with #FakeInvestment 

South Australian Premier Jay Weatherill correctly rejects a population Ponzi scheme as an economic plan for South Australia’s future.

The biggest challenge facing South Australia and other regional parts of Australia is the preferred LNP Australian economic model which favours unproductive speculation and #FakeInvestment in the form of private bank credit creation “household debt” directed towards asset price speculation.

Howard and Costello gave this debt driven economic model their full support by introducing a model of “independent” banking regulation, in the form of the RBA and APRA.  This new model was described as ‘independent’ but in truth was willingly and rapidly captured by the interests of the banking and finance sector.   The relationship between the private banks and RBA and APRA is so inherently intimate that anything less than a Vulcan mind meld would have been a surprise.   To further advantage the banking and finance industries they introduced a capital gains tax discount that made debt based punts on asset prices a very profitable and tax effective exercise.

Mr Scott Morrison has done nothing but seek to encourage and support more #FakeInvestment since becoming Treasurer.   He is hopelessly addicted to the sugar rush of household debt fuelled economic activity.

Debt based punts on increases in existing asset prices is #FakeInvestment.   They add nothing to the productive capacity of the economy.

It is inevitable that when this is the “monetary model” operating at a national level, centralisation of economic activity to a few key asset markets will tend to occur as the safest debt based punts are those that follow earlier debt based punts.


Keep betting on black or as close to black as possible. 

Keep betting on Sydney and Melbourne house prices with scraps for everyone else.

As unregulated capital inflows flooded in, from overseas from capital markets manipulated by foreign central banks, to participate in the Australian #FakeInvestment boom the exchange rate was put under upward pressure and the competitiveness of the real productive sections of the economy declined.

Goodbye South Australian car manufacturing.



While bending the economy out of shape to create room for a massive historic mining boom did not help, the far greater longer term problem has been the hundreds of billions of dollars in external liabilities clocked up by the private banks and the Federal Government.  Those rising external liabilities, especially the ones directed to supporting #FakeInvestment punts on existing asset prices pushed the $AUD above what our trading performance warranted and resulted in factories and businesses closing across Australia for the last 20 years.

Redirecting policy towards productive investment will take some time but one of the first steps is for APRA to be disbanded and its functions to be reabsorbed by Treasury.

Clear and explicit Private Bank credit creation regulation is required to slow and to restrict #FakeInvestment and encourage more productive investment.

APRA is not fit for the purpose of ensuring private bank credit creation is productive.

While in recent times, as #FakeInvestment in Sydney and Melbourne existing property exploded like a bushfire, and APRA have finally taken some action, it is quite clear that APRA is fundamentally unsuited to regulate credit creation because the fundamental premise of APRA is that credit creation can be safely left to the “market”.

Well we did that for the last 20-30 years and we have seen asset prices and household debt go mad and productive industries wither and die.

At core APRA is little more than a pseudo “independent” outfit informed by neoliberal ideological obsessions and captured by the banking sector.  Simply APRA operating as intended is the problem.

At the very least APRA must be required to report on changes to its credit creation regulations publicly just as the RBA does for interest rate policy.


The sooner SA ALP and Federal ALP get their heads around the problem the sooner they will start working out what REALLY needs to be done.

Productive investment will support productive population growth

Start calling for policies that tilt economic policy away from private bank credit creation directed to unproductive asset price speculation and instead direct private bank credit creation towards productive investment.

Do this and there will be less need to announce policies like those announced by Bill Shorten and Kim Carr whereby a future Federal ALP governments tries to cure a massive private banking sector failure with $1Billion worth of investment crumbs to smooth the pillow of dying Australian manufacturing.

Think about the hundreds of billions that have been directed to pumping up the prices of existing houses in Sydney and Melbourne and compare that to the $1 Billion on offer from Bill and Kim to address the problem.

A Liberal National Party economic model dependent on #Fakeinvestment in the hundreds of billions of dollars is the problem and that is where to start.


Premier Gladys:  Selling off NSW homes to foreign buyers by the plane load.

25% of all new housing construction in NSW is sold to a foreign buyer.  In addition there are many sales of existing houses and apartments to the hundreds of thousands of foreign buyers temporary resident in Australia.

Unfortunately despite the wide coverage given in the media to a report on Foreign buying of residential real estate in NSW, based on a Credit Suisse Freedom of Information request to the NSW Government, no link to the actual report has been provided. Credit Suisse do not appear to have made it available to the general public.

Not one of the articles has drawn attention to the fact that ALL of the information concerning the number and value of residential property transactions involving the different categories of foreign buyers (foreign resident, temporary resident and permanent resident) should be released by Gladys Berejiklians’s NSW Liberal-National Party government EVERY month.

