McKibbin: Sell it all to China

Bit shocked by this from a gleeful AFR:

Obsessed by weak commodity prices and volatility in global financial markets to the point of not thinking about the future?

Don’t be, advises top economist and former Reserve Bank of Australia board member Warwick McKibbin.

Australia is better placed than most countries to benefit from long-term global trends – such as population ageing, fiscal adjustments and the shift in economic clout from Europe to Asia, Professor McKibbin says.

…”If you have got something like a fixed asset in a country and you are globalising the entire world then location becomes a valuable asset.”

“Real estate on Sydney harbour for example is also from a national point of view attractive. But for foreign investors it’s also very attractive because there’s billions of dollars of wealth being generated in China.

“The middle class is expanding, and they’re going to want to buy things, environmental goods – they’re going to want to buy stuff which we actually have in abundance. But much of it is fixed assets so you can’t change the supply of it, and so therefore it’s value is likely to go up a lot.”

But it will also drive up the real exchange rate, hurting the competitiveness of trade-exposed industries such as tourism – currently enjoying good growth with a lower Aussie dollar – and manufacturing. A stronger dollar means Australian goods and services are more expensive for foreigners while competing foreign goods and services are cheaper for Australians.

There you have it. The insider’s view of Australia’s future.

Two questions. How will we grow? If we sell our fixed assets to foreigners then we’ll also be borrowing lots offshore as folks chase the assets (there are a few Australians left in Australia after all).

Also, if we’re also going to be consuming the proceeds whilst hollowing out our tradable sectors then the current account deficit is going to the moon. From Australia’s already stretched CAD that will be sustainable for about a year.

Second, is this model politically sustainable as Australian youth is sold down the river?

David Llewellyn-Smith
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Comments

  1. “is model politically sustainable as Australian youth is sold down the river?”

    Fairly evident that he doesn’t give a shit.

  2. Most of us would agree that harbourside property in Australia is attractive. The only thing not attractive about it is the prosoect of it being sold to overseas interests, which in all but a few circumstances, remains illegal. When will the MSM stop omitting facts about this issue, pretending it is ok when it is not?

  3. McKibbin’s remarks are a prime example of ‘she’ll be right exceptionalism’ mixed with the ail-ete’s typical short termism and lack of imagination. The opening sentence: “Australia is better placed than most countries to benefit…” and it’s obvious nothing of any merit is going to be said.

    • Actually the bit about being better placed is the only thing I think he has got right! Demographics suggest this will be the case.

  4. Warwick Mckiddin looks to be about old enough to have bought a couple properties for peanuts many years ago

    • Probably still cleaning the coffee off his computer screen and topping up the swear jar after reading this one.

  5. “Don’t be, advises top economist and former Reserve Bank of Australia board member Warwick McKibbin.”

    So this proffessor is a former reserve bank board member. Who exactly is he working for now. Is he a shill for Chinese lobby interests now ?

    I’m sure if this professor went back to his university and explained his situation, they would be happy to give him his money back that he paid for his degree.
    O wait thats right, he is of a generation that didn’t pay,
    No wonder he has no idea on the value of money.

  6. Glass half empty response would be that this is how far the rot has set in among policy makers and political leaders. Glass half full – at least they’ve stopped pretending our future is anything other than selling out to the Chinese.

  7. “Second, is this model politically sustainable as Australian youth is sold down the river?”

    Yes! That is the problem.
    Does anyone think we really want to suffer the massive long term dislocation necessary to put this economy on a sustainable base? – NO
    Does anyone think that we are willing to take the hit to our living standards that this will entail? NO
    Does anyone think that those who now benefit from the current Ponzil are willing to give up any of their ‘rights’? – NO
    Would the major demographic (Sydney and Melbourne), that by weight of population, now totally control the federal parliament be ever willing to give up their parasitism of the rest of the country? NO
    Can you re-educate anybody, Pollies, Academics, Banks, Lawyers etc etc in this country to even acknowledge the facts of our existence? NO
    Any other questions you need to ask?

    The answers lie back in time.

    • Ah, there you are 😉

      I started an answer but see you’ve already covered it. This country doesn’t want to change. Reform is impossible – someone, everyone, squeals.

      On the bright side I can see a huge market for carefully crafted theme homes for ageing Chinese dotted around our vast coastline…we can put our rapidly growing ‘caring’ economy to good use.

      • ” I can see a huge market for carefully crafted theme homes for ageing Chinese dotted around our vast coastline…we can put our rapidly growing ‘caring’ economy to good use.”

        Soylent Green maybe?

  8. McKibbin has been, from time to time, one who has shown some inclination to recognise the reality. Is it possible he is just laying the truth of the only real future now available to us in order to generate some discussion?
    Jake
    “The opening sentence: “Australia is better placed than most countries to benefit…” and it’s obvious nothing of any merit is going to be said.”

    Sorry I didn’t note that opener 🙁 Sigh!…….

  9. The good professor needs to look at a map. Sydney is no closer to Beijing than Most European capitals. The ‘Australia is on the door step of Asia’ belief is nothing more than an empty slogan. Mckibbin’s ‘thoughts’ demonstrate the intellectual laziness of the Australian elite.

    I’ve just returned here after 2 years away and am equal parts shocked and unsurprised by the kind of thinking on display.

    • Yes thanks for the geography Leighton. The Chinese purchase of property is impacting everywhere – the U.S., Canada, London – I don’t know about the rest of Europe. Our economy and favoured areas of investment is so small (Sydney) that it perhaps makes a greater difference than some other places.

      It’s amazing how important we think we are to others. Really the only thing that gets reported about Aus is the Rugby scores.

      • Spot on white the geography Leighton! As I’ve said before if we are part of Asia then South Africa is part of Europe, coins it’s about the same distance, but wall would agree with that?

