Australian Economy

The “miracle” Australian economy (with its famous run of 24 years without a recession) is an amalgam of pre-modern and post-modern industries with very little in between. Most economies run at least partially upon the productivity gains produced out of manufacturing and ‘making things’ but in Australia productive investment is supplanted with commodity exports (which make up half of exports) and the recycling of the resultant income is deployed as cash flow for borrowings offshore to pump house prices. The former step is basically the selling of dirt, a pre-modern activity. The second step is managed via the sophisticated use of derivative markets and is essentially a post-modern activity. Not that GDP cares. However, both of these activities systematically reduce economic competitiveness by inflating both input costs and the currency. “Dutch disease” by another name. So long as the underlying income from dirt keeps flowing then the leveraging into house prices that supports consumption can continue, supported by both tax distortions and government spending. If, however, the dirt income flow halts the hollowing out of modern industry will leave the Australian economy very exposed to a current account adjustment. MacroBusiness covers all apposite data and wider analysis of these issues daily.


2016 is Census Year. But why do we bother?

By Ross Elliott, author of The Pulse: Every five years Australia holds a census of its people and housing and next year it’s our turn again. The five yearly interval was introduced back in 1961 and it has over time become the essential reference point for demographers, economists, researchers, planners, governments and industry. The last


Aussies more educated than ever before

By Leith van Onselen The ABS today released its annual Education and Work survey, which provides information on participation in education, highest educational attainment, transition from education to work and current labour force and demographic characteristics for the civilian population aged 15-74 years. According to the ABS, Aussies are more educated than ever before, with


Population ponzi drives up water costs

By Leith van Onselen Yesterday, the ABS released its annual Water Account for 2013-14, which revealed that average yearly household expenditure on water rose 12 per cent to $584 per household in 2013-14, despite only a 1% increase in water use: “In 2013-14 Australian households spent more than $5 billion dollars on water, paying an


Secret bid to save Holden SA?

From A Belgian automotive entrepreneur with ties to General Motors is behind a secret plan to acquire GM Holden’s Elizabeth assembly plant and continue to build the current generation Commodore beyond the scheduled closure date in late 2017. The plan has been brewing quietly behind the scenes for two years since GM announced it


Private capex expectations meh

The ABS has released its fourth survey for 2015/16 capex expectations and is OK if you only if you’re a real optimist: Estimate 4 for total capital expenditure in 2015-16 is $120,353m. This is 20.9% lower than Estimate 4 for 2014-15. The main contributor to this decrease is Mining (-34.1%). Estimate 4 is 4.0% higher


Australia’s fiscal straight jacket tightens to strangulation point

As the Budget falls apart on pressure from cuts to ludicrous forecasts and the iron ore hammering, Prime Minister Turnbull is softening us up for little to no action, from The Australian: An analysis by The Australian shows that Treasury’s decision to jettison its highly optimistic growth projections will leave the budget deep in deficit


The private colleges rort bleeding the Budget

By Leith van Onselen Last month, The Australian released three articles (here, here and here) uncovering widespread rorting by private colleges. The Australian revealed that private colleges were handed more than $1.4 billion in government-funded VET Fee -Help loans last year, which was four times as much as was provided to public vocational education and


The Parkinson ascendency

The yet-to-be-announced appointment of former treasury secretary Martin Parkinson to head the Prime Minister’s Department is a tale of justice restored, with a touch of Gilbert and Sullivan. Parkinson fell victim as soon as Tony Abbott became prime minister because he had once headed the climate change department; Abbott’s chief of staff Peta Credlin was


S&P approves Oz risk in rear vision mirror

S&P has released its new BICRA scores for countries and Australia come out OK: Standard & Poor’s Ratings Services classifies the banking sector of Australia (AAA/Stable/A-1+) in group ‘2’ under its Banking Industry Country Risk Assessment (BICRA). Some of the other countries in group ‘2’ are Canada, Germany, Hong Kong, Japan, Singapore, Sweden, and Switzerland.


