Don’t cry for me, Victoria

Via the ABC:

Melbourne-based NAB chief economist Alan Oster has been in the profession for more than 40 years and he’s seen a fair few economic crises in his time, but nothing compares to this.

“In terms of sharpness in the decline in activity, this makes the recessions in the 80s and 90s look like child’s play,” Mr Oster says.

“Unemployment did get to 11 per cent in the 1990s recession, but it took two years to get there.”

National Australia Bank will update its forecasts next week after the results of its latest business conditions survey.

But Mr Oster already knows what to expect.

“I would expect conditions, or certainly confidence, to go deeply south compared to where it was,” he says.

It’s generally accepted that Australia recorded two successive quarters of negative growth in the March and June quarters, even though the latest National Accounts numbers won’t be unveiled for another month to confirm it.

But now, NAB’s number crunchers aren’t sure the recession will end at June.

Policymakers, big business leaders and small business owners who lived through the last recession warn that downturns have a nasty habit of lingering.

NAB had already downgraded its September quarter GDP forecast from 3 per cent growth to 1 per cent after the Federal Government’s July Budget update.

It now thinks the blow to Victoria, which accounts for nearly a quarter of Australia’s GDP, could be between 10 and 15 per cent in the three months to September.

The likelihood of that prolonging the national recession is 50-50, according to Mr Oster.

“A bigger hit to the construction sector in Victoria could prolong the recession. We could have three quarters of negative growth,” he warns.

“That is not our current forecast, but it could well and truly happen.”

Let’s give this the name it deserves: a depression.

It is far worse than it needs to be. The stimulus is woefully inadequate. The Morrison Government has refused to pay for anything new beyond pay for the infected to stay home, only after they’ve run out of all other options. The RBA has put the cue in rack.

Victorians can feel rightly aggrieved for being hung out to dry.

But, they will also, hopefully, learn a lesson. MB has been warning of Victoria’s vulnerability to this kind of offshore shock for a long time. No other state in Australia went so hard at the de-industrialisation, population ponzi, bullshit jobs economic model.

Time and again we’ve highlighted the idiocy of Ponzi Pallas and Dan Andrews as they sold everything that wasn’t bolted down to Chinese students for gains in education, construction, infrastructure and retail:

 

Anyone disputing these facts only needs to look at the below chart showing the stalling of export growth amid the sharply deteriorating trade balance:

Which has driven a gigantic trade deficit:

As a result of this rat wheel economy, median income in Victoria badly lagged the national average:

The median income per job (footnote 4) in Greater Melbourne region was higher than in the Rest of Victoria ($43,800 and $36,700 respectively) in 2016-17. The median income per job grew by 11.7% in Greater Melbourne and 13.9% in the Rest of Victoria since 2011-12. Nationally, the median income per job was $43,200 in 2016-17, slightly higher than the Victoria median of $42,100. 

With Victoria having the second lowest median income on the mainland – only just beating out lowly Adelaide:

From highest to lowest, median incomes are as follows across Australia’s jurisdictions:

  1. ACT: $54,774
  2. NT: $47,367
  3. WA: $45,973
  4. NSW: $43,795
  5. QLD: $42,692
  6. VIC: $42,134
  7. SA: $41,400
  8. TAS: $37,219

The story is similar at the capital city level, with Melbourne also having the second lowest median incomes on the mainland, only beating lowly Adelaide:

Again, from highest to lowest here are the median incomes across the capitals:

  1. Canberra: $54,774
  2. Darwin: $51,007
  3. Perth: $46,929
  4. Sydney: $46,464
  5. Brisbane: $45,164
  6. Melbourne: $43,791
  7. Adelaide: $42,981
  8. Hobart: $39,446

The annual state accounts from the ABS have painted an even worse picture, with Victoria’s household income growth badly lagging behind the other jurisdictions:

And Victoria having the lowest gross household disposable income in the nation, even lagging behind Tasmania:

Victoria’s population ponzi economy failed to lift living standards for the incumbent population. In addition to crushing incomes, Melbourne’s infrastructure deficit, along with congestion, housing and overall liveability is worsened each year as more and more people flood into the city and push against bottlenecks amid woeful planning.

Now comes the final insult. The ponzi-economy has not only made Victorians poorer, it also made them more vulnerable to an external shock than any other state in Australia. That it took the shape of the virus is irrelevant. All economies that develop external imbalances of this scale eventually face a reckoning because the world is a dangerous place.

We warned repeatedly for this very reason. We did not know the nature of the shock but the vulnerability was clear all along. The bigger the imbalance, the bigger the adjustment.

