Not this Houses and Holes, who is flourishing. The houses and holes economy is cooked, says Adrian Blundell-Wignall, former director of the OECD, an adjunct professor at Sydney University and author of Globalisation and Finance at the Crossroads, via the AFR:
“A plan” is not about government policy overreach exposed as flawed in the 1970s. A greater role for markets and openness followed the chaos of that period. One inevitable result was the shrinkage of manufacturing in high-labour-cost economies – in Australia’s case from around 16 per cent of GDP in 1975 to 6 per cent today. Enormous. The infamous decline in US manufacturing was less (16 per cent to 11 per cent of GDP), and this was offset across a broad industrial spectrum.
Australia made up the gap via finance and mining. This made us contented and complacent…Mining and finance both face headwinds. In mining, it is because China’s massive investment-focused strategy has resulted in diminishing returns. Investments need to earn good returns if rising debt is to be paid for. China is on the classic path for financial crises..For finance it is because house prices and debt levels are too high and must unwind in the years to come.
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