By Leith van Onselen The Guardian's Greg Jericho (aka "Grog's Garmut") has published a well argued case for why the $1,000 threshold for levying GST on online imports should not be lowered: The retail trade sector employs about 11% of the labour force and accounts for 4.5% of gross domestic product, so it is a sizeable part of our economy, and it has vocal and high-profile members such as Gerry Harvey who has been calling on the government to levy GST on all online purchases for a number of years now. The government hasn’t been ignoring the issue either. In December 2011...

Cross-posted from The Conversation The idea of further government support for the ailing automotive industry (AKA the Holden problem) generates considerable political and economic debate. For economists and business academics, it comes down to the role of industry assistance programs, and the role of government in economic development. This well-traversed literature covers arguments of market and government failure, but the varied views presented have not dulled the arguments. The debate becomes more intense when moving from general principles to the case of the auto assembly sector in...

By Leith van Onselen The Australian Competition and Consumer Commission (ACCC) has today announced that fuel shopper docket schemes offered by Coles and Woolworths will be capped at 4 cents per litre from 1 January 2014, in a move that is designed to improve competition in the retail fuel sector: The ACCC has today accepted undertakings from each of Coles and Woolworths that they will each voluntarily cease making fuel saving offers which are wholly or partially funded by any part of their business other than their fuel retailing business, and will in addition limit fuel discounts which are...

From the excellent Tim Toohey at Goldman today: Getting an accurate gauge of the current state of the labour market is important for policymakers wishing to assess the likes of spare capacity and medium-term inflation pressures in an economy. However, labour market data the world over is notoriously volatile. Not only this, but the “headline” figures such as employment growth or the unemployment rate can often present imperfect signals on their own of overall labour market trends. This latter point was made clear in our most recent A/NZ Economics Analyst where we looked at the Australia and NZ...

By Leith van Onselen The Productivity Commission has released a massive report today on productivity in the manufacturing industry, which the Commission found declined by 1.4% per annum between 2003-04 and 2007-08, versus productivity growth of 1.3% per annum experienced between 1998-99 and 2003-04; although it found no specific reason why: MFP [multifactor productivity] has been declining since 2003-04. This has been one of the main contributors to the recent flat to declining productivity of the whole market sector of the Australian economy... This study finds that almost two-thirds of the...

Fresh out: Standard & Poor's Ratings Services lowered its corporate credit rating on Australian airline Qantas Airways Ltd. to 'BB+/B', from 'BBB-/A-3'. The outlook is negative. We also lowered our senior unsecured debt ratings on Qantas to 'BB+', from 'BBB-', and placed the issue ratings on CreditWatch with negative implications. The downgrades reflect our view that intense competition in the airline industry has weakened Qantas' business risk profile to "fair" from "satisfactory", and financial risk profile to "significant" from "intermediate". We don't expect Qantas to recover to a...

From the PM this morning: "I am sure Qantas management are doing their best and let's hope they can get the business in a position where it can continue to operate profitably," he said. But Mr Abbott suggested he may be open to changes to the Qantas Sale Act to allow greater foreign ownership. He says while he would prefer to see the company kept in majority Australian hands he would be "happy to look at it" if Qantas proposed changes to the Act with no cost to taxpayers. "If it's a choice between a greater foreign stake in Qantas and taxpayer subsidy I ask the people of Australia - what...

The AIG construction PMI, the PCI, is out for November and the mini-boom continues to build: The national construction industry maintained its forward momentum in November, expanding for a second consecutive month and at a slightly faster pace than in October. Conditions were boosted by a strengthening in new orders (which increased at their highest rate in almost eight years) and an upturn in deliveries from suppliers. Activity also continued to grow, despite the pace of increase moderating from October’s 3½ year high. The seasonally adjusted Australian Industry Group/ Housing Industry...