I feel for my fellow Victorians. We do not deserve the punitive policy treatment coming from Canberra and Martin Place. But an honest assessment must also include the admission that we did it to ourselves.

David Llewellyn-Smith
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Comments

    • One of the great scenes (of many) from The Goodies.

      The pause just before he says “Marge and…Tina” is a case study in comedic timing.

    • Sort of.

      In the same way that burning down a crumbling building lets you rebuild better and stronger.

      But in between, you have a burnt out vacant lot to live on.

      Too bad, the building was beyond repair.

      (I do support lockdown and elimination, in case it wasn’t clear).

  1. GunnamattaMEMBER

    As someone who can lay claim to ancestry which includes:-
    The first punters in Melbourne
    The first punters in Geelong
    The first punters in Ballarat
    And the first settlement in Victoria down at Portland

    And as someone who has lived overseas for a decade prior to returning to Victoria 8 years ago

    I think Victoria is in fact both the ground zero of the economic implosion and housing crash to come, and the definitive epitome of everything Australia has so utterly coqued up over the generation since the mid 90s.

    A (never strong) local media disappeared as the Age went real estate spruiking in a search for relevance.

    The local ALP descended into woke irrelevance at national level while dismantling TAFE running long faux university ‘exports’ happy to wave goodbye to manufacturing (dirty ‘male’ sector) at a state level as Bracks and Brumby signed up as population ponzi gold class members and slopped at the Chinese State owned enterprise trough.

    A local Liberal party happy with Federal suzerainty while generally in opposition at state level (and redolent of the mediocrity it burnished) which got its hands into the till with Napthine and Guy and the property set, all the while riven by the split between Kennett and Kroger camps, and twice ripped off by fraudulent party treasury types, and leaving a legacy in the signing up of the state for a freeway which was never going to deliver value for money with multi million dollar getout clauses, just 6 weeks out from an election they lost.

    The home of the inner city Green voting hipster who prioritises wokeness rather than socio economic reform (indeed finds socio economic reform distasteful).

    I find my homeland a profound disappointment. It traded on, and cashed in on, the ‘worlds most liveable city’ mantra for 20 years after it ceased to be true, all the while adding hours to commutes for the types of bullshit jobs Victoria specialises in.

    I am already telling my kids to look elsewhere in life. Victoria may be wiped out by Covid 19, but the seeds of the wipeout were planted by Victorian politicians over the course of a generation and its been a while coming.

    • Similar story to me.

      You know what summarizes Victoria for me is the inner city woke hipsters – all their parents bought their homes in the 70’s,80’s for nothing (I should know). That left them with millions upon millions for them and their kids to never have to worry about money again – they don’t. They think about woke, PC, identity culture and think they are left wing – they are not – they are Bourgeois.

      This is all summed up nicely by 30 years of prudent blocking of every single inner city street. There is not a single street from Carlton to Parkville, to North Melbourne, Collingwood to Fitzroy, to Richmond, etc which has not been blocked, made one way, no right turn etc. Absolutely EVERYWHERE. So driving in these areas is only allowed on two or three main roads.

      They have effectively turned their personal sanctuary and everyone else can get stuffed. Grid locked from 5 miles out in every direction for personal amenity for rich inner city elite.

      This does not happen in the outer suburbs.

      Imagine Melbournes congestion issues if residents were forced to park in their off-street parking they mandate everyone else must have (they have it – for a chook pen now), imagine if during peak hour we could all filter out through the suburban streets.

      No. Get on that toll, sit on Punt road for 2.5 hours.

      Self serving greed on an epic level. To be honest it was my family who was responsible for most of this at a planning local council level for about 30 years – so sorry.

      • billygoatMEMBER

        Apology accepted.
        That makes total sense of what I experience everywhere around Melbourne.
        AND yes to the take on hipsters whose folks bought them and their 20 something spouse a house.
        Add $3000. dog
        2 x pushbikes for the weekend markets
        $8000 plus road bike
        SUV x 2
        New born 5-7 years in
        Bali villa or Hawaii depending on snob level or north /south Yarra
        woke f wits abound

    • All true but what worries me more is that Sydney never really had the depth of manufacturing that Vic enjoyed, but today there’s no difference in the level of BS jobs in either city.
      In Sydney somewhere between 15% and 25% of jobs are associated with Finance, RE and Insurance. These are all industries associated with Capital and resource allocation and as such they become parasitic at above 5% In the Soviet system there was a goal to keep all of these resource.capital allocation industries below 3% of the work force. yet Sydney is somewhere between 15% and 25% depending on how you count…just absolute madness.

