Posts Tagged‘australia’

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Australian Copyright Amendment Vague, Ineffective.

For us Australians the reasons behind our high rates of piracy are clear: we want the same things that people are able to get access to overseas at the same prices that they receive them for yet we are unable to get them. Our situation has been steadily improving over the past couple years with many notable international services now being available on our shores however we’re still the last on the list for many things, fuelling further piracy. Of course this has prompted all sorts of reactions from rights holder groups hoping to stem the tide of piracy in the misguided hope that it will somehow translate into sales. The latest volley comes in the form of the Copyright Amendment (Online Infringement) 2015 which, yet again, attempts to address the issue in the dumbest way possible.

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Essentially the amendment would empower rights holders to get an injunction against Carriage Service Providers (a broader term that encompasses all telecommunications providers) to block access to a site that either infringes on copyright or enables infringement. The amendment starts out by saying it’s prescriptive however the language used in it is anything but, often painting broad strokes which could conceivably be construed as being applicable to a wide range of sites and services, even VPNs in some cases. Whilst there are provisions in there that are supposed to prevent misuse and abuse much of it is left up to the discretion of the court with very little recourse for sites that find themselves blocked as part of it.

To be clear the legislation targets foreign sites only but makes no strict provisions for the site being targeted to be notified that they are facing an injunction. That’s left to the party seeking the injunction to do, something which I’m sure no rights holders will attempt to do. Whilst the law does say that this law isn’t meant to target sites that are mostly based on user generated content however it’s clear that the intention is to go after index sites, many of which are primarily based on user submissions. This puts the legislation at odds with the current safe harbor provisions which could see a site blocked due to a number of users submitting things which put it in the realms of “aiding infringement”.

Of course whatever blocking method is used will be readily circumvented, as it has always been in the past.

The rhetoric that’s surrounding this amendment is worse still, with the CEO of ARIA saying things like “We’ve made the content available at a reasonable price [but] piracy hasn’t diminished”. Funnily enough that’s a pretty easy thing to verify (or rebuke, as the case is) and last year Spotify did just that and found that music piracy, in Australia specifically, has been on the downward trend ever since the music streaming services came to our shores. Strangely enough Australians aren’t a bunch of nasty pirates who will repeatedly pillage the rights holder’s pockets, we’re just seeking a legitimate service that’s priced appropriately. If the rights holders spent as much money on deploying those services here in Australia as they did lobbying for copyright reform they might find their efforts better rewarded, both monetarily and in the form of good will.

Hopefully this amendment gets shot down before it becomes reality as it would do nothing to help the rights holder’s situation and would just be another burden on the Australian court system. It’s been shown time and time again that providing Australians with the same services that are available overseas will reduce piracy rates significantly and that draconian ideas like this do nothing to stem the tide of illegitimate content. The companies that are realising this are the ones that are killing the old media giants and things like this are just the last death throes of an outdated business model that is no longer relevant in today’s digital economy.


Netflix Global is Commendable, Ultimately Doomed.

After many years and hundreds of thousands of illegitimate users being on their service Netflix has finally arrived in Australia, much to the delight of Australian’s everywhere. In the short time it’s been available Netflix has already managed to account for 15% of all of iiNet’s traffic a sure sign that many people have wanted their service for some time. However, as expected, the content catalogue is a small subset of what’s available overseas leading many to keep their VPNs and over circumventions in order to get access to the same content people overseas get. On the surface that would appear to be a big issue for Netflix, given the pressure they’ve been under in the past to shut down dirty VPN users, however the CEO of Netflix (Reed Hastings) has revealed that they’re a small issue and his focus is squarely on converting long term pirates to legitimate customers.


In the interview (which is well worth a read in its entirety) Hastings says that VPN users are “a small little asterisk compared to piracy”, and further goes on to say that they’re users who are willing to pay for content but can’t for some reason. The solution to that problem he says for Netflix to “get global” and remove the incentive to use a VPN with their service. Essentially this would boil down to making the whole catalogue available to all users of their service, regardless of their location around the world. Whilst this idea is highly commendable, and demonstrates Hasting’s understanding of how media consumption has changed in the digital age, it’s ultimately doomed to failure given the challenge that they’re up against.

