Into the deep freeze

Second wave

In brighter news, there's been no COVID-19 community transmission to speak of in Australia this week...ex-Victoria.

Unfortunately the Victorian government's shocking mismanagement of hotel quarantine means that there's now a potentially nasty second wave of the virus spreading exclusively in that state. 

With another couple of hundred cases over the past 24 hours Victoria now has 1,124 active cases. 

Elsewhere local cases have essentially been running at zero all week, which is a great result. 

Victoria will now go into another lockdown, this time for at least six weeks, which is a disastrous hammer blow for the local economy.

Auctions slump

Sydney recorded rock solid auction results on Saturday, with the median price of property sold under the hammer rising to $1,260,000.

In Melbourne. however, auction success volumes and results have unsurprisingly begun to plummet as consumer confidence has been demolished by the lockdown announcement.

Alas it's now only a matter of time before someone rolls out another 'tale of two cities headline'...sigh.

To date Melbourne's housing prices have fallen by about 3 per cent since April.

Look out below

I'm not usually in the business of making serious predictions, which are usually broad brush and often prove to be pointless.

But these sorts of auction results in Melbourne have normally been commensurate with something close to double digit pace declines in housing prices, and in all likelihood may point to a 10 to 20 per cent decline in Melbourne's market.

Given that Greater Melbourne is Australia's second largest economic hub - and that it's long been accounting for such a significant share of growth - the decision to lock down for six weeks has all but cruelled the chance of a meaningful recovery any time soon.

Research across half a century of historical data from the Bank of England has shown that falling house prices lead to fear of negative equity, falling confidence, and consumers declining to spend, borrow, or invest.

If the Federal government wants to stand any chance of getting the Australian economy back on its feet this year the Treasurer should announce on July 23 a temporary stamp duty holiday for the remainder of 2020 (and fund the difference for the states by making use of bond yields at record lows).

Alternatively, and more sustainably, broaden the GST and raise the rate to 12.5 per cent.

Get onto it!