By Leith van Onselen Yesterday’s release of the overseas short-term arrivals and departures figures for October contained sombre news for Australia’s tourism industry, with the ratio of annual arrivals to departures fell to its lowest level since November 1985 (see next chart). In the month of October 2013, the number of tourism arrivals fell by a seasonally adjusted 1.1%, whereas the number of tourist departures fell by 1.0%. In the 12 months to October 2013, the annual number of arrivals increased by 4.7% relative to the corresponding period of the prior year, whereas departures...

Throughout this year, and much of last, I have been arguing two central political economy points. The first is that Australia is on the verge of an economic reckoning of a magnitude that few understand. By that I am referring to our post China boom adjustment. It is most commonly called the end of the "mining boom". Or even more particularly the "capex cliff". But it is much bigger than that. It is the end of a series of booms that have left our economy so bloated, and our real exchange rate so high, that we are unable to compete successfully in just about anything that is not buried in the ground...

By Leith van Onselen Rumours abound today that Holden is set to close down its Australian assembly operations in 2016, but that it has postponed an announcement until early next year. From The Australian: The Australian understands that General Motors was poised to announce it was ending its Australian manufacturing operations in 2016 as early as yesterday, but a decision in Beijing the night before has delayed the decision. Sources say that General Motors is delaying the announcement for commercial reasons, but the decision to quit Australia has already been signed off by the carmaker's...

From the AFR: Ratings agency Moody’s placed Qantas on review for a possible downgrade to its investment grade ratingbecause of its deteriorating financial situation. Mr Truss, who holds the transport portfolio, was backed by Treasurer Joe Hockey in pushing back against a bailout for Qantas but has not ruled it out. The airline has placed unprecedented pressure on the government to intervene, asking for it to guarantee ­Qantas’s debt. ...Mr Joyce’s concerns struggled to convince Mr Truss, who made the point “the government isn’t a banker” while also warning that “clearly the...

By Leith van Onselen The Australian has just reported that the Abbott Government has just sealed an FTA with Korea, which is Australia's third largest export market with a 7% share: "Under this agreement, tariffs will be eliminated on Australia's major exports to Korea and there will be significant new market openings in services and investment," he said. Tariffs will be phased out over the next 15 years on products such as beef, wheat, dairy, sugar, wine, seafood and fruits. The deal will now go to cabinet and the joint standing committee on treaties. "The conclusion of this free...

Don't say I didn't warn you. From Terry McCrann today: I'VE changed my mind. The retailers are right. The government should - must - extend the GST to online purchases. And without a minimum threshold. At its simplest, it's a matter of the most basic fairness. Consider this example. Two coffee shops 100 metres apart - one has to pay the GST, on every cup of coffee sold, the other does not because for some reason it's 'too difficult' to collect the GST on each of the $4 cups of coffee it sells. That would be outrageous and totally unacceptable. The tax should apply equally to all the...

By Leith van Onselen A few week's back, the head of the Macroeconomics Group at the Australian Treasury, David Gruen, forecast that average per capita income growth will halve over the next decade to the lowest rate of growth experienced in 50 years (see next chart).   Yesterday's national accounts data for the September quarter, released by the ABS, provided a harbinger of things to come, with real per capital national disposable income (NDI) sliding by 1.0% over the quarter and also by 1.0% over the year, pulled down by the falling the terms-of-trade (see next...

Adele Ferguson has a good take on the travails of Qantas this afternoon: Alan Joyce's series of phone calls to the treasurer, minister for transport and opposition leader minutes after issuing a statement to the ASX that Qantas would book massive losses and be forced to slash another 1000 staff was designed to ramp up the pressure on the government to pull out all stops to help it out and in the process crush its competitor Virgin Australia. ...Joyce believes a key reason for the problems at Qantas are Virgin and its dumping of capacity on the market and the resultant airline wars. What he...

By Leith van Onselen The Australian Bureau of Statistics (ABS) yesterday released visitor arrivals and departures data for the month of October, which revealed increases in both net long-term and permanent migration into Australia . In the year to October 2013, there were 679,730 permanent and long-term arrivals into Australia - down slightly from the record 680,200 arrivals set in August - partly offset by 371,690 permanent and long-term departures from Australia (see next chart). There were 308,040 net permanent and long-term arrivals into Australia in the year to October 2013,...