Netflix’s main issue with their catalogue isn’t the ability to deliver it, that’s been a solved issue for them ever since they switched from mailing DVDs to streaming services, it’s always been securing the rights deals to distribute content in certain areas. This is why their current catalogue in Australia is so paltry when compared to the one in the USA as Netflix, lacking a presence in Australia for so long, has been usurped by other distribution partners like Fox. Indeed Netflix even sold the rights to distribution for their flagship series House of Cards to Fox (through Sony) for the first two seasons, although that seems to have been time limited to coincide with their Australian launch.

Therein lies the rub; Netflix’s catalogue can only grow as fast as it can secure rights to distribute content in the countries that it has a presence in. In order to make their catalogue truly global they’d have to secure rights for every show in every region, something I’m sure they’re attempting to do but will run up against the rights holder empires that have cemented themselves in an old-world business model. They could, in theory, make global licensing rights a condition of any show being on their service however most popular shows are either backed by big production houses with distribution rights already in place or the fee required to do so would be so high that Netflix would be unlikely to sign up for it.

Netflix does have the advantage of being the biggest single provider of content across the globe, giving them a little clout in negotiating these content deals, however they’re running up against an empire that’s been extremely resistant to change for the better part of 100 years. They’ve definitely been at the forefront of changing how consumers want their media delivered to them however the lumbering giants that give them the content are steadfast in defending their regionally based business models. I’d honestly love to be proved wrong on this (although I’d still hold onto my VPN for other reasons) but I honestly can’t see a global Netflix in our future.


Wave Power Generators Now Powering Australia’s Grid.

Wave energy always seemed like one of those technologies that sounded cool but was always 10 years away from a practical implementation. I think the massive rise in solar over the past decade or so is partly to blame for this as whilst it has its disadvantages it’s readily available and at prices that make even the smallest installations worthwhile. However it seems that whilst the world may have turned its eyes elsewhere an Australian company, Carnegie Wave Energy, has been busy working away in the background on developing their CETO technology that can provide a peak power output of some 240KW. In fact they’ve just installed their first system here in Australia and connected it to the grid to provide power to Western Australia.

CETOThe way these pods work is quite fascinating as much of the technology they use has been adapted from offshore oil rigs and drill platforms. The buoy sits a couple meters under the surface and is anchored to the sea bed via a flexible tether. As the waves move past them it pulls on the cable, driving an attached pump that creates high pressure sea water. This is then fed up through a pipe to an onshore facility where it can be used to drive a turbine or a desalination plant. These CETO pods also have some other cool technology in them to be able to cope for rough sea conditions, allowing them to shed energy so that the pumps aren’t overdriven or undue stress is put on the tether.

What’s really impressive however are the power generation figures that they’re quoting for the current systems. The current CETO 5 pod that they’ve been running for some 2000 hours has a peak generation capacity of about 240KW which is incredibly impressive especially when you consider what comparable renewable energy sources require to deliver that. Their next implementation is looking to quadruple that, putting their CETO 6 pod in the 1MW range. Considering that this is a prototype slated to cost about $32 million total that’s not too far off how much other renewables would cost to get to that capacity so it’s definitely an avenue worth investigating.

I’m very interested to see where Carnegie Wave Energy takes this idea as it looks like there’s a lot of potential in this technology they’re developing. With offshore wind always meeting resistance from NIMBYs and those who think they ruin the view something like this has a lot of potential to work in places where the other alternatives aren’t tenable. That, coupled with the fact that they can be run as either power generation units or desalination plants, means that the technology has a very large potential market. Of course the final factor that will make or break the technology is the total installed cost per KW however the numbers are already looking pretty good in that regard so I’m sure we’ll be seeing more of these CETOs soon.


Netflix to Come to Australia in March 2015.

The age of the Internet has broke down the barriers that once existed between Australia and the rest of the world. We’re keenly aware that there are vast numbers of products and services available overseas that we want to take advantage of but either can’t, because they don’t want to bring it to us, or won’t because it’s far too expensive. We’re a resourceful bunch though and whilst companies will try their darnedest to make us pay the dreaded Australia Tax we’ll find a way around it, legitimately or otherwise. Probably the most popular of services like this is Netflix which, even though it’s not available here, attracts some 200,000 subscribers here in Australia. That number could soon rocket skywards as Netflix has finally announced that they’ll be coming to our shores early next year.


