Some interesting analysis from Phys.org: Australia’s hottest and driest year on record has slashed crop production, with summer output expected to fall to the lowest levels on record, according to official projections… The country’s agriculture department said it expects production of crops like sorghum, cotton and rice to fall 66 percent—the lowest levels since records
The “miracle” Australian economy (with its famous run of 24 years without a recession) is an amalgam of pre-modern and post-modern industries with very little in between.
Most economies run at least partially upon the productivity gains produced out of manufacturing and ‘making things’ but in Australia productive investment is supplanted with commodity exports (which make up half of exports) and the recycling of the resultant income is deployed as cash flow for borrowings offshore to pump house prices.
The former step is basically the selling of dirt, a pre-modern activity. The second step is managed via the sophisticated use of derivative markets and is essentially a post-modern activity.
Not that GDP cares given it is only the mindless measure of whirring widgets.
However, both of these activities systematically reduce economic competitiveness by inflating both input costs and the currency. “Dutch disease” by another name. This continuous “hollowing out” of productive activity means the broader economy relies heavily upon the non-stop import of capital, either in the form of debt or in the form of assets sold to foreigners, to generate ongoing income growth.
So long as the underlying income from dirt keeps flowing then the leveraging into house prices that supports consumption can continue, supported by both tax distortions and government spending.
If, however, the dirt income flow halts the hollowing out of modern industry will leave the Australian economy very exposed to a current account adjustment. We saw this in the global financial crisis but the flow of dirt income was restored sufficiently quickly to prevent any deep adjustment.
A second risk is that the debt accumulation simply becomes overly onerous for the underlying economy to service, also resulting in a current account adjustment. Well north of $1trillion of the debt is owned externally and household debt is a world-beating 186% of GDP so this is a real risk.
It is offset by a relatively clean public balance sheet that deploys fiscal stimulus in times of economic stress. However, in recent years, as both of the two above risks have increased, the public balance sheet has deteriorated as well, setting Australia up for a famous adjustment to end its famous bull run.
MacroBusiness covers all apposite data and wider analysis of these issues daily.
Incessant claims that Australia just needs to ‘plan better’, invest more and build more, ignore the increasingly costly and constrained options for further infrastructure in the face of such unprecedented numbers of people pouring into our major cities. In already built-out cities like Sydney and Melbourne, the cost of retrofitting new infrastructure to accommodate greater
The Australian Retailers Association’s (ARA) executive director Russell Zimmerman says that foot traffic at some shopping centres has fallen by up to 20% due to factors such as the bushfires and the coronavirus. He has raised the issue with the Shopping Centre Council of Australia’s executive director Angus Nardi, but says retail landlords are unwilling
The Australian Payroll Association has challenged the view that wage theft is endemic across the Australian economy. It has conducted 39 audits of company pay processes in the last 18 months and found evidence of staff being overpaid in 27 instances: The APA’s review found overpayments, involving employers with between 200 and 25,000 staff, ranged
At Domain comes a freshly uploaded press release from some lobby or other: The chief executives of two of the nation’s largest retail employers have blamed incorrectly configured software as a key cause of staff underpayments, arguing this issue also often leads to businesses overpaying workers. Rob Scott, who heads up Bunnings, Kmart and Target
Labor’s Shadow treasurer, Jim Chalmers, is the latest to question the usefulness of Gross Domestic Product (GDP) as a welfare measure, and has called for the federal budget and Intergenerational Report to adopt broader measures of welfare: Many of you know Robert Kennedy told a Kansas audience in 1968 that GDP measures everything ‘except that
A new report by the University of New South Wales (UNSW) and the Australian Council of Social Service (ACOSS) claims 13.6% of Australians live in relative poverty after housing costs are taken into account. ACOSS CEO Cassandra Goldie says the depth of poverty in Australia is getting worse, with households in poverty on average living
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Yesterday’s ABS labour force release for January revealed a mixed outcome for Australia’s youth labour market – i.e. those aged 15 to 24 years old – with annual jobs growth falling, and unemployment and underemployment near record highs. The trend headline unemployment rate rose further to 11.91% in January: Total employment growth for those aged
The CBA not-so-Flash PMI: Service sector business activity fell for the third time in the past four months in February, and at the quickest rate on record. New business, employment and backlogs of work also fell across the sector, albeit marginally. The rate of input cost inflation meanwhile eased further in February, down to a
Exclusively from Gerard Minack at Minack Associates: Australia remains stuck with the macro blahs: tepid growth in aggregate and stagnation per person. The risks are skewed to the downside. The key to the downside unfolding is not whether there’s a fluky one quarter GDP decline, but whether the labour market weakens. Falling employment would trigger
Following Wednesday’s wage growth data, which revealed further weakness: The ABS yesterday released average weekly earnings data for the six months to November 2019. A breakdown of the key changes are provided below: According to the ABS, on a seasonally-adjusted basis, national total AWE increased by 1.5% in the six months to November 2019 and
CommSec senior economist, Ryan Felsman, has broken rank and linked high immigration levels with slow wage growth: ‘So why is wage inflation contained, despite strong job creation? The simple answer is that Australia has an excess supply of workers,’ he said. ‘Population growth remains elevated and workforce participation has lifted to record highs, driven by
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As summarised earlier, the Australian Bureau of Statistics (ABS) today released its labour force report for January, which registered a 13,500 increase in total employment but a sharp increase in the headline unemployment rate (from 5.1% to 5.3%). In trend terms, the unemployment rate remained steady at 5.1%: Again, total employment rose by a seasonally
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Wesfarmers CEO Rob Scott says the complexity of the industrial relations system has contributed to the wage underpayments scandal that has embroiled a number of large employers: Wesfarmers says the “incredible complexity” of the industrial relations system has contributed to Target underpaying employees by $9m over the past decade… Chief executive Rob Scott said… the
At Nine: Victorian-based homewares retailer ISHKA has become the latest victim of Australia’s deepening retail crisis, collapsing after almost 50 years in business. Specialising in handmade craft, gifts, clothing and homewares, ISHKA operates 60 stores and employs over 450 staff. The retailer said an “unusually challenging summer period” and $3 million worth of Christmas stock
The Australian Mines & Metals Association’s (AMMA) has stepped up its attack on the Fair Work Commission (FWC), expressing concern to Prime Minister Scott Morrison that Labor appointees have dominated the rulings in recent years. AMMA says that 94% of cases heard by the full bench of the FWC between 2017 and 2019 were presided
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Via S&P: China’s health emergency will disrupt economic activity throughout Asia-Pacific. S&P Global Ratings anticipates the region’s GDP will expand by 4.3% in 2020, 0.5 percentage points (ppt) lower than our pre-outbreak forecast. Our forecasts are subject to much more uncertainty than normal. We expect significant growth drags of 1 ppt or more in Hong
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No surpise, really, but worth noting: ANZ data show a steep drop in spending in major Australian airports in Feb reflecting #coronavirus travel bans and lower demand for international travel. Steadier spend in smaller airports suggests this is limited to international travel. @Adelaide__T #ausecon @DavidPlank12 pic.twitter.com/eVhCcJ9piT — ANZ_Research (@ANZ_Research) February 19, 2020
Tim Wilson, Craig Kelly and Jason Falinski are among the Liberal MPs who argue that the federal government’s luxury car tax should be abolished, given that it was introduced to protect local car manufacturers. The tax on imported vehicles raised some $675m in 2018-19, and this is expected to rise to $750m by 2022-23. Meanwhile,
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