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.


Import, export prices signal terms-of-trade rebound

By Leith van Onselen The Australian Bureau of Statistics (ABS) has released export and import prices for the June quarter, which portends a much needed rebound in Australia’s terms-of-trade when the national accounts are released in early September. According to the ABS, export prices rose by 1.4% over the June quarter and were down by


CPI in detail: Inflation well contained

By Leith van Onselen As noted earlier in brief, the Australian Bureau of Statistics (ABS) has released the Consumer Price Index (CPI) data for the June quarter 0f 2016, which registered another soft reading for headline inflation, with underlying inflation also remaining well in check. According to the ABS, headline CPI rose by 0.4% in


ACCC: Aussies gouged by privatisations

By Leith van Onselen Australian Competition and Consumer Commission (ACCC) head, Rod Sims, has warned that the recent spate of asset privatisations undertaken across the country have not been in the national interest because they have tended to lessen competition in key markets, harming consumers and stifling the economy’s productivity. From The AFR: [Sims] said


Australia’s “shameful working underclass”

By Leith van Onselen Lawyer Giri Sivaraman appeared on SBS’ Insight program last night where he discussed the cycle of abuse among underpaid workers in Australia, which he labeled as “shameful”, and called for the implementation of stronger protections: Unfortunately, we are not even close to uncovering the full extent of Australia’s shameful working underclass.


Garnaut: beware of looming economic ‘time bombs’

By Leith van Onselen Professor Ross Garnaut has warned that Australia is still to face significant economic “time bombs” which will make the upcoming term of parliament the most challenging in a quarter of a century. Garnaut also calls on all segments of society to share the burden of adjustment, taking a veiled swipe at


Curb your enthusiasm for higher living standards

From the AFR: Living standards for Australian workers will not return to their mining boom peak until 2018 at the earliest, new modelling shows. Janine Dixon, an economist at Victoria University’s Centre of Policy Studies, said real per capita incomes – a measure of material living standards – for this year looked like being 3


Excuses flow for low inflation

The banks are clearly worried about low inflation and, perhaps even more so, low interest rates, from NAB yesterday, via Fairfax:: While lowering interest rates have made the central bank uneasy about the impact it is having of rising asset prices, falling rents are actually weighing on inflation – which is likely to compel the


PC fires another shot at Australia’s FTAs

By Leith van Onselen The Productivity Commission (PC) has today released its 2014-15 Trade and Assistance Review, which fired another direct shot at Australia’s so-called Free Trade Agreement (FTA) negotiations: The benefits of increased merchandise trade emanating from bilateral trade agreements have been exaggerated. Different and complex rules of origin in Australia’s preferential trade agreements


Mike Nahan lathers lipstick on WA economy pig

By Leith van Onselen WA Treasurer, Mike Nahan, has hit back at the CommSec State-of-the-States report, released today, which saw the WA economy slump to second last place. From The ABC: Treasurer Mike Nahan said it was inevitable the state had declined relative to its position during the mining boom. “Western Australia’s gone through the


NSW, VIC parasites continue to eat economy

By Leith van Onselen CommSec has released its latest State of the States report, which once again ranks New South Wales and Victoria on top due largely to strong population growth, housing, and debt-fueled consumption: Each quarter CommSec attempts to find out by analysing eight key indicators: economic growth; retail spending; equipment investment; unemployment; construction


If Aussies are so lucky, why is everyone else more confident?

From Westpac’s Red Book: ― Measures of consumer sentiment globally suggest the shock from the UK’s ‘Brexit’ vote has been minor and that sentiment overall is slightly positive, albeit with above average reads in developed economies partially off set by below average reads for emerging economies. ― Chart 9 shows sentiment across the major economies


Australia needs a broader innovation narrative

Cross-posted from The Conversation: The tone of commentary about the appropriateness and effectiveness of innovation as a centrepiece of Australian government policy has turned from one of enthusiasm, particularly among the start-up community, to pessimism and even rejection. Just a day after the federal election, it had already been pointed out that innovation politics had


Beef is the new iron ore!!!!!

From the AFR: Australia’s live cattle exporters could soon enjoy another surge in prices as turbocharged demand from China makes beef the new iron ore. Abattoirs on the mainland are almost ready to begin importing live cattle, a decade after Chinese demand drove iron ore prices to historic highs. The first shipments are set to


Previewing the CPI (and rate cut)

From Bill Evans at Westpac: The minutes of the July monetary policy meeting of the Reserve Bank Board confirmed the importance of next week’s June Quarter inflation report. The key sentences in the concluding paragraph of the “Considerations for Monetary Policy” section state: “The Board noted that further information on inflationary pressures, the labour market


Australia’s ‘dining boom’ rots on the vine

By Leith van Onselen Over the past few years, we have been sold the notion that Australia could rebalance from the mining boom with some kind of ‘dining boom’, whereby we greatly expand our agricultural exports to feed the growing middle classes of Asia. This notion was always tricky, because unlike mining – where Australia


Should population ponzi be shifted to the regions?

By Leith van Onselen A new study, entitled “The Missing Migrants”, has called for regional towns and centres to target international migrants as a “top priority” in a bid to stabilise or grow their populations and boost their economies. From The SMH: “If more international migrants settled in regional Australia, our regional population would grow


Productivity Commission: Sell the farm

By Leith van Onselen The Productivity Commission (PC) has released a new draft report, entitled Regulation of Agriculture, which has hit-out at laws restricting foreign ownership: The Australian Government has stated publicly that it welcomes foreign investment because of the important and beneficial role it plays in the Australian economy. However, it recently made changes


The blatant pillage of Australia’s youth

By Leith van Onselen The more I examine the 2016 Household, Income and Labour Dynamics in Australia (HILDA) survey, which was released yesterday, the worse it looks for Australia’s younger cohorts. As noted in yesterday’s post, the HILDA survey revealed a rapidly growing wealth divide, whereby median wealth over the period 2002 to 2014 increased