Australia will be the 16th country to receive the Netflix service, 7 years after they originally launched in the USA. Whilst there’s been demand for them to come Australia for some time now the critical mass of semi-legitimate users, plus the maturity of the cloud infrastructure they will need to deliver it here (Netflix uses AWS), has finally reached a point where an actual presence is warranted. Details are scant on exactly what they’ll be offering in Australia but looking at the other 14 non-US countries to get Netflix we can get a pretty good idea of what to expect when they finally hit the go live button for the Australian service.

For starters the full catalogue of shows that the USA service has will likely not be available to Netflix Australia subscribers. Whilst original content, like House of Cards or Orange is the New Black, will be available the content deals inked by rights holders with other companies in Australia will unfortunately take precedent over Netflix. This doesn’t mean that this won’t change over time as it’s highly likely that rights holders will look to move onto Netflix as old contracts expire but it might put a damper on the initial uptake rate. Considering that there are numerous services to change your Netflix region to get the full catalogue though I’m sure the restriction won’t have too much of an effect.

The DVD service probably won’t be making it here either, although I don’t think anyone really cares about that anyway.

Probably the biggest issue that Netflix will face coming to Australia is the dismal state of the Internet infrastructure here. Whilst most of us have enough speed to support some level of streaming the numbers of us that can do anything above 720p is a much more limited market. As long time readers will know I have little faith in the MTM NBN to provide the speeds required to support services like Netflix so I don’t think this is a problem that will be going away any time soon. Well, unless everyone realises their mistake at the next election.

Overall this is good news for Australia as it has the potential to break the iron grip that many of the pay TV providers have on the content that Australians want. It might not be the service that many are lusting after for but over time I can see Netflix becoming the dominant content platform in Australia. Hopefully other content providers will follow suit not long after this and Australia will finally get all the services it’s been lusting after for far too long. Maybe then people will realise the benefits of a properly implemented FTTP NBN and I’ll finally be able to stop ranting about it.

BBC Derp

The BBC Thinks all VPN Users are Pirates.

If you want Netflix in Australia there’s really only one way to do it: get yourself a VPN with an endpoint in the states. That’s not an entirely difficult process, indeed many of my less tech savvy friends have managed to accomplish it without any panicked phone calls to me. The legality of doing that is something I’m not qualified to get into but since there hasn’t been a massive arrest spree of nefarious VPN users I can’t imagine it’s far outside the bounds of law. Indeed you couldn’t really do that unless you also cracked down on the more legitimate users of VPN services, like businesses and those with regulatory commitments around protecting customer data. However if you’d ask the BBC users of VPNs are nothing but dirty pirates and it’s our ISP’s job to snoop on them.

BBC Derp

In a submission to the Australian Government, presumably under the larger anti-piracy campaign that Brandis is heading, the BBC makes a whole list of suggestions as to how they should go about combating Australia’s voracious appetite for purloined content. Among the numerous points is the notion that a lot of pirates now use a VPN to hide their nefarious activities. In the BBC’s world ISPs would take this as a kind of black flag, signalling that any heavy VPN user was likely also engaging in copyright infringement. They’d then be subject to the woeful idea of having their Internet slowed down or cut off, presumably if they couldn’t somehow prove that it was legitimate. Even though they go on to talk about false positives the ideas they discuss in their submission are fucking atrocious and I hope they never see the light of day.

I have the rather fortunate (or unfortunate, depending on how you look at it) ability of being able to do my work from almost anywhere I choose, including my home. This does mean that I have to VPN back into the mothership in order to get access to my email, chat and all other corporate resources which can’t be made available over the regular Internet. Since I do a lot of this at home under the BBC’s suggestion I’d probably be flagged as a potential pirate and be subject to measures to curb my behaviour. Needless to say I don’t think I’m particularly unique in this either so there’s vast potential for numerous false positives to spring up under this system.

