Australian Economy

A brief history of the 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 given it is only the mindless measure of whirring widgets.

However, both of these activities systematically reduce economic competitiveness by inflating both input costs and the currency. “Dutch disease” by another name. This continuous “hollowing out” of productive activity means the broader economy relies heavily upon the non-stop import of capital, either in the form of debt or in the form of assets sold to foreigners, to generate ongoing income growth.

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. A second risk is that the debt accumulation simply becomes overly onerous for the underlying economy to service, also resulting in a current account adjustment.

MacroBusiness covers all apposite data and wider analysis of these issues daily.


Public voices last-ditch opposition to ASIC Registry sale

By Nathan Lynch, Head Regulatory Analyst for Australia & New Zealand, Thomson Reuters A petition from 40,000 Australians has called on the government to reverse its plans to privatise the Australian Securities and Investments Commission’s corporate registry operations. The campaign said privatising the ASIC Registry could permanently entrench some of the world’s highest company search


Jobs market winners and losers

From CommSec: The Australian Bureau of Statistics (ABS) has released trend (annual average) data on regional labour markets. Unemployment rates remain high across regional Queensland and remain low across many Sydney regions. Unemployment has averaged just 2.7 per cent in the Eastern Suburbs of Sydney over the past year… The region with the highest unemployment


FT LEX butchers Australian outlook

The FT’s always provocative LEX column did Australia today: Sometimes, confidence is enough to make it through testing times. This week, the ANZ and Roy Morgan consumer confidence gauge showed Australians at their most upbeat since late 2013. While it is tempting to infer a market recovery, too, confidence alone cannot galvanise a rally. Australia


Academics slam Australia’s FTA processes

By Leith van Onselen A group of eight Australian academics have penned a piece in The Australian questioning the efficacy of Australia’s recent free trade agreements (FTA) and their purported benefits: Australian National University economist Shiro Armstrong has… used the analytical framework developed by the Productivity Commission, and the decade of performance data since AUSFTA


Morrison ignores real debt elephant

By Leith van Onselen As already noted by Houses & Holes, Treasurer Scott Morrison today delivered a speech to Bloomberg in Sydney. While Houses & Holes has already analysed the overall content, I want to focus on just one part: the discussion on Australia’s debt trajectory, which Morrison claims is perilous if various Budget measures


The full Morrison lamington drive (with charts!)

From Treasurer Scott Morrison: Australia has just concluded its 25th year of consecutive economic growth. This has not occurred by accident – it is the product of more than 30 years of economic reform and hard work, ingenuity and sacrifice from millions of Australians. Events have both assisted us and challenged us – but overall


More temporary visa rorting revealed

By Leith van Onselen Earlier this year, the Senate Education and Employment References Committee has released a scathing report entitled A National Disgrace: The Exploitation of Temporary Work Visa Holders, which documents the abuses of Australia’s temporary visa system for foreign workers. The most damning assessments from the Committee were regarding Australia’s Working Holiday Maker


Gorgon ramp up as deep as capex cliff will get?

Has the capex cliff just passed its deepest quarterly point? From UBS: Construction work -3.7% q/q…as -9% engineering dominates 1% building gain Q2 real construction work done (private & public) was weaker than expected, for the 2nd consecutive quarter, dropping 3.7% q/q (UBS: -1.2%, mkt: -2.0%). However, Q1’s prior 2.6% q/q drop was revised to


Jobs vacancies fall in July

By Leith van Onselen The Department of Employment (DoE) has released its Internet Vacancy Index (IVI) for July, which registered a decline in the number of job vacancies over the month, with the trend also fairly weak: The decline in vacancies was broad-based, with all jurisdictions except South Australia experiencing falls in July: Blue collar


Too many uni graduates, not enough jobs

By Leith van Onselen The conga-line of commentators criticising Australia’s demand-driven university system just grew a little longer, with Fairfax’s Nicholas Stuart penning a well-argued piece on the massive waste inherent in the university system: Degrees have become commodified; just another product. The only difference is they operate in a hugely protected and subsidised market.


Racism rises on people ponzi

From The Australian today: Deepening divisions over immigration and racism threaten to shatter Australia’s acceptance of new migrants according to a disturbing study revealing a “polarisation” in attitudes that will shape a growing fight over multiculturalism and free speech. High levels of discrimination are making it harder for migrants to settle, exposing some to property


Skills shortage “remains low by historical standards”

By Leith van Onselen The Department of Employment (DoE) has released its Skills Shortages Statistical Summary for 2015-16, which has found that “the proportion of skilled occupations in shortage remains low by historical standards”: According to the DoE, competition for available vacancies remained strong in 2015-16. For each skilled vacancy there were (on average): 11.5


The great immigration subterfuge

By Leith van Onselen One of the most profound changes affecting the Australian economy and society over the past 12 years has been the massive lift in Australia’s net immigration, which surged from the mid-2000s and is running at roughly twice the pace of long-run norms (see next chart). With much of this immigration flowing


No country for young men

By Leith van Onselen Two sets of data came out last week highlighting how male workers, particularly those seeking full-time employment, have borne the brunt of Australia’s labour market adjustment towards services. First, the Average Weekly Earnings (AWE) data, released on Thursday, revealed that male full-time earnings grew by just 1.2% in the year to


Petrol hits 14-year lows, but margins highest

From the Australian Competition and Consumer Commission (ACCC) comes news that retail petrol prices are at their lowest level in 14 years, although retail margins are at their highest: The Australian Competition and Consumer Commission’s latest report on the Australian petroleum industry shows that average petrol prices in 2015–16 were at their lowest levels since


Why the PC’s IP inquiry is a lame duck

By Leith van Onselen Australia’s Productivity Commission (PC) has long been opposed to strengthening Australia’s intellectual property (IP) rules. Essentially, the PC’s empirical work on IP has found that, as a net importer, Australia would lose more than it gained by granting stronger IP rights, whether that involves: lengthening the period of the protection; broadening


More on the fiscal spending rush

From Macquarie Bank: Construction activity is likely to fall in 2Q16, but public infrastructure spending is rising. Earlier (1Q16) commencements data suggest some early signs of the long-awaited upswing in infrastructure spending. Whilst this will support construction activity as a whole, it is unlikely to be enough to offset headwinds in the private engineering and


More policy confusion and conflict from Xenophon

By Leith van Onselen Senator Nick Xenophon has co-written an article today arguing that the RBA should abandon its 2%-3% inflation target in favour of a 5% nominal GDP growth target. From The Age: Wages are growing at recessionary levels, profits for small and medium-sized businesses are flat and the budget deficit constrains government spending.


Election, Census disguise jobs market “hollowing out”

So much for that part time jobs surge, from Peter Martin: Full-time employment has slid 64,500 since December while part-time employment has surged 136,600. The net result of 72,300 extra Australians in work reflects a hollowing out of employment rather than a boost in hours. There were scarcely any more hours worked in July than