What did Bloomie expose in its Crapstralia series?

It was a beating for Australia not seen before outside of MB. Bloomberg took aim at Crapstralaia and it did not miss.

Satyajit Das destroyed economic structure:

First and most obviously, the Australian economy is still far too dependent on “houses and holes.”

During part of the typical business cycle, national income and prosperity are driven by exports of commodities — primarily iron ore, liquefied natural gas and coal — that come out of holes in the ground.

At other times, low interest rates and easy credit boost house prices, propping up economic activity. These two forces have combined with one of the highest population growth rates in the developed world (around 1.5 percent annually, driven mostly by immigration) to prop up headline growth.

Yet a significant portion of housing activity is speculative. Going by measures such as price-to-rent or price-to-disposable income, Australia’s property market looks substantially overvalued.

Meanwhile, GDP per capita has been largely stagnant since 2008. Australia’s manufacturing industry, once a significant employer and an important part of the economy, has increasingly been hollowed out.

The country’s cost structure is high. Improvements in productivity have, as elsewhere, been lacklustre. Infrastructure is aging and unable to cope with the demands of a rising population, especially in major cities. Australia stands at 21st place in the 2017 Global Competitiveness Report. It ranks 15th in the World Bank’s ease of doing business list.

Michael Heath slammed productivity:

There’s been no major economic reform since the turn of the century, with just about every attempt reversed or cannibalized by toxic politics. And the impact is starting to show. Just when the economy needs growth drivers outside of mining, a slide in global rankings for innovation and education suggest living standards could decline. The miracle economy that shrugged off the global recession is turning mediocre.

“Now that we don’t have the benefit of the mining boom, there’s nothing really that replaces it in terms of driving economic activity,” said Jeremy Lawson, chief economist at Aberdeen Standard Investments in Edinburgh and a former Reserve Bank of Australia economist. “The really big task of governments over the next 5 to 10 years is to deal with these big structural issues that Australia is facing. Potential growth is relatively weak.”

…That political dysfunction is threatening the nation’s prospects. A policy vacuum around energy has seen electricity prices surge to among the highest in the world, despite Australia holding some of the largest coal and gas reserves on the planet. The building of a nationwide broadband network has become a political football plagued by cost overruns and delays, with internet speeds languishing below those of some former Soviet bloc nations. And home ownership among young Australians is the lowest on record as successive governments have failed to tackle generous tax breaks that have helped turn housing into a speculative financial asset.

Angus Whitley destroyed the NBN:

Australia’s $49 billion broadband network was meant to spearhead a digital revolution. Instead, the botched project risks becoming a poster child for government mismanagement.

The nation’s biggest-ever infrastructure investment has turned into a political football, plagued by cost overruns and construction delays.

With the network years behind the original schedule and only about half finished, Australia has slumped to 50th place on a global ladder of internet speeds, behind Kenya and a string of former Soviet bloc nations. Public frustration with the project is boiling over amid mounting criticism that politics is trumping policy across a host of areas from housing to energy and damaging Australia’s economic prospects.

“We are really an example of how not to do it,” said Paul Budde, a Sydney-based former adviser to the United Nations on the social and economic benefits of digital development. “We have ended up with the worst possible solution.”

Emily Cadman popped the housing bubble:

Home ownership among young Australians has fallen to the lowest level on record, as an explosive property boom squeezes out all but the wealthiest.

Supercharged by record low interest rates, a lack of supply and a tax system that favors property investors, home prices have surged more than 140 percent in the past 15 years, propelling Sydney past London and New York to rank as the world’s second-most expensive housing market. Melbourne, ranked the world’s most liveable city the past seven years by the Economist Intelligent Unit, is now the planet’s sixth-most expensive place to buy a house.

…“The great Australian dream of home ownership is becoming a nightmare,’’ said Brendan Coates, a housing policy expert at the Grattan Institute. “It’s down to a collective failure of government policy that will take at least two decades to fix.”

Adam Haigh caned the scrotum sharemarket:

Australia’s economy has grown faster than its developed-world peers over the past decade, uniquely avoiding a recession. That means its stock market has grown handsomely too, right?

Wrong. It’s actually smaller today than it was on the eve of the global financial crisis, in 2007. In that period, the U.S. stock market’s capitalization has grown by more than $9 trillion. Closer to home, Australia’s market has been surpassed by Asia-Pacific peers South Korea and India.

Not only is the contraction a disconnect with the economy, it also stands against an expanding pool of pension-fund capital, which has opted instead to invest abroad. Behind the contrast lies a corporate structure that favors oligopolies in retailing and finance in what ultimately is a nation with a small population. Also helping explain the decline: an appetite among foreign firms to buy Australian businesses, removing their Sydney listings.

Perry Williams marveled at the energy disaster:

A bungled transition from coal to clean energy has left resource-rich Australia with an unwanted crown: the highest power prices in the world.

New Yorkers pay half as much as Sydneysiders to keep the lights on, despite Australia boasting among the world’s largest coal and natural gas reserves, as well as ideal conditions for clean power generation. A decade of political dithering and climate policy missteps have set its patchwork power system adrift, ratcheting up manufacturing costs and hurting consumers with a doubling in electricity prices since last year and rising risks of blackouts.