Worse still all of those proposed measures fall on the ISP’s shoulders to design, implement and enforce. Not only would this put an undue burden on them, which they’d instantly pass onto us in the form of increased prices, it would also make them culpable when an infringing user figured out how to defeat their monitoring system. Now everyone knows that it doesn’t take long for people to circumvent these systems which, again, increases pressure on the ISPs to implement even more invasive and draconian systems. It’s a slippery slope that we really shouldn’t be going down.

Instead of constantly looking towards the stick as the solution to Australia’s piracy woes it’s time for companies, and the Australian government, to start looking at the carrot. Start looking at incentives for rights holders to license content in Australia or mandating that we get the same content at the same time for the same price as it is elsewhere. The numerous Netflix users in Australia shows there’s demand for such a service, we just need it to match the same criteria that customers overseas expect. Once we get that I’m sure you’ll see a massive reduction in the amount of piracy in Australia, coupled with the increase in sales that the right’s holders seem so desperate to protect.

Senator Darth Brandis

Potential Australian Copyright Reform Ignores the Actual Problem.

Copyright law in Australia isn’t as cut and dry as many believe it to be. Whilst some of our laws are in line with what the general public thinks they are (I.E. United States based) there’s a lot of things that are more draconian, like the lack of safe harbor provisions, and others that are a lot more lax like the lack of any formal infringement notification systems. This has often been cited as one of the main reasons why piracy is so rampant in Australia although that’s really only a minor part of the equation. Still this hasn’t stopped rights holders from lobbying members of our parliament into getting the laws changed and a recently leaked discussion paper, from the offices of Senator Brandis and Minister Turnbull, showcases a rather disturbing future for Australian copyright.

Senator Darth Brandis

The discussion paper reads as a wish list of measures that rights holders would like to see implemented that would be used to curb copyright infringement behaviour within Australia, taking inspiration from similar schemes overseas. The proposed measures will be familiar to anyone who’s been involved in the copyright debate ranging from requiring ISPs to take “reasonable action” against infringing users (something our High Court has ruled against in the past), blocking websites that facilitate infringement and the measures required to support those processes. There are some potential positive questions for discussion in there, like the expansion of safe harbor provisions, but the rest of them will only cause more headaches than they will solve.

The first discussion point around ISP’s taking “reasonable steps” towards discouraging users from engaging in copyright infringement is a blatant attempt to skirt around the high court’s previous ruling that there are no such steps that an ISP can take. Essentially it comes down to a question of liability as increasing the exposure that the ISPs have make them a better target for litigation than the thousands of individuals beneath them do. The worst thing about this is that it will most certainly lead to increased costs for consumers with no benefits for anyone but the rights holders themselves. Honestly this smacks of the “mandatory voluntary” system that Conroy proposed, and then swiftly abandoned, all those years ago. If it didn’t work then I fail to see how it could work now.

The second point revolves around blocking some sites outright which they’re proposing to do at the ISP level. Now the paper doesn’t go into details about how the site would be blocked, just that injunctions could be granted, however we know that whatever method they use will end up being ineffectual. DNS blacklisting, IP blocks and all other methods that other countries have used in the past simply do not work in an environment with users with a modicum of technical experience. Heck there are dozens of browser extensions which help with this and there’s already a healthy number of Australians completely circumventing any ISP level blocking through the use of VPNs. So realistically the discussion point about what matters should be considered in granting an injunction are moot as it won’t stop the site from being available.

The last 3 points dig into what the impacts will be (both in terms of reducing infringement and the cost to business) as well as asking if there are any alternative measures that can be taken. Honestly I feel these are the points that should be front and center rather than the previous two I mentioned as this is the real crux of the copyright issue in Australia. In terms of the discussion paper though they feel like afterthoughts, each given a brief paragraph with a one liner question following them. It really looks like the other points are, essentially, already agreed to and these are just there to placate those who feel that they need to have their voice heard.

What this discussion paper completely misses is the real issue here: the lack of content systems that are on the same level available overseas. The Australian tax is no longer just catch cry, it’s a fact, and the residents of this country have voted with their wallets. Indeed the high use of Netflix within Australia shows that we’re ready, willing and able to pay for the services should rights holders be willing to provide them but instead this paper wants to focus on the stick rather than the carrot.