    • ErmingtonPlumbingMEMBER

      “I am already telling my kids to look elsewhere in life.”

      Im telling mine the opposite. Im telling them to stand and fight for themselves and their cohorts interests and to never apologize for it.
      The infection of political apathy is everywhere and can not be escaped, it can only be resisted and fought through demanding the right to participation in the political decision making process
      Social Conservative Peter Hitchens who I vehemently disagree with on a wide range of issues, depressingly, says the same as you, telling kids to leave Britain (3 mins in here) as all is lost.
      Even more depressing is how on point his criticism of the UK labour party is here and how it equally applies to ALL of the supposed “Left leaning” parties of the “West”
      https://youtu.be/5xu7hu5OOvE

    • It’s not just Victoria. Australia has gone from being a fairly high trust, almost egalitarian country with a sense of its self to being an individualist, low trust, rootless nation in the space of a generation.

      Melbourne represents ground zero in this societal spiral and is almost unrecognisable from the 1990s. While Sydney has always been a bit vacuous and soulless, Melbourne’s elites have outdone themselves in turning their once characterful city in a dismal, cold, bleak, overcrowded version of its old subtropical rival.

    • @ gunna & DLS
      I agree with what you say and with your terrible disappointment, which we all must feel, but you and DLS laying the blame for the destruction of Victoria at Bracks, Brumby and Dan’s feet seems a little unfair.

      Surely much of the wipeout can be attributed firstly to the high immigration initiated by successive federal governments after WW2, initially to counteract the 60,000 war time increase in the factory workforce – which by the way, was only made possible by large numbers of women entering the workforce, which continued after the war in the textile, footwear and clothing industries and in companies such as CSL – so your ‘’dirty male jobs” comment is not strictly true.

      And secondly, by Federal governments beginning with Keating, dismantling manufacturing and selling off and privatising vital industries after the recessions of the 80s and 90s.

      Surely the states had little choice but to work with the destruction of manufacturing and to accommodate the increasingly large number of immigrants foisted on them by the Feds, which at least both Gladys and Bob Car fought against, and which have become today’s rampant Ponzi scheme.

      Interesting short read on the history of Victoria’s manufacturing here:

      http://www.emelbourne.net.au/biogs/EM00896b.htm

      • GunnamattaMEMBER

        Sorry, if I gave the impression I thought the biggest single factor in the looming wipeout was Bracks Brumby or Andrews then I apologise. The biggest single factor was the lying rodent himself (JW Howard) – who as you rightly observe troweled immigrants into service industry ‘bullshido jobs’ across the country and oversaw the nosebleedization of the Australian dollar, which helped to euthenase the manufacturing sector, though I would note that Bracks and Brumby did nowt to protect the manufacturing sector and they did dismantle TAFE. I tend to see Andrews as little more than the inheritor of the overripe denouement.

        The reasons immigration worked superbly from circa WW2 to the mid 70s and has been more questionable since are given a brief look at here……

        The ‘Population Ponzi’ – Employment, Migrants, Incomes and Manufacturing & Australia’s lost Economic narrative
        https://www.macrobusiness.com.au/2020/06/the-population-ponzi-employment-migrants-incomes-and-manufacturing-australias-lost-economic-narrative/

        I would point first to the IR system, and second to the socio economic type of migrants coming, as the main differences relating to the people, and the decimation of manufacturing and ever greater job insecurity as the backdrop change resulting in immigration having a different context certainly since circa 2000.

        • An excellent article identifying the degree of corruption, laziness and stupidity of Australia’s manufacturing and immigration policy for the last fifteen years at least, and how far we are now from having anything vaguely resembling a viable economy.

          However the problem is much deeper and more intractable than immigration, manufacturing, construction, politics and finance, or indeed, Australia.

          You finish your article with “somewhere in our political system [we] need to identify the shortcomings of the lived experience and map out a growth strategy” and emphasise that we must ‘go out and create growth’ again.

          While I acknowledge it’s vital to identify where we’ve gone wrong, and the corrupting of the immigration story is a big and sorry part of this; also the virus has now laid bare just how imbecilic our past policies have been and how desperate our situation suddenly is with a hollowed out economy, massive unemployment and no real jobs or genuine, complex exports.