…Natural gas was meant to bridge the electricity supply gap left by the shutdown of decaying coal-fired stations and the gradual shift to solar and wind energy. But rising exports of the fuel to higher-paying overseas buyers created a local shortage.

Squabbling over climate policy has been a key contributor to political turmoil in Australia, which has changed prime ministers five times in the past decade.

David Fickling ripped into toxic privatisations:

Private owners are often able to wring efficiencies out of businesses that weren’t apparent when they were in public hands, but such plain-vanilla improvements can’t account for the way the states are shooting the lights out with these deals. A better explanation is that, in their eagerness to raise short-term cash, governments are letting private owners take larger and larger clips of the ticket for access to monopoly assets.

…The bigger worry, though, is for Australia itself. From Roman roads to the internet, the dynamism of modern economies is built in part on the way that the costs of doing business tend to decline over time. The inflation-linked or inflation-plus charges that most infrastructure owners require to cover their costs of capital, especially at these heady valuations, all but guarantee that won’t happen for years into the future.

Not much left is there? There is one overriding theme in each of the excellent pieces: corruption. It is intellectual corruption in the bureaucracy. It is political corruption in ruling parties obsessed with short term answers and each other. And it is literal corruption in the dominance of rent-seekers over the national interest.

If the Australian political economy is a reflection of our values then it is not flattering. We appear to have reverted to our penal colony roots.

Comments

      • bolstroodMEMBER

        Too damn right it didn’t.
        And it now stands visible to all.
        Regard our draconian brave new terror laws, the high security fence around our
        People’s House.
        The Rum Corps stands in full sight, but is everywhere disregarded.

  1. What an excellent summation. This needs to be repeated until every Australian or investor in Australia UNDERSTANDS the truth, that our country is corrupt and the representatives you voted for work for people who want to damage you. Yes they work for your enemy.

    ”There is one overriding theme in each of the excellent pieces: corruption. It is intellectual corruption in the bureaucracy. It is political corruption in ruling parties obsessed with short term answers and each other. And it is literal corruption in the dominance of rent-seekers over the national interest.”

      • Yes, corruption is at the heart of Australian politics. Donations from mining interests dictate policies and that’s what’s caused the so-called “climate wars” of the last decade. It’s exactly the same in the US; you can take it as a given that the same thing is happening here, just change the names of the players:

        According to the Center for Responsive Politics (CRP), a nonpartisan group that tracks money in politics, the oil and gas industry was the ninth biggest supplier of campaign funds during the 2013-2014 election cycle, with 87% of the $51 million it spent going to Republicans. The coal industry provided another $10 million in contributions, with 95% going to Republicans. K0ch Industries, the energy conglomerate controlled by billionaire brothers Charles and David K0ch, was the top oil company provider, accounting for $9.4 million in contributions; Chevr0n, Exx0nMobil, and Occidental Petroleum were also major donors. These figures, it should be noted, only include direct donations to candidates in accordance with federal campaign laws. They exclude funds channeled through secretive super PACS and supposedly “non-profit” organizations that are not bound by such rules. During the 2012 election, the CRP reports, the K0ch brothers helped steer an estimated $407 million to such entities; equally large amounts are thought to have been expended in the 2014 go-around.

        To a significant extent, these funds were shuttled to especially industry-friendly and powerful Republicans. Among the leading recipients of oil funding in 2014, according to the CRP, were John Boehner and Mitch McConnell, along with John Cornyn, the particularly enthusiastic pro-energy senator from Texas, and Congressman Cory Gardner of Colorado, who just took a Senate seat from the environmentally conscious Democrat Mark Udall. Not surprisingly, among the top recipients of coal industry funding were Boehner and McConnell, as well as especially coal-friendly congressional representatives like Shelley Moore Capito and David McKinley of West Virginia.

        These and other recipients of fossil fuel cash know full well that their future access to such largesse, and so their ability to get reelected, will depend on their success in pushing legislation that facilitates the accelerated extraction of oil, gas, and coal. It doesn’t take too much imagination to calculate the consequences of this conveyor belt of financial support, both for affected communities and for the climate.

    • Doing the simple and wrong thing rather than the complex and right thing. Then you add in corruption…

  2. Jake GittesMEMBER

    It was a good series and a did good job in each topic. It may not have reached the wider population yet. As for the policy makers, politicians and senior bureaucrats, not at all: they have no clue at all.

  3. ‘We appear to have reverted to our penal colony roots.’

    Gene pool theory at work. The Chinese are working very hard to dilute it with their own brand of spiv.

  4. I’ve joined the Australian Labor Party. It’s time to start going to these meetings and telling them how shit is, how it will be, and most importantly how it could be.

    Put some shoulder to the wheel.

  5. I thought this passage from Das was also very important but mostly overlooked by commentators:

    “Asians deride Australia’s hypocrisy, pointing to the historical abuse of its indigenous population and recent treatment of asylum seekers. Australia’s “Whites Only” immigration policy ended only in the early 1970s. Recent decisions restricting foreign investment smack of latent xenophobia.”

