You can’t help but love him… Michael Pascoe of the Fairfax papers.
In today’s effort he comes up with two beauties:
“And now, with all but the hard-core climate change denialists accepting that extreme weather will become more common, there’s no excuse at all. Streets and houses that flooded in 1974 are flooding again now and will flood again.”
And…
“As for the economics of it, yes, there are terrible numbers being bandied around, but while there’s damage and destruction and loss, there’s also massive stimulus in the rebuilding. The economy is as strong as the determination of the people. It’ll be all right.”
We’ve already exposed this economic flood stimulus as – to use the Fairy Ruddfather’s phrase – bunkum.
There is no stimulus.
But Pascoe isn’t the only one spinning this yarn. Westpac economist Matthew Hassan and St George economist Justin Smirk writing over at Business Spectator provide more detail:
“There would be also the boost to economic activity due to cleaning and rebuilding activity. A rough rule of thumb is that the rebuilding effect is about ½ the size of the output loss. We estimate a 0.1 per cent contribution to GDP.”
At least they admit that the net position is no stimulus to the economy. The net position is a cost. That is, it doesn’t stimulate the economy.
For example, point to the stimulus in this photo… if you can:
Source: The Age
No, I can’t see a stimulus either. I can see a whacking great big clean-up bill though… I can see that a bunch of people will be without a car for a few weeks… I can see that Queensland Railways will need to replace and inspect a whole lot of train rails.
This idea of economic stimulus from natural disaster is ridiculous.
Money Morning reader Graham sent us an email a week ago. He was responding to our comment in Friday’s Money Morning about how HSBC chief economist Paul Bloxham had claimed the floods would result in a boost to the economy.
Graham wrote:
“Just like the 250 homes rebuilt, out of the 2000+ homes destroyed on black Saturday? Now two years on! I’m one of those still trying to rebuild and get my family back home in Kinglake, and I’ve seen many families fall apart or go under as a result! The only way I can get my family back home is to rebuild my home, myself, nail by nail… Forget the household durable goods! ALL the ‘under insurance’ money goes into rebuilding a roof over your head first…”
We also wrote about the stimulus nonsense in Money Weekend. You can read that article here.
The way mainstream logic works, the next thing we’ll hear from them is that people dying in the floods is good because it’ll create more jobs for gravediggers!
I mean, seriously. There’s something wrong with these people.
Not only that, but many readers wrote in to point out that flooding isn’t covered by most insurance policies.
The Australian Securities and Exchange Commission’s (ASIC) website points out:
“Because flood cover is not offered in most house and contents insurance policies, people may find out too late that they are not covered for the losses caused by a flood.”
Oops! There goes the argument that foreign insurance firms will pay for the flood damage. Not that we bought that argument anyway.
And the front page of today’s Australian Financial Review (AFR) – just this moment dropped on our desk by Australian Wealth Gameplan editor, Dan Denning – notes:
“More than half of all insured homes in Queensland are not covered for flood damage, and insurers have ruled out making voluntary payments to compensate policyholders.”
Which is fair enough. If policyholders take the risk that their home won’t flood, it’s hardly fair to ask the insurance firms to cough up for the damage after the fact.
So who’ll pay? The individuals themselves, or charties, or equally likely the taxpayer. Now, you may be fine with that. But let’s not kid ourselves with the pathetic argument that the floods will provide a boost to the economy.
And we’ll guess that in the town of Toowoomba, much fewer than half the households will have flood insurance. Considering there’s no major river that flows through the town, and having looked at Google Maps we’re struggling to even find the creeks that supposedly exist.
Oh, and the fact that it’s 691 metres above sea level would also make you think flooding isn’t likely.
But it didn’t take long for the Climate Changers to point the finger. Again, Pascoe wrote:
“And now, with all but the hard-core climate change denialists accepting that extreme weather will become more common, there’s no excuse at all. Streets and houses that flooded in 1974 are flooding again now and will flood again.”
Mr. Pascoe may care to remember that the world existed before 1974. But listen to him and the other climate changers and you’d think all these floods are a recent event. That it’s all down to what we’ve done to the planet since the early 1970s.
