Australian Economy

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.


Victoria is a rat on the turbocharged immigration treadmill

By Leith van Onselen The release yesterday of the ABS population data for the 2016 Calendar year revealed some inconvenient truths for the Victorian economy. This data showed that Victoria’s population surged by an Australian record 146,628 people in the 2016 calendar year, representing a population growth rate of 2.40%: The State Government has been


Victorian immigration ponzi goes completely mad

By Leith van Onselen The ABS released its Australian demographic statistics for the December quarter of 2016, which revealed that Australia’s overall population growth rate has accelerated led by unprecedented growth in Victoria, which has once again obliterated records. According to the ABS, Australia’s population rose by 1.55% in the year to December 2016 to


Abbott: Cut immigration to take pressure off houses and wages

He sure ain’t going away: Tony Abbott has delivered a stinging rebuke to the Turnbull Government sharpening his own vision for the country and politics in Australia, promising he is “in no hurry to leave public life because we need strong liberal conservative voices now, more than ever”. In an address delivered in Brisbane this


Bloxo sees wages boom, baby, boom!

From Bloxo today: Sentiment indicators show a stark gap between businesses and consumers. While surveyed business conditions are around decade-highs and business confidence is well above average, consumer confidence is below average. Importantly, it’s not just a confidence effect – growth in household spending has been sluggish. The main drivers appear to be weak growth


More warnings about unpaid internships slave labour

By Leith van Onselen A fortnight ago, several labour market experts raised concern about the proliferation of unpaid internships, which risked becoming a black market for slave labour. Today, The ABC has picked up on the theme: Unpaid internships are increasingly becoming the default way of beginning a professional career in Australia. According to the


Inner-West residents revolt at Sydney population ponzi

By Leith van Onselen Remember the below chart showing the immigration-fueled population explosion that is projected to take place across Sydney over the next 20 years, increasing the city’s population by an insane 1.74 million people – the equivalent to adding a Perth to Sydney’s population? And remember this chart showing that almost all of


It’s time to cap politicians’ and bureaucrats’ pay

By Leith van Onselen In the wake of the latest wave of pay rises received by federal politicians and senior bureaucrats, The Australian’s Adam Creighton has called for pay caps to be implemented that limits their pay to a certain multiple of average earnings: Australian politicians and public servants are paid well, more than double


Fake Left wrings hands about wages. Ignores immigration

By Leith van Onselen Former federal treasurer, Wayne Swan, is concerned that Australia’s middle-class risks going the way of America’s and claims the Labor Party and the union movement need to better argue the case for improved wages for middle-class workers. From The AFR: “If we cannot make the economic case that good wages and


BIS warns on household debt

From the Bank of International Settlements (BIS): Excessive indebtedness has been one of the root causes of financial crises and the ensuing deep recessions. In recent years, the focus has been on household debt, as excessive leverage by the household sector was at the heart of the Great Financial Crisis. It is well recognised that


The politico-housing complex devours itself

The MSM bank protection racket is in full swing, at the AFR: London-based investors have warned National Australia Bank chief executive Andrew Thorburn that they consider Australia a less stable and less consistent economy for investment after the South Australian budget hit the big four banks and Macquarie with a surprise $370 million tax. Speaking


Pascoe two-faced on mass immigration

By Leith van Onselen Let’s recall Michael Pascoe’s article on Friday whereby he basically labelled those of us seeking a more moderate immigration intake – commensurate with Australia’s first 100 years after Federation – as racist simpletons: A little after Friday lunch, the population clock on the Australian Bureau of Statistics web site will tick


Naked CEO gets golden arse, anger mushrooms

Not before time: CPA Australia’s controversial chief executive Alex Malley has been sacked, effective immediately. CPA’s board released a statement late on Friday evening announcing the decision, and that Mr Malley will receive termination benefits of $4.9 million. “Alex’s legacy is an organisation with a global footprint and an ambitious outlook,” president Jim Dickson said.


Pascometer burns red on population ponzi

Weeoo, weeoo, weeoo. The Pascometer is wailing on the population ponzi, strongly indicating that the days of mass immigration are indeed numbered: A little after Friday lunch, the population clock on the Australian Bureau of Statistics web site will tick over to 24.5 million. …The simplistic negative economic view of our migration program concentrates on


Did China just yank the handbrake on Strayan commercial property?

Via AFR: The days of Chinese companies bidding up asset prices in Australia appear to be numbered, after the banking regulator in Beijing ordered a review of the sector’s exposure to the most acquisitive private firms. The companies singled out for review include property and entertainment conglomerate Dalian Wanda, which has interests in Sydney and


Victoria’s roads crack-up amid population deluge

By Leith van Onselen You don’t have to be a rocket scientist to acknowledge that the unprecedented immigration-fueled population growth into Victoria: Which is projected to continue ad infinitum: Necessarily requires massive infrastructure spending to ensure that incumbent residents’ living standards are not eroded. So why then has the Victorian Government slashed funding for road


ABC joins Naked CEO roasting

Via the ABC: It is said “success breeds success”, but at troubled professional accounting body CPA Australia, it seems failure is delivering a pretty healthy revenue stream. Amid mounting controversy about CPA Australia’s management style, heavy spending on promoting its chief executive officer Alex Malley as well as his $1.8 million pay packet, heavy losses


The rise and rise of government-funded jobs

By Leith van Onselen The Australian Bureau of Statistics (ABS) yesterday released its quarterly labour force report, which breaks-down employment at the industry level to May 2017. Below are some key charts, which present the changes in employment aggregates on a trend basis. First, the quarterly change in employment by industry: As you can see,


Yield curve suggests no recession on horizon

By LF Economics It is well known the yield curve is an accurate predictor of recession and financial instability. When the yield of bonds and bills with shorter-term maturities are larger than that of longer-term maturities (the yield spread inverts), it is a clear indicator economic growth will decline in the near future. The general


Mark Latham Outsiders does the immigration ponzi

William Bourke, President of the Sustainable Australia political party, appeared on Mark Latham’s Outsiders last night to talk about the federal government’s mass immigration program – roughly 200,000 per year – and its deleterious impacts on housing, infrastructure, the environment, the labour market, and overall living standards. The discussion starts from 39.25 in the video