Kohler: We are priced out

Congratulations to Alan Kohler for being the first in the MSM to FINALLY cut through the guff to Australia’s real problem:

On Thursday last week, JP Morgan’s Australian economist Stephen Walters published two devastating charts. Here they are:

To sum up: interest rates and the minimum wage are roughly double the global average, electricity costs about 50 per cent more here, and the price of gas is getting on for triple the global average. And while wages growth here is the weakest it’s been since the 1990s, the average wage level remains 70 per cent above the global mean.

Business confidence has slumped and it is generally agreed that the biggest problem in the Australian economy right now is the failure of businesses to invest.

…Although the recent Canberra circus is undoubtedly a factor, for most business people the real problem is the cost of doing business in Australia.

Exactly. And the Walters chart does not capture the biggest factor of all, land prices, which are astronomically high relative to other nations.

We’ve had two consecutive booms, the first in land prices, the second in mining and it has left us with an incredible dose of Double Dutch disease with everything from dirt to the dollar pricing us out of global markets.

It’s not confidence, it’s competitiveness. It’s not cyclical, it’s structural. And neither the RBA nor Government has the faintest clue about the real problem. Indeed, applying cyclical solutions – such as inflating asset prices to chase wealth effects and “confidence” – only makes the real problem worse.