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.


A look at the future beyond car making

By Leith van Onselen The shutdown of Ford Australia is imminent, with the last car to role off the Broadmeadows production line at the end of next week, with the loss of thousands more manufacturing jobs. With this deadline looming, ABC’s The Business aired an interesting segment last night looking at the End of the


Flood of dodgy Chinese money has AUSTRAC worried

By Leith van Onselen Let’s recall last year’s report from the global regulator, the Paris-based Financial Action Taskforce (FATF), which warned that Australian residential property is a haven for international money laundering, particularly from China, and recommended that Australia implement counter-measures to ensure that real estate agents, lawyers and accountants facilitating real estate transactions are


22 years on and we’re still waiting for a population policy

By Leith van Onselen Back in 1994, when Australia’s population was just under 18 million, the Australian Academy of Science (AAS) convened a symposium on a topic of scientific interest: the future population of Australia. The analysis was extended to Australia’s resources of water, minerals and arable land, and the interactions between present lifestyle and


RBA defines Australian Kurzarbeit

From the RBA: A firm’s demand for labour is derived from the demand for its output. During a downturn in demand, firms can reduce their use of labour by reducing either the number of workers they employ (the ‘extensive margin’ of labour adjustment) or by reducing the hours worked by their employees (the ‘intensive margin’


Angry Chinese investor slams Strayan “xenophobia”

From Rowan Callick: Charles Liu, one of China’s “rainmakers” who played a significant role in putting together the $371 million S. Kidman & Co rural property bid ­vetoed by Treasurer Scott Morrison, says he is fed up with Australia, despite 20 years of doing business there. He believes Australia is heading down the same populist ­­de-globalisation,


Melbournian revolt against population ponzi grows

By Leith van Onselen Last week, the ABS released its latest population data, which registered near record population growth for Victoria, with nearly 115,000 residents added to the state in the year to March 2016: This result followed the Victorian Government’s latest population projections, which forecast a whopping 115,000 new residents for the state each


China not the US threatens Australian policy independence

There is an increasingly wild public relations battle underway in the Murdoch Press between notional Chinese and US interests. Late last week, The Australian launched the following attack on Bob Carr: Over breakfast at Sydney’s plush Park Hyatt a mere 10 days after Bob Carr had been sworn in as foreign minister in 2012, Kurt


The harsh reality of Australian youth unemployment

By Leith van Onselen This blog has gone to significant effort to highlight the plight of youth unemployment in Australia, which has seen significant jobs evapourate since the the Global Financial Crisis: As well as a huge increase in youth underemployment to unprecedented levels: Last night, ABC’s Lateline aired a sobering segment on youth unemployment


Melbourne train commuters ‘crush loaded’ by population ponzi

By Leith van Onselen I’ll ask the question once again: What do you get when you shove an MCG-worth of people into a city each year, without sufficient new infrastructure investment? Answer: Infrastructure bottlenecks, rising congestion, and lower living standards. Let’s recall yesterday’s population data for Victoria (read Melbourne), whereby a whopping 114,865 new residents


Apartment boom juices construction employment

By Leith van Onselen The Australian Bureau of Statistics (ABS) yesterday released its quarterly labour force report, which breaks-down employment at the industry level to August 2016. Below are some key charts, which present the changes in employment aggregates on a trend basis. First, the quarterly change in employment by industry: As you can see,


ABARES says no “dining boom”

From ABARES: Outlook for Australian agricultural and fisheries exports Total volume of farm production is forecast to rise by 2.8 per cent in 2016–17, following an estimated 2.3 per cent decrease in 2015–16. The forecast rise in 2016–17 reflects increased crop production. The index of unit returns for Australian farm exports is forecast to decrease


Chinese dodgy money mastermind plays McCarthyism card

From the AFR: Political donor Huang Xiangmo has suggested there is an atmosphere of McCarthyism in Australia in an article published a day after it was revealed he had resigned as chairman of Bob Carr’s China institute at the University of Technology. …Writing on Thursday on popular Chinese Australian website, Mr Huang suggested sometimes


Melbourne drives fresh population ponzi moon shot

By Leith van Onselen The ABS released its Australian demographic statistics for the March quarter of 2016, which revealed that Australia’s overall population growth rate accelerated slightly, with stronger growth in Victoria offsetting plummeting growth in Western Australia and South Australia. According to the ABS, Australia’s population rose by 1.38% in the year to March


Student “citizenship exports” boom

By Leith van Onselen Australia’s education system has become an integral part of the immigration industry and Australia’s population ponzi – effectively a way for foreigners to buy backdoor permanent residency to Australia. Dr Jenny Stewart, Honorary Professor of Public Policy at the University of New South Wales, recently drew the direct link between permanent


RBA mulls C3PO taking your job

Fresh from her appointment as Head of Economic Analysis Department the RBA, Alexandra Heath today produces an interesting take on the changing labour market: The Changing Nature of the Australian Workforce The underlying policy question of CEDA’s report on the vocational education and training sector is whether the education system has the ability to meet the changing


Even Turnbull wanted ASIC company data to be open and free

Cross-posted from The Conversation: The Australian government is planning to privatise the management of the Australian Securities and Investments Commission database of companies. This is a potentially damaging move which goes against the government’s own open data policy. On behalf of the Australian government, ASIC currently charges businesses and individuals around A$50 million each year


Did Carlyle’s Brian Wilson approve the Port of Melbourne sale?

The sale of the port required FIRB approval including, presumably, involvement by its chairman Brian Wilson. As I noted last week at The Australian: Foreign Investment Review Board chairman Brian Wilson has accepted a role as adviser to the $180 billion private equity giant, the Carlyle Group, potentially putting the former investment banker in conflict when it


Australians are stuffed full of household debt

By Leith van Onselen Back in June, Phil Soos from LF Economics released data showing that Australia had overtaken Switzerland and Denmark to become the most indebted household sector in the world: And despite record low mortgage rates, Australia’s mortgage slaves are still sacrificing a higher share of their income to pay mortgage interest (let


Who will be Australia’s Donald Trump?

Weasel words from Prime Minister Turnbull overnight at the UN migration conference, from the AFR: Governments that fail to control their borders face political destabilisation and a losing battle to win public support for a humanitarian approach to refugees, Prime Minister Malcolm Turnbull has argued. In a speech early on Tuesday AEST to the United Nations Summit on Refugees and Migrants in New York, Mr


Coalition does weasel words on Chinese investment

From the AFR: The speech by Mr Ciobo to the Credit Lyonnais Securities Asia forum on Monday is a bid to reassure Chinese investors who reacted angrily to the Turnbull government’s move to block the sale of the Ausgrid electricity network to Chinese interests. …Mr Ciobo is expected to suggest on Monday that the foreign investment framework will change to “ensure” Australia’s foreign investment policy


OECD: Aussies pay more, get less from uni

By Leith van Onselen The OECD has released its latest Education at a Glance Report, which contains some very interesting benchmarking data on education-related matters. Below are some key charts and analysis from the report, which shows that Aussies contribute far more towards their university education than most other OECD countries, but receive relatively little