Links January 25: Mixed messsages

Inflation is coming. Alphaville

Not to the US. John DizardTim Duy

Flood inflation here. FT

Quant churn. Zero Hedge

Short bonds & stocks. Nic Lenoir

China to slow. China Daily

Greed siezes metals. Bloomberg

Ore falls !?!?!?! Bloomberg

Ore flood panic. John Garnaut

Record ore inventory. Bloomberg

Levy and cuts pay for floods. SMH

New frugalism here to stay. SMH, John Durie, Bartho

Gold hammered. BusinessWeek

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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  1. Wow this mining boom is great for Australia isn’t it? High interest rates, new frugalism, Dutch Disease. I can’t wait for ore to smash through $250 and deliver more of the good times.

  2. “Wow this mining boom is great for Australia isn’t it? High interest rates, new frugalism, Dutch Disease. I can’t wait for ore to smash through $250 and deliver more of the good times.”

    “LOL, it might be good if didn’t have a housing bubble pushing everything to extremes…”

    Agreed and agreed.

    What’s astonishing about Australia’s 21st Century economy is that it in no way resembles the one my high school teachers told us we’d be working in.

    I started high school just as Australia was achieving escape velocity from “the recession Australia had to have” and the unemployment amongst blue collar males (including my Stepfather) was a terrible thing to see. The collapse of the commercial property market really took it’s toll on the blue collar workers and with the economy fast moving away from manufacturing exports they didn’t have a factory to run back to.

    Consequently us spotty faced 13 year-olds were told not to do trades as our parents had done, but to go to uni and study IT, science, engineering, business or something else that would contribute to the knowledge economy. Australia was all about productivity growth, innovation and “working smarter”.

    Prosperity could not be taken for granted, we were told.

    And as Australia’s economy started growing again that’s roughly how it panned out for a time, until we poured silly amounts of cash into houses and then China started writing us blank cheques for our iron ore and coal, which I believe rescued us from a 2003 housing bust.

    Now it’s common for kids who choose tertiary education to be laughed at by their tradie apprentice mates and our productivity growth is a joke. It’d be interesting to see if there’s an inverse relationship between changes in productivity growth and changes in residential property investment. I took a look at our multivariate productivity growth and noticed that it skidded to zero after Costello halved the CGT in mid 1999, which is roughly when our housing market started to move ahead of the CPI and wages. If there’s a relationship between residential housing investment and multivariate productivity I doubt it’d be easy to pin down, but you never know.

    • Yeah I believe that was called the “clever country”. Now, apparently, we no longer need to be clever because we can just ride the China boom forever. Ask Glenn, or Wayne, or Warwick, or Gittins!. Another 20 years of boom. Guaranteed.

    • Kids who chose the right tertiary education (geology, engineering) would be pretty happy. If truck drivers are pulling $100k plus in the Pilbara, they must be doing very, very well.

      • Alex, truck drivers are pulling $140-150k in the Pilbara. Crane drivers $150-$200k. Labourers $130-140k. Cleaners $90-120k. Office staff $110-$170, depending on seniority, managers $200-???k and so on.