Average Australian Households

Thanks to high house prices and compulsory superannuation the average Australian household is much wealthier than the average American household.

We are below average with a net worth of about $A510k vs. $A720k for the average household. The average house was worth $A541k for those who owned their home outright and $A521k for those with mortgages. The average superannuation (retirement) balance was $A154k. Here we are above average at $A261k. That includes a couple of US retirement accounts though.

Our income (not discussed in this article) puts us in the top 10% or so probably of households and in the long-run I expect we will end up wealthwise in the top 20% of households who average $A2.2 million.

Sovereign Credit Ratings

With all the talk about the U.S. credit rating possibly being lowered to AA from AAA due to the debt ceiling debate debacle, I was wondering what the credit ratings of other countries were as a point of comparison. Wikipedia, helpfully has a list. According to Standard and Poors, other AA countries include:

Belgium
Bermuda
China
Japan
Kuwait
New Zealand
Qatar
Saudi Arabia
Slovenia
Spain
Taiwan

Not such a bad club to be in. Some are countries with un-democratic governments but low debt like China and others democracies with very high debt levels like Japan. Apart from the U.S., the AAA club currently includes:

Australia
Austria
Canada
Denmark
Finland
France
Germany
Guernsey
Hong Kong
Isle of Man
Liechtenstein
Luxembourg
Netherlands
Norway
Singapore
Sweden
Switzerland
UK

These are democracies with reasonable debt levels and good track records or tax havens. Yes, Hong Kong is a tax haven. I don't think that Singapore counts as a tax haven and isn't a democracy really (despite having elections) but it does seem to have very good and reliable financial regulation.

In France it is Illegal to Rent an Apartment for Less than One Year!

This New York Times story stunned me with how stupid regulation can be. So the government prefers wealthy people to leave their apartments empty for much of the year instead of renting them out? I wonder what the hotel industry did to get that law passed? Seems there is so much inefficient regulation in the housing industry worldwide.

Sign of the Times

HSBC (USA) is converting my checking account from "Interest Checking" to "Basic Checking" because the former product is being discontinued, which is no surprise given the level of US interest rates. It's good news for me as the fees on the new account are a quarter of what I was paying on the old account and will be waived for 6 months after the conversion...

Mean and Median "Ordinary Time Earnings" in Australia

"[The mean is] $62,400 per year. Around half of workers earn less than three–quarters of AWOTE [$46,800]."

Henry Review Predictions

Based on all the leaks some things seem clear about what the Henry Review to be released Sunday will contain.

I do expect that we'll move one step closer to the Roth IRA model where super contributions are fully taxed but earnings are not. One guess would be that super contributions will be taxed at 15% below your marginal rate. So 0% for those in the 15% bracket, 15% (the current rate for everyone) for those in the 30% bracket, and up to 30% for those in the 45% tax bracket. Maybe with that they can relax the $A25,000 a year contribution cap. I'm likely to be exceeding the cap myself next year, will be interested to learn how that is dealt with by my employer.

The Henry review will if anything reduce overall taxation on capital from all the sounds it has been making. First, they may reduce the corporation tax in return for the resource rent tax. They might fiddle with capital gains tax discounts but doubt they will eliminate them. The aim overall is to lessen the gap in tax treatment between different forms of savings and to increase the tax burden on immobile land and reduce it on more mobile capital.

Henry Review Release Scheduled

The tax review will finally be released a week from this Sunday. Releasing a report on a Sunday is very weird. If that is meant to bury it, it could do just the opposite as there is less news on Sundays generally.

P.S.
That's a hairy nosed wombat in the picture. Ken Henry, secretary of the Treasury and head of the tax review, is a big fan of these creatures.

How Much Does it Cost to Replace a Car Window?

This isn't our car, just the closest picture I could find on the web

Some time between Saturday afternoon and Sunday morning someone smashed the front passenger window on our car, which was in a supposedly secure underground car park underneath our apartment building (at least in Canberra, car parks under the building are the norm at apartment complexes (why not complices?)). That's all that happened. Either they were looking for the garage opening device that all of us have been warned not to leave in our cars or thought that an empty bag lying on the back floor might have had a laptop in it. We won't leave a bag in the car again.

The police said that the body corporate should install security cameras. The body corporate person told me that cameras are useless...

Anyway, so we needed to get quotes. These guys who advertise on TV wanted $A450 whether we went to them or they came to us to replace the glass. NRMA quoted $A350. Another guy wanted $A300. In the end we went with a semi-DIY approach. This morning we went to Queanbeyan, NSW about 10 miles away and bought a second hand window for $A75. Then Snork Maiden took it to another place in Canberra that cleaned and fitted it for $A88. You need to add some time and fuel costs into our real price but still it looks like there is a lot of price dispersion there.

Epic Grant Fail

After I put a lot of work into developing a grant application to try to create a position for myself (as well as applying for regular jobs) it turns out that I need someone at a university to guarantee a 50% contribution to the salary. If I got a job with them and got the grant then they might receive a 50% subsidy from the funding agency but if I don't get a job but get the grant they'd have to pay out. The expected value of this seems to be close to zero and given that I might get a job elsewhere instead (and take the application with me) the probabilities of either receiving a payout or having to make an equal contribution are quite low. But noone wants to risk it and I can understand them. The amount of money they might have to pay out is significant. It seems that the university as a whole would want to do this - maybe get an extra position half funded by a funding agency. As people leave all the time it's not neccessarily an increase in their outlays. But there is a tragedy of the commons problem here to some degree where each individual department would like to see it happen but doesn't want to put their own money up. I haven't completely given up and just sent out two "last ditch" e-mails.