Not one of the articles has drawn attention to the fact that some of this information was released for 3 months at the end of 2016 and was then removed from the monthly data release by NSW Revenue.

The Glass Pyramid has covered this story regularly over the last 12 months.

The government of NSW has nothing but contempt for the people of NSW and the ‘lions’ of our mainstream media, the ones who constantly moan about social media stepping on their turf, say and do next to NOTHING.

And a big fat nothing on this issue is largely what we have received from the NSW ALP, the NSW #FakeGreens (including Ms Jenny Leong who is upset that a lot of Sydney residents are fed up with the sell off), Fred Nile, the Shooters, Fishers and Farmers and the National Party.

Rather than idly report on the contents of a private bank report that is not available to the public, they should be demanding that Premier Gladys Berejiklian and the NSW Treasurer Dominic Perrottet release the data on foreign purchases of new and existing property each month and when they fail to do so file FOI requests and make the information public.

Here is a list of the information that should be released by NSW revenue and the LTO each and every month.

(a) The number and value of new homes and apartments bought by Foreign buyers (Offshore)

(b) The number and value of existing homes and apartments bought and sold by Foreign buyers (Offshore) with approval of the Foreign Investment Review Board (FIRB).

(c) The number and value of new homes and apartments bought by Foreign buyers (Temporary residents)

(d) The number and value of existing homes and apartments bought and sold by Foreign buyers (Temporary resident) with approval of FIRB.

(e) The number and value of new homes and apartments bought by Foreign buyers (Permanent residents)

(f) The number and value of existing homes and apartments sold by Foreigners (Permanent residents)

(g) The amount of surcharge stamp duty and surcharge land tax paid by foreign buyers (all categories) and foreign owners of property

The information is being collected as a routine matter and should be released as a routine matter on a regular basis just as it was for July, August and September in 2016 before the NSW government decided it was better to keep the people of NSW in the dark about how much residential real estate NEW and EXISTING was being flogged off to foreign buyers

Socialism with a spine? Is that the only alternative?

In an article published by the Guardian today John Quiggin discusses whether “Socialism” may find new support now that the flaws in neoliberal economics are becoming impossible to ignore.

A lively discussion of this article appeared on Macrobusiness that included the following comment.171010 - Quiggin

“The private banks that offer cheap mortgages supported by an independent central bank will be at minimum curtailed. In their place we’ll have a central bank working hand-in-glove with the government to print money into existence via buying the sovereign bonds that fund various forms of agreed public income generation – infrastructure investment, basic income, digging holes, filling them in, etc.”

This over complicates the reforms that are required.

Perhaps we will eventually find ourselves rebuilding a large public sector with technocrats running more sectors of the economy or distributing incomes as they see fit but there is so much we can do/try before throwing the baby out with the bathwater.

For example:

Yes, the RBA could buy government bonds directly from Treasury for the purposes of funding new activities of the government, but a simpler starting point would be to buy the bonds directly from Treasury and just fund tax cuts for the lowest income earners (raising the tax free threshold or earned income rebates) and some increases to social security recipients.

That would increase money in the wallets of the people who need it most.  They are more than capable of working out how much they can afford to save and how much they need to spend now on health, education, food, transportation etc.

No need for a Basic Income any time soon

Plus until there is a clear demonstration that all the important tasks that need doing are being done by robots we should NOT be assuming that we cannot fully employ all able bodied people in a productive manner.   An income earned doing productive work beats an unearned income every time.

As Japan with an unemployment rate of 2.8% and heaps of robots demonstrates, there are lots and lots of jobs for people to do right now and sentencing that resource to bean bags and Smokey Dawson easy risers with a basic monthly income guarantee is simply nuts.    That we have an unemployment rate of close to 5% is a failure of policy and a political choice not because we have a shortage of things that need doing.

Reducing taxes while maintaining the current level of government expenditure will generate fiscal deficits as large as we require and WITHOUT an interest burden if government bonds paying 0% are sold to the RBA directly and they remain non-transferable.

And yes unproductive capital inflows MUST be tightly restricted to ensure that the exchange rate reflects our trade performance and not our capacity to sell off assets and claims on our future incomes (public or private).    Restricting unproductive capital inflows is an essentially part of any reforms (click here for more on that subject).

