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.


How housing killed Australia’s productivity

The Australian’s Robert Gottliebsen has written an interesting article, based on research by former ANZ Bank director John Dahlsen, explaining how Australia’s housing obsession has diverted resources from the real economy and is stifling the nation’s productivity: In the decade before the 1987-89 crash banks poured vast sums into business credit but they were enticed


Australia joins vaccination leaders as COVID runs rampant

Last week, Australia passed the 95% single vaccination threshold for the 16-plus population, with 92.6% double vaccinated. This has put Australia among the world’s leaders on vaccination, with 76% of the entire Australian population now double vaccinated and a further 4% single dosed: Despite its high vaccination rate, Australia is also now one of the


Queensland’s deadliest COVID day

Queensland recorded 15,962 new COVID cases over the past 24 hours alongside a record 16 deaths: The next chart plots the flow of daily cases across Queensland: Active cases are steady at 86,561: Whereas hospitalisations have risen to 819, with 50 in ICU: Queensland has recorded 45 deaths since the state border opened on 13


Immigration into Australia still negative

The reopening of Australia’s international border saw a solid increase in overseas arrivals and departures in November, according to new data published today by the ABS: There were 197,000 overseas arrivals to Australia and 229,000 overseas departures from Australia in December 2021, the highest volumes since international travel restrictions were introduced in March 2020, according


Morrison’s freedom for mates, plague enslavement for you

Ah yes, freedom Morrison Government style. Freedom for mates that is: The shortage of rapid antigen tests for consumers is being exacerbated by state and federal governments and large corporates placing mammoth orders for the kits, causing stock to be diverted from online retailers and pharmacies. Australia is in the middle of a huge Omicron


Frydenberg plays class warfare card as billionaires double wealth

Treasurer Josh Frydenberg has kicked off the election cycle by scaremongering over Labor’s “class warfare”: “Anthony Albanese has spent his whole career arguing for higher taxes whether it was the retirees tax or the housing tax or the super tax, and a big supporter of the carbon tax and the mining tax”… “Anthony Albanese has


Morrison’s plague tanks consumer confidence

From the ANZ: ANZ Roy Morgan Australian Consumer Confidence dropped 7.6% last week, to its lowest reading since October, as Omicron case numbers surge. #ausecon @DavidPlank12 @RoyMorganAus — ANZ_Research (@ANZ_Research) January 17, 2022 Hoocoodanode that the people of Australia would react so badly to being sprayed by plague while their government withdrew all health


Aussie COVID deaths soar

NSW recorded 29,830 new COVID cases over the past 24 hours alongside 36 deaths: Victoria recorded 20,180 new cases and 22 deaths: Daily cases since the beginning of the Delta waves last winter are plotted below: Active cases across both NSW and Victoria seem to have passed their peak: Hospitalisations are still rising in NSW:


Albo needs an “immigration accord”

Anyone with a memory longer than a goldfish will know that the last time Australia was fighting a combined falling commodity price and rising wages outlook was in the late 1980s: The Prices and Incomes Accord was an agreement between the Australian Council of Trade Unions and the Australian Labor Party government of Prime Minister Bob Hawke and Treasurer (later Prime Minister) Paul Keating in 1983. Employers


Employers: 3% wage growth risks jobs. Give us migrants instead!

At the same time as employer groups are complaining of acute “skills shortages”, and are begging the federal government to open the immigration floodgates, they are pushing back against the unions’ “unsustainable” demands for 3% wage rises: Key unions have vowed to pursue “significant” annual pay rises of at least 3 per cent in 2022…


SA records 3829 COVID cases as NT locks down

South Australia has recorded another 3829 new COVID cases over the past 24 hours: The next chart plots daily cases across South Australia: There are 33,703 active cases across South Australia: Whereas hospital admissions have have retraced to 227: Across the smaller jurisdictions: Tasmania recorded 1037 cases, up from 825 yesterday; ACT recorded 1601 cases,


Australia’s ‘shadow lockdown’ delivers open goal to Labor

Driving around Melbourne’s streets over the past fortnight has been an eerie experience. Despite stunning summer weather, the roads are dead and shops/cafes are open but largely devoid of clientele. Last Saturday evening at around 5pm my family visited Easton Mall in Oakleigh – a famous mall of Greek restaurants and cafes. Our car was


Wesfarmers warns of Morricession

WES with the warning today: OMICRON cases will peak soon but they will also remain elevated for months given the private sector lockdown and second stage surge as schooling resumes. So expect a slew of similar warnings. I remain of the view that Q1 will return us to the “Morricession“, the phenomenon in which a


QLD COVID cases vanish into thin air

Queensland has recorded 15,122 new COVID cases over the last 24 hours and seven deaths: Perversely, active cases have more than halved from 203.657 yesterday to 86,953 today: Finally, and most importantly, Queensland COVID hospitalisations have risen to a record high 702, of which 47 cases are in ICU (15 ventilated): Meanwhile, the Palaszczuk government


Morrison’s Joker propaganda worthy of Goebbels

Playing the Joker card worked a treat in the left and right weekend press for the Morrison Government: This immense distraction has only one purpose, to bury the lede of the collapse of government service delivery during Morrison’s “let it rip” recession. ACOSS has summed up what is missing: The ACOSS policy recommendations are organised


Morrison plays the Joker as government collapses

The national economy is falling apart: Judo Bank chief executive Joseph Healy has warned the worst is still to come as omicron’s rapid spread and closed borders combine to stifle Australia’s economic recovery. Mr Healy slammed a lack of leadership from the top and said the federal government’s failure to articulate a clear course of


Australia records more than 100K new COVID cases

Gold! Gold for Straya! With Queensland reporting more than 20,000 in the last 24 hours, on the back of more than 70,000 new cases for Victoria and NSW, the other State’s have piled in to make it a century… Here’s the full picture from the ABC: Victoria: 40,127 new cases (PCR: 21,693, RAT: 18,434) and 21 deaths; 946 in


NSW and Victoria see big surge in COVID deaths

The two most populous States have seen a surge in COVID deaths in the last 24 hours with  42 Australians dying as case numbers continue to climb, now exceeding 70,000: Again its mainly younger cohorts reporting new cases (Victorian data below) The number of people in ICU/ventilators is thankfully not moving higher faster in NSW,


Retail boomed pre-Christmas

Classic pent-up demand coming out lockdowns. Via the ABS: The November 2021 seasonally adjusted estimate: Rose 7.3% month-on-month. Rose 5.8% compared with November 2020. All about the stuff we could no buy locked down: And Victoria! Alas, the Morrison recession is back as “let it rip” bunkers households: ANZ-Roy Morgan Australian Consumer Confidence starts 2022


NSW and VIC see more COVID deaths as hospitals fill up

Another 24 Australians died of COVID in Victoria and NSW yesterday with the total number of new cases in the two most populous states exceeding 60,000:   In Victoria the number of people hospitalised continues to increase, now past the October Delta peak but no large uptick in those ventilated/ICU: But in NSW COVID-19 hospitalisations