    I thought it was courageous of Das to say what many understand clearly and while others reject, at times viscerally…

    Which brings me to my own incident in south east Queensland at the weekend – while volunteering and helping out during my kids’ sporting activity – the kids were just practising the event, and my own child was outed very early – one of the parents (of a kid that really excelled) afterwards walked up to me and accused me of biasing the outcome against their child… and looked at my Sri-Lankan born wife and back at me saying “it’s just not the Australian way!”…

    With Hanson looking like playing an important role in the upcoming Queensland Government elections, it is once again time for all people of good character to stand up and be clear that xenophobia in any guise will not be tolerated in our society…

    • CharlieChaplinMEMBER

      What charm school did he go to? It’s a kids match! Have fun! Stop being such a racist and narcissist. Amazing how some people can squeeze the fun out of everything.

    • I am not convinced that PHON’s racism it that type of racism, that we are superior to others, more just like we all talk about here, look after the people who are already here not mater their background. But keep in mind that there are many here who would perhaps need to return home.

      • A person who thinks that they can somehow divine, free from prejudice, who deserves to live in any particular place would surely know that ethnicity and geography of birth are irrelevant… in other words, if one was to make such choices using the same parameters then there would be many multi-generational Australians “who would perhaps need to” shift countries… (Let’s hope that the benevolent diviner(s) might think that the people who have lived on this land for 40,000+ years might perhaps deserve to continue to live here)…

    • “Recent decisions restricting foreign investment smack of latent xenophobia.” What can he be referring to here? That the Treasurer did not allow Shell to takeover Woodside or that some attempt was made to block Chinese ownership of our remaining locally owned farmland?

      It is comments like that make it clear to anyone that Das is extremely biased against white Australians. Australia is by far the least restrictive of any country in the world towards foreign investment, especially compared with those countries in Asia which he favours. Can Oz companies just buy up assets (other companies, real estate, farmland, mines in China or Thailand or Indonesia? When small Oz companies have attempted to get set up in Korea, Indonesia or China the locals change the rules to suit themselves and hurt our companies. China does not allow foreign ownership of its land, farms, and mines and only allows investment in manufacturing deemed to be in its interest (and then its on a partnership basis rather than outright and involve technology transfers).

      As for the issue of discrimination against other races, well we all know the Asians are the most racist on the planet – think of the racism within India (where Das comes from) as one example or what goes on within China with respect to minorities. Asia is also rife with religious intolerance.

      I can understand where you are coming from on a personal level in relation to your family, but I very much doubt you would find anything better in those Asians lands that you hanker after.

      Das has been sneering at Australia for a long time. Our increasing level of corruption is mainly due to our attempt to integrate ourselves within Asia, where corruption is the norm (although I doubt that Das would admit that), and the policies that have taken hold since the Howard government first gained office. Without a doubt, Chinese and Indians are streets ahead of us in the corruption scales, but we are learning fast as these people became an increasing part of our national identity.

  6. SoMPLSBoyMEMBER

    The systemic dysfunction described by Bloomie has yet to be ‘appreciated’ by the wider populace. The magnificent ‘wealth effect’ of soaring property values suggests to most that we’re on the ‘right’ track. That big ‘pro’ offsets a lot of ‘cons’. With a Roll Reus in nearly every driveway, it’s ‘all good’.

  7. Not much left is there? There is one overriding theme in each of the excellent pieces: corruption. It is intellectual corruption in the bureaucracy. It is political corruption in ruling parties obsessed with short term answers and each other. And it is literal corruption in the dominance of rent-seekers over the national interest.

    They haven’t torn our education system to pieces yet. C’mon Bloomie, just rub some salt into the gaping wound that is our VET track record and demolish the farce that is our university sector. It’s all I want for Christmas!

  8. That whole series totally missed the real issue that underlies the whole house of cards. You have the world’s reserve currencies printing fiat by the trillions. We have totally open capital markets, valuable assets for sale to whoever wants them, and a so-called flexible exchange rate (the ffefr). The result is we equate, as pfh coins it, actual production with sales of assets. There is NOTHING in all MB’s prognostications that indicates it even recognizes the problem.

    The problem is not Houses n Holes. The problem is a totally distorted economy caused by a totally false economic narrative that has now been taught in universities for 60 years and that Keating used as the basis for policy that would destroy the nation.

  9. You could send this article to the Treasurer and shadow Treasurer for their comment and while you’re at it also send it to Sarah Hansen Young for a really good laugh.

    • Ludlam might have been the only member of parliament who could join the dots, but he’s also the only one with any integrity. If Shorten thought he could win the election by dealing with the above he’d change tune faster than a busker who has been shown a fifty dollar note. So, there’s an outside chance some of it might get dealt with.

  10. All those articles are symptoms of a broader malaise which is an economy that lacks ‘competitiveness’. Conventional business and economic ‘thinking’ as characterised by debt and the nuttery of neoliberal economics has no answer except to make 1% wealthier.