The real problem here is that the grant application deadline is soon, before the jobs I am applying for will be decided

There is another fellowship I can apply for but I need to submit an "eligibility request" as a priori I'm not eligible. Apparently they make few or no exceptions. So I don't expect that will work either but we'll try.

The effort is not entirely wasted. It has helped me clarify my ideas, learn about this funding agency, and if I get a job I can make an application next year recycling the proposal I wrote this year.

Signature Debit?

It's weird that "signature debit" dominates the US debit card market - at least according to the New York Times. I don't think there is such a thing here and I can't remember ever doing anything other than keying in a pin number in the US either in recent years... (I banked with HSBC, maybe that explains it). Here, PIN credit cards are increasingly common as are debit and credit cards with chips in them. Credit cards do cost merchants more in Australia than debit cards. From the article it seems that signature debit costs the merchant almost as much as a credit transaction in the US while PIN debit is cheaper. The NYT article has this interesting graphic of trends in US payment vehicles:



Britain has already decided to phase out personal checks by 2018. When will banknotes and coins eventually go too?

Moxy Vote

Moxy Vote is a new website (got started in November) which aims to link individual investors and advocates in order to get more individual investors to participate in corporate democracy. Most small shareholders don't bother to vote in corporate elections because a lot of effort is needed to understand the issues and most resolutions pass overwhelming in the direction recommended by the board of management. There are, though, occasionally mergers and the like which get voted opposite to board recommendations.

The idea of Moxy Vote is to change this by enabling investors to align their investment accounts alongside advocates that have informed opinions on the proxy ballots. The retail investors will then have their shares automatically voted in parallel to the advocates' shares. The site will cater to investors who are concerned about social causes (such as animal rights, human rights, environmental concerns, etc) as well as those that are pro-shareholder and are concerned about such things are executive compensation, strategic business decisions, etc.  Moxy Vote will just be a neutral platform that retail investors can use to get involved in any way they see fit.

It still seems to be very early days for this site as some of the advocates have not posted opinions on any of the upcoming votes. It is an interesting idea though and I'll be interested to see if it succeeds.

Self-Service Checkout

Our local Woolworth's store has just introduced self-service checkout machines. I've used these before at Big-W (pictured) and in the US. After today's experience though it seemed to me that it would be so easy to rip the store of and steal stuff when using these machines:

1. The machine asked me how many mangoes I had. If I put one instead of the four I actually had, how would anyone know?

2. If I told the machine I had some cheap vegetable in place of the one I actually had how would anyone know?

Or are they planning on random audits of customers leaving the store? I didn't see any evidence of that.

Also I could just leave some stuff in the trolley/cart and not check it out as there doesn't seem to be an electronic security system in place. Or would I get caught if I tried to pull these tricks off?

What Gets the Most Comments in the New York Times?

An article on what waiters should and mostly shouldn't do. I find the article and comments pretty amusing. The only things that annoy me are waiters grabbing my plate before I've finished or barely finished eating and keeping coming back and asking questions about how everything is and whether there is any more they can do for us. At cheaper restaurants in the US sometimes it gets very annoying as you keep getting interrupted by the waiter. Of course they are trying to sell more stuff to get a bigger tip and trying to turn over more customers as the individual bills are low. I found as the price went up a bit this was less of a problem. The constant asking of questions isn't much of a problem in Australia where tips are usually a question of rounding the bill off if anything (at least traditionally and in my experience (certainly not an expected percentage).

There's Been No Recession in Australia

According to the official data.

Psycho-Economic Environment in Australia

Following up on the comments on a recent post things feel a lot different here than in the US.

Income Replacement Rates of Mandatory Retirement Schemes

The table is from a paper by Richard Disney presented at a conference on taxation held as part of the Australian tax policy inquiry. It shows the percentage of income replaced by mandatory retirement programs at different levels of average earnings. The Australian data includes both the means tested age pension and the 9% superannuation guarantee! The two together are estimated to replace only 52% of average earnings. Australia's outcomes are very similar to those of the US which only has one mandatory program: social security. With Australia's government worrying about the tax benefits provided to superannuation and raising the age of eligibility of the age pension to 67, you can see just how unsustainable the US program must be. I won't even talk about some of the European schemes :)

Bottom line: You probably need to save more than the 9% superannuation guarantee.

George Friedman Thinks the Iranian Election was Fair!

My opinion of him and Stratfor sank even lower.

Conspicuous Blogging

An interesting article about changes in the ways people are signalling status - a switch from conspicuous consumption of material goods to online signalling through the number of Facebook friends say. I'm not sure quite how important this is as a trend in quantitative terms but there is certainly something in it. It fits in with similar news from Japan. Of course those of us in academia have long signalled our status through publication, citation, winning research grants etc. and the same has been true of other professions such as art or music. Conspicuous production rather than consumption. The paradox is I'd love to tell you right now about an article I wrote where I referred to this issue 12 years ago. But I can't without revealing my identity. An anonymous blog is very unconspicuous production in it's nature. Maybe I should go down the road of other non-anonymous academic bloggers :)

Face to Face Interview

So I went out to the airport today to meet the partner of the recruitment firm at the Qantas Club (=Lounge). I think the interview went well and that there is a good chance he'll put my name forward at the meeting with his client on Monday where the short-list of candidates to be interviewed on campus will be composed. The taxidriver on the way there told me he studied accounting but the economics part was hard. I told him I found it hard the first year or two as well, the concepts took a while to sink in.

Tianjin Eco-City

We also visited the area of the planned Tianjin Eco-City on our trip to China last year. We saw even less of the site than these guys did. We did see lots of non-specifically Green development in neighboring Tanggu. Snork Maiden's father knows a bunch of people in the planning department there.