Unconventional Economist

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Weekend Reading: 7-8 December 2019

Global Macro / Markets / Investing: Are you ready? Goldman Sachs says that every one of its private equity clients is preparing for recession – Business Insider Moody’s Downgrades Outlook for Global Banks – Gold Silver Bitcoin Fed pumps $70.1 billion in one day liquidity into financial market – what does this actually mean? –

2

The great “skills shortage” myth debunked again

Businesses incessant claims about ‘skills shortages’ has been shattered again, with university graduates taking 2.6 years after graduation to land a full-time job, according to a recent report from the Foundation for Young Australians: The proportion of young Australians in full-time work prior to age 25 has also declined markedly over the past 30 years.

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NBN is trash

A fortnight ago I reluctantly shifted from my Telstra BigPond cable broadband service to the same priced NBN 50 service after being warned that my existing cable service was about to be switched off. As I noted at the time, I experienced an immediate downgrading in my internet download speed from the following (taken immediately

15

Labor must slash immigration to save wages (and itself)

Shadow treasurer Jim Chalmers will urge the federal government to address issues such as low wages growth, underemployment and falling productivity in its mid-year economic outlook. He will tell a Chifley Research Centre conference that the economy is not working for ordinary Australians, while warning of the dangers associated with the rise of populism. From

4

Auction market picks up steam

Last weekend, CoreLogic released its preliminary auction clearance rates, which revealed the following results: Today, CoreLogic has released its final auction results, which reported a 5.3% decline in the final national auction clearance rate to 73.6% – well above the same weekend last year (41.3%) and well above last week’s 68.5%: As you can see,

7

Australian households’ long economic winter

Australia’s production, as measured by aggregate real GDP, continues to diverge wildly from the growth (or lack thereof) in ordinary Australian’s living standards. To illustrate why, I have once again deflated three measures of the domestic economy, as provided in the September quarter national accounts (released yesterday), by the ABS’ population data, in order to

6

CoreLogic weekly house price update: Bubbling

In the week ended 5 December 2019, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, surged another 0.41%: The rise in values was broad-based, but again driven by Sydney and Melbourne: Quarterly dwelling values continue to rise strongly, driven by Sydney and Melbourne, where prices are rocketing: The

8

It’s official: Recessionberg’s tax cuts have failed

Five months ago, ahead of the Morrison Government’s tax cut package passing the Senate, Treasurer Josh Frydenberg was confident tax cuts would pump-prime the economy by juicing household consumption: “The tax cuts are equivalent to two 25 basis rate point cuts. So they’re not insignificant. It’s billions of dollars into the economy”… “They will add

36

The endless exploitation of international students

The systemic exploitation of international students is endemic across the Australian economy. For years we have read countless reports of wage theft from international students, particularly from migrants employers from the same nationality. For example, the 2016 Senate Committee report, entitled A National Disgrace: The Exploitation of Temporary Work Visa Holders, claimed international students “were

8

Links 6 December 2019

Global Macro / Markets / Investing: The repo market is ‘broken’ and Fed injections are not a lasting solution – MarketWatch Crude Oil Could Fall to $40 if OPEC+ Fails to Deepen Cuts – Wolf Street The Fourth Industrial Revolution could spell more jobs – not fewer – WEF Forum Americas: Harvesting the Blood of

29

Unions: Migrant wage theft “part of the day-to-day business”

It’s been more than three years since the Senate Education and Employment References Committee released its scathing report entitled A National Disgrace: The Exploitation of Temporary Work Visa Holders, which documented the abuses of Australia’s temporary visa system for foreign workers. And still the exploitation continues with a large supermarket pizza manufacturer the latest to

0

Australia’s trade surplus retraces

The Australian Bureau of Statistics (ABS) today released trade data for the month of October, with Australia’s trade surplus retracing to $4.5 billion from $6.8 billion in September: The next chart shows that Australia’s trade surplus is still running at strong levels: In October, exports (credits) fell and imports (debits) rose: In seasonally adjusted terms,

8

Grill’d receives $7m from taxpayers to lower wages

A spokesman for the Fair Work Ombudsman (FWO) has confirmed that it is undertaking an investigation into fast-food chain Grill’d, which has previously attracted scrutiny for allegedly underpaying its staff. Some former Grill’d employees also claim that it is using a compulsory retail and hospitality industry training program to legally pay wages that are below