By Leith van Onselen The Australian Bureau of Statistics (ABS) has released trade data for the month of October, with Australia recording a seasonally-adjusted trade deficit of $529 million. The result missed analysts’ expectations, which had expected a trade deficit of $350 million. It was the 22nd monthly trade deficit and followed the $271 million deficit recorded in September (revised down from $284 million) and the $784 million deficit recorded in August (revised up from $693 million). The next chart shows the monthly breakdown: In seasonally adjusted terms, exports fell $26m to...

Cross-posted from Richard Branson's blog: We began competing with Qantas in 2000 with just two planes and one route. Over the last 13 years we have grown the airline to more than 140 planes but flying in Australia has sometimes been akin to having a bleeding competition with a blood bank. Qantas was the giant in the market with a myriad of foreign alliances and advantages determined to bleed Virgin Blue, now Virgin Australia, dry. However thanks to the superior quality of Virgin Australia’s management and its staff, it has not only survived but has now managed to create a much more level...

This is better from the PM. From the AFR: Prime Minister Tony Abbott has forecast a bounce in economic growth emanating from his promised review of competition policy as he reassured the business community he had not dropped the ball on economic reform. ...In a speech on Wednesday night to the Business Council of Australia, Mr Abbott said the competition review which will, as part of its remit, take aim at the market dominance of supermarket giants Coles and Woolworths, would be the biggest such inquiry into competition since the Hilmer inquiry two decades ago. The reforms which came from...

By Leith van Onselen The debt ceiling farce looks all but over, with the Greens last night agreeing to abolish the debt limit in exchange for measures enabling greater public scrutiny of Federal debt. Under the deal, which will be passed by the Senate today, the Charter of Budget Honesty will be amended so that all economic updates - including the Budget, the Mid-Year Economic and Fiscal Outlook (MYEFO) and the Pre-Election Economic and Fiscal Outlook (PEFO) - will contain a debt statement reporting the total dollar value of debt and its percentage of GDP for the relevant financial year and...

More GDP, this time from Westpac which doesn't spare the gloom. After that is the always optimistic Bloxo. Economic growth remained weak in the September quarter with significant downward revisions to history. GDP rose 0.6%qtr, 2.3%yr, a touch below our expectations of 0.7%qtr, 2.5%yr. The National Accounts show growth substantively below trend which in Australia is around 3-3.5%yr. Growth in the Australian economy slowed in the September quarter from 2.4% in the June quarter to 2.3% in the September quarter. There was very little in the September quarter national accounts to support any optimism...

Cross-posted from The Conversation Australia spends more on infrastructure today than at any stage in its history. Yet governments are unable to meet demand and don’t expect ever to do so. What can governments do to keep up with escalating demand and community expectations for infrastructure? Reserve Bank assistant governor Philip Lowe says tolls and levies could be the answer to more efficiently funding the transport infrastructure we need - infrastructure he says would boost productivity and improve living standards. Tolls are just one issue likely to be debated as part of the...

By Leith van Onselen Following on from today’s national accounts release by the Australian Bureau of Statistics (ABS), I thought it would be interesting to once again benchmark Australia’s economic recovery since the Global Financial Crisis (GFC) against the recessions of the 1970s, 1980s and the 1990s. For the purpose of the analysis, I have chosen to use real GDP per capita as the measure, since it removes growth distortions from population growth and inflation, and better reflects economic welfare than the headline real GDP figure typically quoted by economists. As shown by the...

By Leith van Onselen The Australian Bureau of Statistics (ABS) today released the national accounts for the September quarter, which registered a 0.6% increase in real GDP over the quarter and a 2.3% rise over the year. The result disappointed market expectations for 0.7% growth over the quarter and 2.5% growth over the year. On a per capita basis, however, real GDP increased by only 0.2% and by 0.6% over the year. Further, real national disposable income per capital fell by 1.0% over the quarter and also by 1.0% over the year. According to the ABS, seasonally adjusted growth for the...