Restricting private bank credit creation 

As for the activities of the private banks, the curtailment of their credit creation operations will be necessary simply because if they continue to create credit as they presently do we are likely to suffer from a rising rate of inflation due to the combination of the larger directly financed fiscal deficits and private bank credit creation.   The only reason the out of control credit creation activities of the private banks has not led to inflation recently is because it has been directed heavily towards unproductive asset price speculation and the government insists on flooding the labour market with high rates of immigration.171010 - Social

The simplest way to start limiting the Private Bank credit creation operations is to regulate those operations to ensure that any credit they do create is limited to the creation of new productive capacity. That means loans where the security is existing assets will be limited either by price, volume or availability. There are plenty of non-bank methods of securing loans using existing assets and that is the way forward for those who wish to borrow using their existing assets as security. The price of those loans will reflect that they are not getting an effective taxpayer subsidy which is what happens when private banks create credit secured by existing assets.  Credit creation by private banks is a privilege and it should not be used to pump up the price of existing assets.

The private banks will be increasingly restricted to credit creation that involves new productive capacity with lending secured by existing assets heavily regulated and/or left to the non-bank lenders.

Ending private bank credit creation completely

If needs be, and I think it is likely as the understanding of and confidence in direct monetisation of fiscal deficits grows, private bank credit creation could be abolished completely and all lending and investment would then be conducted by non-bank financial organisations.

Let the market determine the price that borrowers pay to secure the acorns of the savers.

The government can always intervene in any of the markets for ‘borrowings’ if it sees fit by making available funds to the non-bank intermediaries that bring borrowers together with savers.   It would in effect be increasing the supply of ‘savings’ to a market for a particular type of loans.   This may not prove to be necessary but it remains an option where market failure is identified or public purposes require.

For example:   The government might choose to make available resources at lower cost for new housing construction or servicing new land. It could do so by making a suitable budget allocation available to loans for those purposes.

None of the above is difficult or involves radical reform.

In essence the system we had prior to the effective deregulation of private bank credit creation was close to such a system.

Looking to the past for new solutions not old

A lot of people overlook that prior to financial system deregulation we had TWO major ways that the public sector could create ‘money’ and room for them to do so was created by careful regulation of how much money the private banks created via their lending decisions.

The two methods were

1. Fiscal deficits

2. Credit creation decision by publicly owned banks like the commonwealth bank.

Lending decisions by the old Commonwealth development bank for example were designed to encourage the creation of new productive economic capacity.

The sale of all the publicly owned banks during the deregulation period removed Option 2 and in doing so limited the option to fiscal policy and deregulated private bank credit creation.

In addition the balanced budget mania meant that two options effectively become a single option – private bank credit creation.    The result of this process was more asset price booms and busts, the GFC and is the reason we are 10 years down the road with few signs of real economic recovery.  We simply refuse to accept that the neoliberal model for money creation and allocation is a dismal failure.

We could bring back Option 2 – publicly owned banks – but a more practical approach from this point of time is likely to be:

1. Directly monetised fiscal policy

2. Private bank credit creation restricted to clearly productive purposes

3. Other lending left to the non-bank sector.

4. A public savings bank option so that savers have a public option for a secure location for their savings – Australia Post could supply these services.

This debate will not advance if people insist on running hysterical hyperbole about the alternatives or over complicating what is required.

Fixing the obvious flaws in the obsessions of economic neoliberalism especially with regard to the banking and monetary system do not involve crashing the economy or unleashing the four horsemen of the apocalypse.

It is about draining an abscess and encouraging the regrowth of healthy economic tissue and habits.

The reforms proposed above are not difficult and we need to start talking about them now.

A Big Australia and the problem of #FakeInvestment: A note for Dr Andrew Leigh

Macrobusiness reported the latest ABS release on demographics.

“…….The ABS released its Australian demographic statistics for the March quarter of 2017, which revealed that Australia’s overall population growth rate has accelerated led by unprecedented growth in Victoria, which has once again obliterated records.

According to the ABS, Australia’s population rose by 1.61% in the year to March 2017 to be way above the 30-year average:…..”

389,100 new people last year.

If nearly 400,000 sounds like a lot that is because it is.

To give that figure some context check out the demographics for the USA between 1790 and 1890.

The population grew from about 3 million to 62 million. Continue reading

The end of Oz car manufacturing – “Mission Accomplished” by the LNP, RBA and APRA

So the end of Australian car manufacturing has arrived with closures of both the Toyota and Holden plants to take place by the end of October.

Next year Australians will buy close to 1,200,000 vehicles at a cost of approx $40B (assuming each car costs approx $30,000) and they will all be imported from our trade rivals like France, Germany, England, USA, Italy, Sweden, Japan, Thailand, Korea, China, Russia, Austria and all those other countries that reckon maintaining heavy industry and manufacturing skills is a very good idea.


Continue reading