If Brandis and Turnbull are serious about copyright reform in Australia they should be looking into what they can do to encourage those services to come Australia rather than attempt to dissuade people from pirating their content. History has shown that the latter can never be prevented, no matter what legislation you put in or DRM you attempt to ram down the customer’s throats. The latter has a tried and true history of being successful and I have no doubts that rights holders would see similar success in Australia should they choose to bring their services here. For now though it seems like they’re still stuck in the past, trying to protect business models that are failing in the new Internet powered economy. They’ll have to come around eventually, it’s just a question of whether they do it before someone else does.

Oh wait they already are. Time to wake the fuck up.

Cost of a movie by country

Are We Really Surprised by Australian’s Being Pirates?

Australia is an incredibly strong country economically being ranked as the 12th largest by GDP of all countries in the world. When you then consider that our population is a fraction of that of many countries that are above us (Canada is the closest in size and is in 11th spot with a population about 50% bigger than ours) it means that, on average, Australians are more wealthy than their global counterparts. This is somewhat reflected in the price we pay for certain things however it doesn’t take a lot of effort to show that we pay more than you’d expect for many goods and services. The most notable being media as we lack any of the revolutionary services that drive their prices down (Netflix, Hulu, etc.) or any viable alternatives. It gets even worse though as it seems we also pay more just to go to the cinema.

Cost of a movie by country


The graphic above shows that Australia, along with a few other developed nations, pay an extraordinary amount more than others do when the costs are normalized. The differences between the lowest and the highest aren’t exactly huge, you’re looking at a spread of about $15 from the cheapest to the most expensive, however this is yet another indication of just how much more Australia pays for its media than anyone else does. In essence we’re paying something on the order of 25%~50% more for the same product yet the excuses that the industry once relied on, that Australia is “really far away”, don’t really hold water anymore.

It should come as little surprise then that Australians are then far more likely to pirate than any other developed country, sometimes representing up to almost 20% of new release piracy. There have been some inroads made into attempting to reduce this number, with a few stations “fast-tracking” episodes (although they still usually carry a delay) or giving users access to an online option, however the former doesn’t solve the problem entirely and the latter was unfortunately repealed. The hunger for the media is there it’s just that a reasonably priced option has failed to materialize for Australian users (and if you mention Quickflix I’ll gut you) which has led to these dramatic figures.

Now I’d be entirely happy with doing the slightly dodgy and getting myself a Netflix or Hulu account via a VPN or geo-unblocking service however my bandwidth isn’t up to the task of streaming media at 720p. Sure it could probably do a lower resolution but I didn’t invest as much as I did in my entire home theatre system to have it operate at a sub-par level. This issue was supposed to go away with the NBN being just around the corner but I literally have no idea when that might be coming nor what incarnation of it I will end up getting. So it seems that, at least for now, I’m stuck in digital limbo where I either fall to piracy or being gouged repeatedly.

Neither of these issues are beyond fixing and indeed it’s been shown that once a reasonably priced alternative becomes available people ditch piracy in a heartbeat. Heck I know that for me once Steam became widely available my game spend increased dramatically, especially after I found sites like DLcompare. I can assure you that the same will happen once a media based alternative comes to Australia and I’m not the only one who has the disposable income to support it.

David Cameron Hey You With The Porn

The Slippery Slope of the Clean Feed Appears in the UK.

Back in July David Cameron announced that he’d be ensuring that all ISPs within the United Kingdom would implement a mandatory filtering scheme. The initiative drew a lot of negative attention, including a post from yours truly, as the UK’s citizens were rightly outraged that the government felt the need to fiddle with their Internet connections. The parallels between Cameron’s policy and that of the Clean Feed here in Australia were shocking in their similarity and I, like many others, thought that it’d likely never see the light of day. Unfortunately though it appears that not only has Cameron managed to get the big 4 Internet providers on board he’s also managed to broaden the scope far beyond its original intentions, much to the chagrin of everyone.