19

Conflict-of-interests mire Coalition’s visa privatisation

The planned privatisation of Australia’s visa system has been delayed until next year after a web of conflict-of-interests were discovered across the Morrison Government: The tender bid, managed by the department, is now at arm’s length from Prime Minister Scott Morrison and Immigration Minister David Coleman because of their long personal and professional relationships with

26

Australian retail pulls another donut

The September quarter retail sales data from the Australian Bureau of Statistics (ABS) revealed the first annual decline in retail sales volumes since the early-1990s recession: Now, the ABS has released retail sales figures for the month of October, which recorded zero growth in the value of retail sales over the month in seasonally-adjusted terms,

16

Thousands more apartments wrapped in flammable cladding

Australia’s flammable cladding fiasco has just mushroomed with “biowood” also being declared unsafe, and apartment owners now facing millions of dollars in costs to have the cladding replaced: Thousands of apartment owners across Australia who thought they were safe from potentially deadly cladding fires now face millions of dollars in bills to remove and replace

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Tamworth sucks rivers dry. Demands 40,000 new migrants

The NSW regional city of Tamworth is currently facing Stage 4 water restrictions, with the Chaffey Dam at just 15.6% capacity after experiencing record low inflows. Today, The SMH reveals that Tamworth has sucked the Peel River dry: The once-proud Peel River – also described as a “glorified creek” by those who know and love

29

ScoMo takes axe to public service

The Morrison Government is reportedly poised to slash Australia’s public service in a bid to reduce ‘red tape’ and save on costs: Scott Morrison is poised to put an axe through the public service today with plans to dramatically cut the number of government departments with another round of mandarins set for the chopping block.

7

Business profits boom as workers’ wages bust

Monday’s September quarter Business Indicators release from the ABS, which feeds into today’s national accounts, showed that wages & salaries remain wildly divergent from business profits. As shown in the next chart, real business gross operating profits continued to boom in the year to September: Whereas, there remained a huge gulf between wages & salaries:

42

Australian consumers plunge into recession

The recent flow of macroeconomic data supports the view that Australian households are in recession. The September quarter retail sales figures from the Australian Bureau of Statistics (ABS) revealed that retail sales volumes declined for the first time since the early-1990s recession, falling by 0.2% year-on-year: Yesterday’s new car sales for November, released by the

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Links 5 December 2019

Global Macro / Markets / Investing: Trump blows off concerns he’s roiling markets with his trade comments – Politico 70% of economist expect a recession before the end of 2021 – MarketWatch The ergodicity problem in economics – Nature Americas: U.S. solar industry to lose 62,000 jobs due to Trump tariffs – Reuters U.S. Students

1

Academics: Infrastructure privatisation ripping-off Aussies

In September last year, ACCC chairman Rod Sims explicitly warned state governments against accepting unsolicited bids for infrastructure projects because they generally lead to “higher costs for taxpayers, drivers, or both”: “The ACCC considers that state governments should only award new toll road concessions through a competitive bid process, and not following an unsolicited proposal

11

Private health insurers facing “demographic death spiral”

The Grattan Institute has released another report warning that Australia’s private health insurance industry is facing a “demographic death spiral” from an exodus of younger, healthier members, which requires urgent action to resolve. Below is the report summary, along with key graphics: The Australian private hospital insurance system is unsustainable in its present form. The

22

NBN tax to stifle competition

The Morrison Government has announced that it will implement a broadband tax for residential and business users of non-NBN services: Under the bill, announced by Communications Minister Paul Fletcher, households and businesses not using the NBN will be hit with a $7.10 monthly fee. That’s $85 Over the course of the year. The proceeds of

9

Property listings surged in November

SQM Research has released its Stock on Market figures for November, which revealed a big 6.3% jump in for sale listings over the month, although listings were still 6.3% lower than the same month last year: As you can see, the rise in listings in November was broad-based, with everywhere rising except for Darwin. Likewise,

9

Developer tyrants rule over Sydney

A cabal of property industry parasites has demanded developers be given free rein to transform Sydney’s suburbs into high-rise: The percentage of apartments and houses approved for construction within an 800-metre walk from train stations has been trending down for the past three years, according to research from Urbis. Urbis group director Clinton Ostwald said

5

Australian households’ ten year wage recession

The September quarter Business Indicators report was released by the ABS, which includes aggregate wages & salaries data, namely “gross earnings before taxation and other deductions” and “includes provisions for employee entitlements”. In order to get a better sense of how Australian workers are faring, I have deflated this aggregate nominal wages & salaries data