Fair dues though. He’s not the only one. Reuters quotes Matthew England of the Climate Change Research Centre at the University of New South Wales:
“I think people will end up concluding that at least some of the intensity of the monsoon in Queensland can be attributed to climate change.
“The waters off Australia are the warmest ever measured and those waters provide moisture to the atmosphere for the Queensland and northern Australia monsoon.”
David Jones, head of climate monitoring and prediction at the Australian Bureau of Meteorology in Melbourne chips in:
“The first thing we can say with La Nina and El Nino is it is now happening in a hotter world.
“So the El Nino droughts would be expected to be exacerbated and also La Nina floods because rainfall would be exacerbated.”
The Reuters reporter notes that Mr. Jones added – but without directly quoting him – that “it would be some years before any climate change impact on both phenomena might become clear.”
Very convenient. Say it’s caused by climate change but then push the proof out to some time in the future.
But if all these terrible humans have caused the climate to change and monsoons to increase and floods to worsen… how do we explain the following chart:
Source: Bureau of Meteorology
It’s from the Bureau of Meteorology (BoM) and shows “Known Floods in the Brisbane & Bremer River Basin”.
You can click here to see the chart for yourself. This particular chart records levels at the City gauge.
A second chart records levels at the Ipswich gauge:
Source: Bureau of Meteorology
I don’t know about you, but can we really say that flooding on the Brisbane River is a new occurrence?
I wouldn’t have thought so. In fact there were more “major” floods in the Nineteenth century than in the following centuries.
So the idea that the floods are proof of climate change and that we must do something about it now before it gets worse, is just plain nonsense.
As we’ve pointed out before, your editor has no clue whether climate change is genuine or not. We simply don’t have the brain power to figure it out.
But what we do know is that floods happen. They happen regularly. In fact we’ve had a lot of rain down in Melbourne too – although not as bad as in Queensland.
And what we also know is that it’s disingenuous for the climate changers – and non-climate changers – to pick individual weather events and claim it’s proof that climate change does or doesn’t exist.
As far as we can see the Queensland floods provide about as much proof of climate change as they do about disasters being good for an economy… in other words, none.
Regards,
Kris Sayce
For Money Morning Australia
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Drew, in the case of the properties, Bob might indeed have to use the investment property as a security against the loan in order to qualify. But this example is a grey area to me. The fact that Bob does not let the house makes it sound like a second home, like a holiday home, the tax treatment of which might be quite specific, and not applicable to the situations we have been discussing where you have your mortgage secured against the house, but you use part, or all of that loan to make other investments, such as a business, an income producing rental property, shares and bullion.
cb @ 48, from what I understand, I don’t think there’s a dollar threshold. It’s simply whether the asset produces, or could be expected to produce, an income. So gold (like land) would not qualify, and you have to capitalize any expense.
@ 49, sorry, I should have clarified – where I mention an investment, I meant that Bob lets the house out and makes rental income.
Well, in that case, Bob can probably write off his expenses as we discussed, although it is a somewhat curious situation that he is not using the investment property as security against the mortgage. Even so, it should make no difference. His expenses should be deductible against the loan, which is secured against his new home, instead of the old one, which has now become his investment property. Of course, Bob should not shoot himself in the gut by claiming on his tax return that he is not borrowing the money for the investment property. Not even the ATO has a cure against such stupidity.
As for the exact status of threasholds and bullion investment, we have come as far as we can, it seems. I belive versus you believe will not resolve the question. One would need to ring the ATO or a good accountant to.
… to reach a definitive and reliable conclusion.
And one more thing about Bob. He would need to do a market valuation on his old home when he turns it into an investment property. This valuation will serve to establish his base line figure for calculating future CGT liability, as well as the baseline amount, the upper ceiling, for claiming interest expenses on borrowings against his new home. If his new borrowings are one million, while his old home is valued only at half a million, the ATO will not allow him to claim the full million in deductions, but only the half million, which he is borrowing on account of keeping his old home as an investment property, instead of selling it and only taking out a half million loan against his new home. I am pretty sure that this is right, but while you are at it, do run it past an accountant.
Tim @ 4
you go on believing that GHG are causing global warming…
lol
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