David Cameron Hey You With The PornThe base principle behind this initiative appears to be the same as the Clean Feed: to protect children from the vast swaths of objectionable content that reside on the Internet. Probably the biggest difference between however stems from its implementation as the Clean Feed was going to be enforced through legislation (although that later changed when it couldn’t pass parliament) Cameron’s filter is instead a voluntary code of practice that ISPs can adhere to. If the same thing was introduced in Australia it would be likely that none would support it however in the UK nearly all of the major suppliers have agree to implement it. The problem with this informal system though is that the scope of what should and should not be blocked isn’t guarded by any kind of oversight and, predictably, the scope has started to creep far beyond it’s initial goals.

Among the vast list of things that are making their way onto the list of “objectionable” content are such legitimate sites including sex education sites and even the UK equivalents of sites like Kids Helpline. Back when Conroy first proposed the filter this kind of scope creep was one of the biggest issues that many of us had with the proposal as the process by which they made the list was secretive and the actual list itself, even though it was eventually made public, was also meant to be kept from the general public. Cameron’s initiative does the same and, just as everyone was worried about, the list of objectionable content has grown far beyond what the general public was told it would. It’s happened so quickly that many have said (and rightly so) that it was Cameron’s plan all along.

If you ever had any doubts about just how bad the Clean Feed would have been in Australia then the UK’s initiative should serve as a good example of what we could have expected. The rapid expansion from a simple idea of protecting children from online pornography has now morphed into a behemoth where all content either fits into someone’s idea of what’s proper and what’s not. It’s only a matter of time before some politically sensitive content makes it onto the objectionable list, turning the once innocent filter into a tool of Orwellian oppression. I’d love to be proved wrong on this but I can’t say I’m hopeful given that the slippery slope that many of us predicted came true.

Fight this, citizens of the UK.



Australian, US Researchers Dramatically Reverse Aging in Mice.

I’m something of a quiet transhumanist, reveling in the ideas of elevating the human existence through the use of technology but staving off from raving about it whenever I get the chance. Whilst the idea of living longer appeals to many the idea of removing that inevitable end date, the one thing that has proved to be unavoidable for the vast majority of humanity to date, feels abhorrent to many and thus I leave the subject to one side. Still every so often a piece of science will make it into the mainstream media that brings with it some of the implications of transhumanist thinking and I feel compelled to comment on it.

TranshumanMichelangeloA collaborative research effort between scientists in Australia and the USA has discovered a compound which, when administered to 2 year old mice, makes them appear to be as youthful as their 6 month old counterparts. The time line for the dramatic effects was also impressive with the reversal taking just under a week to occur. The compound acts on mitochondria, the energy generators of our cells, and appears to act directly on the muscle tissue of the mice. Whether that extends to other aspects of aging isn’t made clear (at least not that I can see, the article is behind a paywall) but the results have been impressive enough to warrant approval for human trials next year. Of course that means that a proper human model is some years off (with commercial production further still) but we should have some preliminary results in the not too distant future.

If this compound does pretty much exactly as advertised then it could mean a lot for our aging populace. Restoring muscle function is a key aspect in leading a healthier life as we age (which is why regular exercise is so important) and this could go a long way to making our golden years that much more enjoyable. At the same time it could also potentially help keep us in physical peak condition much longer, enabling us to be more active for an extended period of time. Whether this will translate to a bump in life expectancy and, more importantly, total longevity though will be something we won’t know for decades but it does sound promising.

Of course such life extension technologies always beg the question of how we’d deal with a larger population that’s living longer. Currently the world’s population is expected to peak around 2050 at roughly 8.3 billion, about 1.3 billion above what it is today. Technology like this wouldn’t immediately mean everyone suddenly starts living an additional 20~30 years, due to cost and adoption rates, so it’s far more likely that you’d see a gradual increase in average lifespan over the course of a couple decades. Indeed I believe this is true for all life extending technologies and thus their effects would be far more subtle and would be highly unlikely to lead to an unsustainable population of people who live forever.

It’s my hope that this line of research paves the way for more studies into what causes aging and what we can do to treat it. Whilst I will always support people’s decisions to live their lives the way they choose I believe that medical science can do a lot to help improve it and, one day, make death a choice rather than an inevitability. 


