It’s a marvelous thing that the closer you look at the good ship ‘Australian economy’ that the less it appears held together by the English oak of strong institutions, evidence-based policy-making, a robust and innovative private sector supported by well managed banks and competitive advantages. Careful examination shows a busted collection of paddle pop sticks, string and cardboard glued together with a clag of lies and it has never been more obvious than today.
Let me explain. Long term readers will know that MB has a simple take on the Australian economy. The basic process of growth is as follows:
- national income is generated in the world by selling dirt;
- that income is narrow but redistributed widely via the stock market, high wages in mining and associated industries and most importantly via low taxes;
- the generalised income is leveraged up in house price speculation which is funded by offshore borrowing in our banks (and more recently our government);
- high house prices generate wide wealth effects that boost activity in the giant services sector.
