Labor wants to legislate minimum wage increases from July 1. JPMorgan says what?
Business confidence fell sharply in March according to the NAB business survey, with a drop in employment prospects and business sentiment. Its release beat the latest ABS jobs figures by a day, which are being watched closely as an early indicator of what the Reserve Bank is likely to do with interest rates.
Labor's negative gearing tax proposals are back in the news today, with the likes of the Grattan Institute saying the policy will have little benefit for the housing market and Master Builders Australia questioning the wisdom of adding more burdens to a sector already under intense pressure. This analysis by The Australian's economics editor, Adam Creighton is worth a read.
Speaking of new taxes, NAB's chief economist Alan Oster has criticised both major parties today on their failure to come up with policies that will stimulate the economy. He says RBA rate cuts are almost inevitable at this point, but will have little impact; the heavy lifting has to happen at a policy level, and the current focus on what's going to happen over the next ten years "is garbage".
Labor dropped a clanger yesterday when it said it would immediately move to legislate a lift in minimum wage rates from July 1 if it wins government this weekend. Forget the uncertainty this would drop on an already over-complicated system; plans to lift wages without the support of a productivity boost have been universally panned by economists, who say while the problem of low wage growth is significant, this isn't the way to fix it.
JPMorgan's global chief economist, Bruce Kasman reckons rising labour costs will make a bad situation worse, hitting inflation or profit margins and putting more pressure on employment.
Back to negative gearing, and SQM's latest rental vacancies report showing that more than 10,000 homes across the country are currently empty compared to this time last year. It expects this situation to continue in Sydney and Melbourne, largely due to softer tenancy demand.
The soft apartment market is just what Sydney developer Capio ordered; it has set up a $50 million fund to buy distressed apartment inventory in bulk in anticipation of the market strengthening again. It's about to drop $19 million to purchase a line of 30 apartments in western Sydney, and is looking to projects in suburbs with oversupply concerns including Parramatta, Epping, Mascot, Macquarie Park and Waterloo.
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