    • I was amused by your comment. When you have been away from OZ for 25 years, the OZ MSM Conventional Wisdom is bizarre – and in too many cases, just plain silly.

  10. Did this really come from the AFR? It read more like something from the Shovel.

    You just can’t make this sh#t up!

  11. Since Christmas I’ve heard three couples declare they are emigrating, all will be gone by June 2016. All are Australian, university educated, recently married and looking at where they have a long term career,,buy an affordable house and raise a family. When I see this I have to say they have made the right choice.

    • Good for them, and it is worth noting that there are alot of Australians living elsewhere in the world. The mobility of the professional classes is growing and for those with transferable skills, the opportunities in Europe, Asia and North America are considerable. Speaking English as a first language is an advantage too.

      But as a recent returnee (with intentions of going somewhere else after a while when it suits), Australia is still a great place to live with good weather, good food, pretty good standards in health and education, not to mention security. The country is just afflicted by a disease that so often stems from such fortune, a disease with symptoms of intellectual laziness and a lack of collective ambition. Not to mention a level of self importance far in excess of how the rest of the world sees us, as flawse pointed out above.

    • Any hints on where they’re heading to? I am thinking the same thing but for the life of me I can’t imagine anywhere that would be better, obviously I am not as world wise as I should be. 🙂

      • if i wasn’t stuck here and was younger I’d be in the UK, USA, Canada, NZ or if I was fluent in another language Europe or Scandinavia – any where that is less of a nanny state and doesn’t have the block on tv is a good place – or anywhere people don’t talk about RE in the morning, day time and at night and then dream about RE is ideal

      • One “unusal” place that is ment to have a lot going for it is Chile! If you want to take a more adventurous path Nigeria is set to be the China of Africa as it’s population booms in the coming decades. Through don’t expect Aussie level infrastructure!

      • Every place has its own problems. If there’s a perfect place, everyone would have gone there. It depends on individual tolerance to various things. Easy to see every thing bright from a distance. Once you become a local, reality hits. If you’re running from people talking about RE, you’ll be surprised how much of that you’re going to see out there.

      • Principally to the US (west coast) and Ireland attracted by IT, pharmacy and medical sectors (specifically the building of replacement limbs….to be honest I didn’t fully understand it but it’s only done in Ireland and they managed to get a job there).. Thye do know property is expensive but they have a better chance of a long career there.

  12. TailorTrashMEMBER

    “The (Chinese) middle class is expanding, and they’re going to want to buy things, environmental goods – they’re going to want to buy stuff which we actually have in abundance. But much of it is fixed assets so you can’t change the supply of it, and so therefore it’s value is likely to go up a lot.”……….

    What is this “stuff” we have in abundance …….our homes ?….our land ? …….I guess Australia is a fixed asset then …….” And we can’t change the supply of it “…
    ………….how f$&@ing right ………once we have sold our home we won’t have anymore to supply ……..and if its “value goes up a lot” the Chinese buyers will be very happy .indeed ………but where will our Australian children be? ………..and this guy was on the RBA board being paid by Australian taxpayers …..we really are lost !

    • “and this guy was on the RBA board being paid by Australian taxpayers”
      Sorry to tell you TT but he was giving Australian taxpayers exactly what they wanted Big screen TV’s, SUV’s, the best imported tiles, the latest Apple hoosywhatsit……..and…………Coffee bloody machines 🙂

      • TailorTrashMEMBER

        Too true …..Lee Kwan Yew will be quietly smiling where ever he is as his “poor white trash of Asia” get fooled by their “Riches ” into giving up their homes ……

    • Thanassis Veggos

      It’s a country, it has a flag, borders, the lot…
      just not much of a nation.
      It reminds me more of a business actually, you milk it for all it’s worth and then either sell it on or wind it up.

  13. Australia – a spacious retirement community for wealthy Asian pensioners.

    Unfortunately, that does seem like the most viable economic strategy given the current political and cultural climate. The youth of this country should either leave or get trained in aged care.

    • I feel sorry for younger gens then me (I think x may have escaped total wipeout) who have to look forward to a life fulfilled by wiping boomers bottoms for 18 dollars an hour and blowing all that money on renting the very same boomers investment property

  14. Another reason they want the minor parties out of business. There will be no liblab objection to this.

    • Marked – who would object? For anyone to object they have to make up a fairytale – we can reform and fix all this but there will be no cost to anyone especially the Sydney Canberra Melbourne axis. Yes there is a minor party that does that.
      Just at the moment that, to me doesn’t matter much. Anyone trying to get this truth through the thick heads of the Aus people after the MSM have beaten them is doing us a favour.
      Anyway screw this – I have to be home to watch ‘I’m a celebrity – get me out of herre’
      Godalbloodymighty!

      • Cough…. international trade flows of physical exchange is dwarfed by 60X international financial flows… thank you decades of freedom and liberty…

        skippy… sux on it mate…

      • skippy what is your point – if you think you are informing me I ‘pfh and a few others, have been banging on about that as part (actually I think the multiple is much larger than 60 from memory) of the necessity for capital controls for some years – in here and elsewhere. So I’m not sure whether you were agreeing, trying to be insulting, or didn’t grasp at all what was being said?

    • That’s about it. The CAD is eliminated if foreign investment pays it off. The new owners start afresh. What most people, the current crop of politician especially, don’t realise is that they aren’t part of the new equation. They … are irrelevant. Worse. They are going to be ‘transitioned’, and even poor Warwick doesn’t appreciate that he’s going to be one of the irrelevant….

  15. Why doesn’t he be honest and cut to the core of his message:
    – sell out your kids’, grandkids’ and greatgrandkids’ futures to rich foreigners so that you can retire in luxury.
    You’re nothing but a mercenary McKibbin