Negative Gearing Income 2010-11

Think Negative Gearing is to Blame For High House Prices? Think Again.

Before I dig my hooks into the reasons why negative gearing isn’t to blame for high house prices (a seemingly controversial view these days) I will tell you, in the interests of full disclosure, that I’ve been negatively gearing property for the past 5 years or so. Back when we first bought our property I lamented the dearth of good properties that were available in our price range, focusing much of my anger of the property boom that took place mere years before we went into buy. However we found something that we could just afford if we played our cards right, even though it was out in the sticks of Canberra. During that time though I never once blamed the negative gearers for this predicament but the more I talk about it the more it seems my generation blames investors for it when they should really be looking elsewhere.

Negative Gearing Income 2010-11

Depending on what figures you’ve read though I’d find it hard to blame you like the table above (from this ATO document) that has been doing the rounds lately. On the surface it seems pretty hefty with some $7.8 billion in total losses being claimed by investors with negatively geared property. Realistically though the total cost to the government is far less than that as even if everyone was on the top marginal rate (which they aren’t, most are on $80,000 per year or less) the total tax revenue loss is closer to  $3.5 billion. Out of context that sounds like a lot of dosh, especially when this year’s budget came in at a deficit of $18 billion, but it’s like 0.9% of total tax revenue which is significantly dwarfed by other incentives and exemptions. If your first argument is that it costs the government too much then you’re unfortunately in the wrong there, but that’s not the reason I’m writing this article.

The typical narrative against negative gearing usually tells a story of investors competing against homebuyers (usually first timers), driving up the price because they are more able to afford the property thanks to negative gearing and the higher amount of capital that they have. Whilst I won’t argue that this never happens it fails to take into account the primary driver for upward trending house prices: owner occupiers. Initially this idea sounds ludicrous, since homeowners aren’t taking advantage of negative gearing gains nor are they in the market for new property, but the thing is that the vast majority of capital gains in Australia are held by just such people, to the tune of 84% of the total property market.

In Australia the primary mechanism which drove house prices up, with most of the increase occurring between 1994~2004, was current home owners upgrading their houses. For a current homeowner  especially ones that own their property outright, the cost of upgrading to a larger property is a fraction of what it would cost to buy it outright. However anyone looking to upgrade will also try to extract the maximum amount of value out of their house in order to reduce the resulting loan and thus the cheaper priced houses get pushed up as well. Couple that with the fact that the majority of Australian owner/occupiers move at least once every 15 years and that selling your primary place of residence is exempt from capital gains tax and you have a recipe for house prices going up that’s not predicated on negative gearing’s influence.

Indeed the ABS Household Wealth and Wealth Distribution supports this theory as the average value of an owner occupied property is $531,000 which is drastically higher than the Australian average (which includes all investor properties) at $365,000. Considering that the bulk of the Australian property market is dominated by owner-occupiers (since investors only make up 16% of it) then its hard to see how they could be solely responsible for the dramatic increases that many seem to blame them for. Most will retort that investors are snapping up all the properties that would be first home owners would get which is something I can’t find any evidence for (believe me, I’ve been looking) and the best I could come up with was the distribution of investment property among the 5 sections shown here which would lead you to believe that the investors are normally distributed and not heavily weighted towards the lower end.

The final salvo shot across the negative gearing bow usually comes in the form of it providing no benefit to Australia and only helps to line the pockets of wealthy investors. The counter argument is that negative gearing helps keeps rent costs down as otherwise investors would be forced to pass on the majority of the cost of the mortgage onto renters, something we did see when negative gearing was temporarily removed. Indeed the government actually comes off quite well for this investment as using that revenue to instead build houses would result in a net loss of rentable dwellings which would put an upward pressure on rents.

I completely understand the frustration that aspiring home buyers go through, I went through it myself not too long ago when I was in a position that wasn’t too different from average Australian. But levelling the blame at investors and those who negatively gear their property for the current state of the Australian property market is at best misguided and at worse could lead to policy decisions that will leave Australia, as a whole, worse off. You may believe to the contrary, and if you do I encourage you to express that view in the comments, as the current Australian property market is a product of the Great Australian Dream, not negative gearing.