Capex preview

From Westpac: The ABS survey of private business investment plans, the CAPEX survey, will provide some further guidance to growth prospects. The September quarter edition will be released on November 26, with responses received over October and early November. This update will include Estimate 4 of capex plans for 2015/16. Here we provide scenarios for


Hits and misses in competition policy response

By Leith van Onselen The Turnbull Government has released its response to the Competition Policy Review (‘the Harper Review’), accepting in full or in principle 39 of the 56 recommendations and partly accepting a further five, while pushing the controversial recommendations to change the law on companies abusing their market power and on liberalising pharmacy


Trade deficit narrowed in Q3

By Leith van Onselen The ABS today released its preliminary estimate of the September quarter trade balance, which registered a $3,508 million (2%) improvement in the trade deficit to $7,438 million. The main components contributing to the balance of goods and services were: goods exports, up $3,614 million (6%), with: non-monetary gold, up $1,648 million


WA construction poised to crash

By Leith van Onselen Reality is dawning that the Western Australian economy is facing a serious decline in activity and jobs as the joint housing and mining construction booms unwind. From  The Western Australian: The WA economy and State Budget are facing fresh pressures, with warnings the house construction sector is going to rapidly slow


NSW cabbies to receive Uber compensation

By Leith van Onselen ABC Radio has reported today that New South Wales taxi plate owners are likely to receive compensation from the Government for competition arising from ride-sharing services such as Uber: TIM PALMER: The New South Wales Premier Mike Baird has signalled his Government will consider compensation for the taxi industry if Uber


Consumer confidence retraces again

By Leith van Onselen The ANZ-Roy Morgan Research consumer confidence index retraced by 1.4points in the week ended 22 November after hitting a 22 month high two week’s back (see next chart). The slight fall in the index was driven by reduced confidence towards future finances, which fell 4.7% and is down 0.2% on a


The commodity truth that Australia forgot

There is one iron law in the commodities business (pun intended). Only one. And it is this: the lowest marginal cost of production sets the price. What that means in practice is that in the commodities business over time there is no competitive advantage other than the cost of production. It is dirt. There is no


Australia needs a new model for universities

Cross-posted from The Conversation: Australia is in need of a new model for universities. That isn’t the impression you get from the delighted students, contented staff and shining buildings pictured on every university website. But that’s a fantasy. University managers now hire a considerable number of advertising staff to create the pretty picture. Behind the


HIA: End is nigh for dwelling construction boom

By Leith van Onselen The Housing Industry Association (HIA) has today released its Spring 2015 National Outlook, which once again forecasts the peaking of Australia’s dwelling construction boom in 2014-15 before recording a 5.5% decline in dwelling starts this financial year followed by a further decline of 13.4% in 2016/17. From the Media Release: “New


Victoria crowns itself ponzi-economy king

By Leith van Onselen You’ve gotta wonder about the economic literacy of the Victorian Government. After the ABS released the state accounts for the year ended June 2015 on Friday, Melbourne’s radio and newpaper pages were littered with triumphant claims from the Government that Victoria was the strongest non-mining economy in Australia in 2014-15. Here’s


Australian foreign worker exploitation “systemic”

By Leith van Onselen The fallout from the the joint Fairfax-Four Corners investigation into 7-Eleven’s labour hiring practices continues, with Fairfax today revealing that Two-thirds of all 7-Eleven stores in Australia appear to have been underpaying its workers, according to a Senate Inquiry investigating the matter: The panel reviewing wage compensation claims for 7-Eleven workers


Population ponzi killing our universities

By Leith van Onselen The more I look at it, the more it seems like Australia’s higher education system is busted. Rather than focusing on delivering the best possible education to students, in turn boosting the productivity and competitiveness of the Australian economy, higher education has turned into one giant “degree/diploma factory” whereby providers sell