The message in yesterday’s Australian GDP is as loud and clear as it is widely ignored. The national economy is now running tilt so you can go backwards. Indeed, we’ve created a perpetual motion, rat wheel machine, force-fed by empty calories.
GDP per capita is now trending towards perpetual zero:
While wage growth collapses:
What’s happening here is not at all mysterious. The commodity income rebound since 2016 has peaked. But we’ve kept feeding people into the economy, diluting the profits.
The resulting population growth has force-fed unproductive sectors such as retail and banking. But even these are steadily becoming less profitable as income is dispersed ever more widely and shallowly just as peak debt kills demand.
That demand shortfall is being offset by unproductive and profitless government spending. Some will add productive capacity in time but much of it is spent just to keep the wheel spinning.
Add to that a whole series of rent-seeking sectors that suck profits out of the economy to no purpose. We produce energy only to offset export losses for the gas cartel. We produce too many houses for people that don’t live in them. We produce education for the dumbest foreigners not to make ourselves smarter. We produce dis-economy infrastructure that is crush-loaded before it opens. We produce dirt only to fund wage rises for bureaucrats.
And here’s what it does in green and red ink. Planet Earth is enjoying a spectacular profits boom as Australia rips backwards:
And don’t forget that the above has transpired amid a serendipitous mining profits spike. Now imagine what it’s going to be like ahead as that boom goes bust with a slowing China.
We’ve created a near perfect profitless economy with no productivity, no competition, no dynamism, no recessions and no hope. There are three beneficiaries to this Catherine wheel of stupidity:
- pollies get to point at headline numbers and claim that they are good economic managers;
- rent-seekers in the narrow benefiting sectors get easy (if diminishing) profits growth;
- the Fake Left gets to feel good about not being “racist”.
Meanwhile the vast majority of Australians pay with their quality of life for the pathetic vanities of this preening elite. The implications are obvious:
- more anger;
- more government turnover;
- more condemnation of business;
- more bad policy;
- more loss of living standards.
David Llewellyn-Smith is chief strategist at the MB Fund which is currently overweight international equities that will benefit from a weaker AUD so he definitely talking his book. Fund performance is below:
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The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance.