Tarric Brooker, an independent economist, coined the term “burnout economics” to describe the current state of the Australian economy.
According to Brooker, the Albanese government has one foot planted firmly on the accelerator with its record immigration program, while the RBA has one foot planted on the brake with its aggressive interest rate hikes.
In Friday’s testimony to the House of Representatives Standing Committee on Economics, the outgoing governor of the Reserve Bank of Australia (RBA), Phil Lowe, alluded to this “burnout economics”.
Philip Lowe said that Australia’s population is growing at 2.5%, but the number of dwellings has increased by only 1.5%. Business investment is also failing to keep pace with population growth.
Therefore, there is an imbalance between supply and demand, which is lowering productivity as well as driving up housing inflation (most notably rents).
“If you’re going to keep the capital labour ratio constant, the capital stock has to rise by 2.5%. And if it doesn’t, we get capacity constraints”, Lowe said.
“We’re seeing this very clearly in the housing market at the moment”.
“There’s been strong demand for rental accommodation, and the rate of addition to the housing stock is low”.
“This year, the population has increased by 2.5%. The number of dwellings in the country has increased by 1.5%. So, there’s a big gap there”.
Lowe’s testimony can be viewed as a veiled jab at the Albanese government, which has chosen to force-feed Australia with record immigration with no plan to accommodate the extra people.
As a result, property rents are increasing fast while productivity is falling, which is fueling inflation and putting pressure on the RBA to keep interest rates higher for longer.
The process will continue as long as the federal government continues to quickly expand the population through immigration, crush-loading the economy’s supply-side.