          But the real world, the physical world, particularly in Australia, is in even worse shape than our economy – far worse. I refer you to any number of think tanks and scientific bodies, and a now vast array of scientific literature on this. The Australian Commission for the Human Future is one such, with such respected Australians such as Bob Douglas, Ian Dunlop, John Hewson, authors Julian Cribb, Stephen Boyden and many others making desperate representation that time is short for true reform and an about face on everything we do.

          The heat and bush fires we experienced last summer, now but a distant memory in most Australians’ minds, burnt 20% of our trees – on a continent that has over the last 200 years destroyed 65% of our trees; that is also the driest inhabited one; that had very marginal top soil when we came 200 years ago; and is comprised mostly of deserts – which are expanding at a rapid rate, with rivers drying, small towns emptying and farmers leaving the land, with even fewer to replace them.

          And our much touted agriculture? It has become industrial farming on a scale unimaginable only fifty years ago and is dependent on large inputs of fossil fuels at every step of the way, from tractors, trucks and harvesters, storage and transport, to the fertilisers, pesticides and herbicides, practically none of which we manufacture, and without which our thin, infertile, rapidly eroding soils will not be able to ‘manufacture’ a fraction it does today. (you can’t call it ‘growing’)

          Australia has little oil left, or refining capacity; as I’m sure you know, we import most of it now, and it must pass through two narrow straits to get here; that Australia has ludicrously and belatedly now asked the US to set aside some reserves for us says it all, as DLS pointed out recently.

          It’s quite possible that the world will face oil shortages within the decade, and food shortages are imminent, as the UN and IMF warn. But we complacent Australians think that doesn’t apply to us; it’s only third world countries that have food, power and oil shortages.

          Why is it that even intelligent and thoughtful commentators insist on commenting either on the economy or the environment? And why, at this 11th hour is the environment still a discredited political issue? Like mask wearing….

          Yes, finance and the economy are complex, and environmental issues are also gargantuan, complex and pressing now, but surely it’s past time for genuinely thoughtful and intelligent business, finance and political commentators to still be focusing on growth and the economy against the backdrop of what is actually happening in the real, physical world, which contains the resources and surrounds and encompasses the economy – not the other way around – and which we’ve been warned for at least forty years now is in dire trouble, far worse than the economy, a poor human construct as it turns out based on the idiotic concept of permanent growth from a finite base.

          Tragically it seems the vast majority of even intelligent humans, even those who are desperately worried about their children’s’ future, are incapable of looking at a problem in context of the world that supports us that is now running very low on many resources needed to support life.

          For this reason most scientists and many others are not optimistic that we’ll act in time to prevent the collapse of civilisation and even quite possibly, the human species.

          Time is very, very short. It’s past time people like you and others on this blog take this up; it’s no longer enough to say, ‘oh but this is a finance/politics/economic blog’. For our children’s and all future generations’ sake, it’s time for anyone who can, to speak out and connect the dots and to do so in any context and at any and all times.

          Anything less and we quite possibly face extinction.

          https://www.youtube.com/watch?v=2ThBxeBUYAQ&feature=emb_title

  2. Shades of MessinaMEMBER

    Can we move Canberra to Victoria and just wall them off from the rest of the economy ?.

    Would kill two birds with one stone.

  3. Without a return to mass immigration, Melbourne is dead. Without a return to work, to offices, the city vibrancy will die leaving only the lost, the addicted and homeless to loiter in the streets. Inner urban property values worth what, what value dystopia?

    Can see little Morrison can do apart from the one thing nobody here wants…

    • Morrison has little interest in making Melbourne better because that would make Dan Andrews look better and by extension the ALP. He will be looking to win seats in the next election by making huge spending promises as a way to save Melbourne from the ALP.

      • Without immigration what can save Melbourne? Few natural comparative advantages. Population growth and the tertiary sector its only lifeblood.

    • 90% of middle and outher suburb properties are as worthless after period of infinite subdivisions. 500sqm block is as bad as 250sqm when it comes to utility

    • billygoatMEMBER

      At Xo loitering will not be a problem
      Police, army and ‘Protection Service’ officers walking the streets moving folk along and offering non police army and protection service folk masks…. I kid you not:))
      PLUS there are now NO LOITERING signs on Melbourne inner city streets.

    • Melbourne is dead with a return to immigration.

      Australia is dead with a return to immigration

      The country both economically and environmentally is dying. With the right policies there is a slim chance of turning it around but adding more people at this stage seals its fate forevermore.

  4. A great example of yet another perceived wealth bust ….
    Months ago were the richest or second richest country in the world… few months later and we are poor despite still having as much money and owning the same stuff

  5. might help other stats as expect a massive exodus from Vic when people can. esp if no jobs here