Mining lobby takes the prize in the Year of the Furphies

Posted on 15/12/2011  

The year about to pass into history will be remembered by me as “the Year of the Furphy”.

The year has been resplendent with dire forecasts which have served little purpose other than to provide cheap profile for people suffering from limelight deprivation.

Interest rate rises, the collapse of property values everywhere and the death of mining projects were some of the calamities predicted for 2011.

This year was in fact the third consecutive year in which economists, share-market analysts and others with little understanding of what makes real estate tick told us to prepare for a wholesale devaluation of our homes.

I’m still waiting for one of the anti-property champions to explain why they so desperately want home values to drop 40 or 50 per cent. It would be a disaster for most Australian households and for the nation.

But it hasn’t happened – not in 2009 when it was first touted, nor in 2010, nor this year when capital city home values declined about 4 per cent, according to RP Data – but that won’t stop the same frothing-at-the-mouth naysayers from transferring their doom forecasts to 2012, and then to 2013, and beyond.

As the latest research from the Australian Bureau of Statistics shows, our housing costs have maintained their relativity to incomes for the past 10-15 years.

A new report from ANZ Bank’s head of property research Paul Braddick says the steady relationship between dwelling costs and incomes stretches back to the 1980s.

With our economy growing strongly, incomes rising steadily, unemployment low and interest rates falling, we have the conditions for property values to rise in 2012.

Recommendation for 2012: Base your investment strategy on values rising, not falling.

The two interest rate cuts with which we have ended 2011 make a mockery of the forecasting skills of Australia’s gaggle of chattering economists, who were most strident in telling us to expect multiple rises.

How did they manage to get it so wrong so often? Well, these are the people who predicted ten of the last three recessions, including the one that didn’t happen in 2009.

Recommendation for 2012: Ignore everything they say – there’s at least a 75 per cent chance they will be wrong.

Scare campaigns have been one of the defining characteristics of 2011, with the mining lobby, the building industry and the Federal Opposition the chief protagonists.

The most vacuous rhetoric throughout the year has come from the miners, who have established a marvelous track record of crying wolf whenever government proposes anything they don’t like.

The carbon tax, now passed by federal politicians, would kill projects and destroy tens of thousands of jobs, so they said.

But, while their words have foretold calamity, their actions promise prosperity. Mining companies are expanding like never before, including coal miners who are currently embarked on the greatest growth phase in the history of civilization.

This is good news for property investors who own property in regions dependent on mining economies. The scare campaigns have created a lot of fear among investors, but they can relax.

Recommendation for 2012: ignore what the miners say and watch what they do.

The mining lobby’s scare campaigns have had the enthusiastic support from the attack dog of federal politics Tony Abbott, who seems to take the word “opposition” terribly literally.

Hopefully one day people will realize that not only does Abbott devote all his energies to talking down Australia – with a consequent blow to consumer confidence – but he has been out-manoeuvred by Julia Gillard in all the key issues, including negotiations with the Independents who hold the balance of power and in getting the mining taxes through Parliament.

Then perhaps we can have an alternative prime minister who is not an embarrassment to the nation and a detrimental force to the most critical issue for the economy and real estate – public confidence.

Recommendation for 2012: do not base investment decisions of what politicians say.

The other great furphies that characterized 2011 came from the remorseless and counter-productive campaigns of the organisations that represent builders and developers.

If I was a fee-paying member of the Master Builders Association, the Housing Industry Association or the Urban Taskforce, I would demanding a refund or a change of personnel at the top.

The only tangible outcome from their pointless efforts to generate a perception of crisis in real estate is to convince consumers to avoid buying property, particularly new homes.

They have shot themselves in both feet. Perhaps if they aimed the next bullets at their heads, the housing industry could get back to doing something productive and positive, like promoting the idea of buying new homes rather than telling people they can’t afford it.

Recommendation for 2012: disregard anyone who tries to tell you there’s a chronic housing shortage crisis, an affordability crisis or anything else which features the word crisis.

My award for Furphy of the Year in this Year of the Furphies? It goes to the mining lobby. Fortunately for the national economy, these people are better at digging up minerals than they are at identifying the truth.

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