Sydney, Melbourne economic sinkholes engulf nation

Last Friday, the Australian Bureau of Statistics (ABS) released its State Accounts for 2018-19, which contained some interesting data on the trade performance of Australia’s states and territories.

The summary charts for Australia’s major states are provided below:

And here’s the chart combining the above trade balances:

What should be abundantly clear from the above is that NSW and VIC are parasite economies that are not paying their way in a trade sense – i.e. their exports are not paying for their imports.

The sad reality is that it is Australia’s rural and regional areas that provides us with not only our food, but also the lion’s share of the nation’s export revenue, which is effectively what pays for Australia’s imports (consumed mostly by city dwellers in Sydney and Melbourne!):

Put simply, both NSW’s and VIC’s economies are highly reliant on the population ponzi/housing bubble, each of which requires the accumulation of more imports and debt, rather than genuine sustainable growth.

Of course, the FIRE, property and retail sectors located in Sydney and Melbourne love this growth model because they make more money from more consumers, while also enjoying a larger pool of labour.

But for the rest of us, the infrastructure deficits in both states, along with congestion, housing and overall liveability worsens each year as more and more people flood into the city and push against bottlenecks amid woeful planning.

It is precisely the wrong kind of economic model that Australia should be facilitating via ongoing mass immigration and a ‘Big Australia’: one that places headline growth ahead of improving productivity, sustainability and per capita living standards. And one that sucks financial resources from the other states in order to support Melbourne and Sydney’s bulging populations.

Leith van Onselen

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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