OECD smokes crack on Aussie economy

By Leith van Onselen

If you feel like a bit of a laugh, check-out the OECD’s latest Economic Outlook for Australia, released overnight:

Economic growth is projected to increase gradually and reach almost 3% by 2018. The drag on growth from declining resource-sector investment will fade and gathering momentum outside the resource sector will support wage and employment growth, thus boosting consumer spending. Tightening labour and product markets will bring inflation up from current low levels.

The central bank is projected to start increasing its policy rate towards the end of 2017, as growth improves and consumer price inflation moves towards its 2-3% target band. Higher interest rates will relieve some of the pressure on the booming housing market, although the risks posed by possible overheating still call for enhanced macro-prudential policies. In the event of an unexpected downturn, fiscal policy should be used to support activity. Given the good fiscal position, projects with high rates of return should be pursued.

Australia is distant from major world markets but is nevertheless well integrated into global markets. Sound policies have helped. In particular, Australia’s immigration and visa systems have been critical to demographic and economic development. However, there is room for a more business-friendly tax mix. Also, inequality needs to be contained, including that linked to globalisation, in particular through enhancing labour-market skills and providing better paths for disadvantaged people to get jobs.

There’s so much garbage here, it’s hard to know where to start.

The projected rebounding in real GDP to 3% by 2018 is hard to fathom. Mining investment still has further to fall, as evidenced by last week’s Capex survey, and the monster dwelling construction boom is nearing its peak and will soon begin detracting from growth. Sure, there will be some offset from infrastructure investment, but not much.

Rather than magically firming, wages growth, employment and consumption spending will remain under pressure as the housing market begins to fade. Canberra’s mass immigration program, which the OECD loves so much, will also continue to hold wages down and keep unemployment elevated.

Adding to the soft economic outlook, commodity prices are already falling and will likely continue to do so on the back of the iron ore glut, lowering national income and Budget revenue.

As the Budget’s assumptions are smashed, and the deficit continues to rise, Australia will lose its sovereign credit rating, thus raising funding costs for the banks and raising mortgage rates. Along with the soft domestic economy and weak inflation, the RBA will be loathe to raise interest rates as anticipated by the OECD.

Finally, the point about containing inequality is delusional as long as Australia maintains a rorted visa system and turbo-charged immigration program, which necessarily undermines labour for the benefit of wealthy owners of capital.

The OECD needs to wean itself off the crack.

unconventionaleconomist@hotmail.com 

Comments

  1. – Isn’t one Leith van Onselen aware that this data put out by the OECD is simply copied & pasted from the australian government itself ?
    – Just for fun: compare what this document with the projection of the australian government itself. Do you see any (major) differences ?
    – Conclusion(s) ???

    • I actually looked at it. There are the same spelling mistakes between the LNP budget forecasts, OECD forecasts, Standard and Poor’s along with the IPA statement.

      According to Google the IPA was the first, wuth the LNP and Hill Top Church strangely about 2 minutes later

      • Consistency man! Gotta stay on message!

        Kind of reminds me of my high-school years – one of the guys in class cheated so well on this biology snap-test one day – he copied even the name of the guy at the desk next to him he was reading his answers from… Hilarity duly ensued when the teacher brought the results back and there were 2 tests with the same name but different hand-writings 😀

        I always wondered what would happen if you’d pump all these papers and reports that come out of the government through one of those anti-plagiarism services universities and schools more generally use these days…

        Hmm… shall we try this? -> http://copyscape.com

      • Please do tell what these spelling mistakes are – I’d like to make a document history of these lazy copiers.

  2. Jake GittesMEMBER

    Ideal for Canberra: they quote the OECD and it’s all good. Then some ministers have the ‘No one knew’ moment and have to admit to the media that all the forecasts are wrong.

  3. WHO DOES WHAT IN THE AUSTRALIAN ECONOMY

    WORKERS  (i) pay rent, (ii) help their employers to pay rent, and (iii) raise some of the next generation of rent-payers.

    LAND SPECULATORS  (i) receive economic rent for the gifts of nature, (ii) take the credit for providing them, and (iii) lobby governments for an ever-increasing supply of rent-payers.

    BANKS  (i) borrow money from overseas and lend it against the gifts of nature, driving their prices as high as possible, in order to siphon off the largest possible share of the economic rent under the guise of the interest margin, (ii) ensure that home ownership is financed by debt instead of equity, so that new owners become human shields against price falls, and (iii) take the credit for facilitating changes of ownership that might otherwise have taken place at much lower prices.

    HOME OWNERS  (i) work themselves to death in order to pay rent under the guise of interest on their inflated mortgages, and (ii) support any policy that would increase their “equity” in their homes by making life even harder for future buyers.

    PROPERTY DEVELOPERS  drip-feed land to the market, after hoarding it for as long as possible in order to maximize prices (see LAND SPECULATORS).

    IMMIGRANTS  supplement the ranks of working rent-payers because, mysteriously, people of that class can’t afford to breed at a sufficient rate.

    GOVERNMENTS  (i) enforce debts, (ii) protect property rights over the gifts of nature, (iii) provide public works and services that raise the market values of the gifts of nature for the benefit of the owners, (iv) bring in rent-paying immigrants who raise the market values of the gifts of nature even without public works and services, (v) fund these activities by taxing rent-payers, and (vi) take the credit for rising asset values.

    THE UNEMPLOYED  (i) try to take jobs from other people, thereby putting downward pressure on the price of labour to compensate for the upward pressures caused by rents and taxes, and (ii) take the blame for all the free-riding in the system.

    EMPLOYERS  (i) pay rent, (ii) help their workers to pay rent, (iii) collect taxes payable by their workers, their customers, and sometimes even their suppliers, without being paid for this service, but under threat of penalties if they don’t perform it, (iv) foot the bill for minimum wage increments that are mostly confiscated by the central government via welfare clawbacks and income tax, (v) hire immigrants in a self-defeating attempt to compensate for the above costs, and (vi) take the blame for all the exploitation in the system.

    ASYLUM SEEKERS  (i) divert attention from the far more numerous economic immigrants brought in by the central government, (ii) get branded as economic immigrants by the central government, and (iii) take the blame for the decline of national unity and national values.

    LEFT-WING POLITICIANS pretend that employers can fix everything.

    RIGHT-WING POLITICIANS pretend that the unemployed and precariously employed can fix everything.

    ECONOMISTS provide plausible explanations why the system doesn’t need fixing, but should be as it is, only more so.

    VOTERS reward governments for policies that (i) maximize the rents and land prices that they have to pay, and (ii) make the unemployed try ever harder to take their jobs and their kids’ jobs.

    Did I leave anybody out?

    • casewithscience

      RESEARCHERS: Try like mad to create new intellectual property and production methods until they have their grants cut down (see GOVERNMENT) because RENT SEEKERS spend almost nothing on dynamic efficiency in this country.

      NB: The new OECD research funding figures show that 4b of the 18b in private research funding in this country was spent on real estate and business research. The cure for cancer, that is not.

  4. The politicians extract rent from heavily connected party member Chinese as part of a “rent to buy the nation” scheme.

    Developers and real estate agents extract rent from Chinese to hide their stolen billions