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.
By Leith van Onselen 60 Minutes’ excellent ‘Big Australia’ demolition featured Shane Geha, managing director of EG – “a leading real estate investment fund manager” . According to their website: As founding Managing Director of EG’s Urban Planning business, Shane bears overall responsibility for all EG’s rezoning projects. Shane has extensive rezoning experience and brings a
It’s not often that MB gets out-beared but it’s happening at the moment, via News: Mr Adams said an inversion of the “one year to 10 year” yield curve had been the most accurate prediction of a coming recession since the 1960s — a phenomenon also recognised by the US Federal Reserve. …In a previous
By Leith van Onselen Labor has indicated it might seek to excise investor-state dispute settlement (ISDS) clauses in free-trade agreements (FTAs) with Indonesia and Peru if it wins the upcoming federal election. Such clauses can be used by foreign companies to sue the federal government; tobacco company Philip Morris used them to sue the government
Watch Part One Here Watch Part Two Here 60 Minutes last night did a great job analysing the ‘Big Australia’ debate, and certainly put the ABC’s recent biased investigations to shame. The best excerpt is in Part One, when reporter Liam Bartlett wedged Immigration Minister Alan Tudge, who couldn’t even answer when asked how big
By Leith van Onselen Former editor of the Canberra Times, Crispin Hull, has continued his herculean battle against the ‘Big Australia’ mass immigration policy, penning the following demolition of the Coalition’s fake immigration cuts: [Morrison] announced that net immigration will be capped at 160,000 a year for the next four years. Previously it was nominally
By Leith van Onselen For more than a decade, the Productivity Commission (PC) has debunked the common myth that immigration can overcome population ageing. For example: PC (2005): “Despite popular thinking to the contrary, immigration policy is also not a feasible countermeasure [to an ageing population]. It affects population numbers more than the age structure”.
But I’m sure that it is an isolated case: PappaRich manager-operator Loke Cheng Wong will face fines of up to $75,600 in the Federal Court for allegedly underpaying staff, a number of which were migrant workers on students or working holiday visas. Fair Work Ombudsman Sandra Parker said enforcing workplace law compliance in the fast food, restaurant
The mass immigration spruikers have shown their hand. In particular Migration Council of Australia chief executive Carla Wilshire: “My concern is that every time we look at population, we look at it through the lens of infrastructure and congestion rather than through the broader framework of industry policy, global competitiveness and (geo-strategic) positioning,” she said.
Via Martin North: Meh. I’ll not be holding my breath. Although I side with John Adams on his general thesis, I find his arguments too extreme. As for Chris, although he’s had a good track record on housing, he’s been ordinary on the wider economy and inflation. I’ll be at the pub instead.
By Leith van Onselen For years business lobbyists have argued that Australia needs to run a mass immigration program to counter chronic skills shortages across the economy. For example, last week Fairfax printed the following: Chief executives of some of Australia’s biggest companies have thrown their support behind the nation’s immigration program, saying it is
Thanks to the CBA: Shame it’s not a longer time series but it’s not a pretty trend. Unless you work at the lunatic RBA.
The rat wheel has stopped spinning, from CBA: Business activity stabilised in the Australian private sector at the end of the first quarter of the year following a decline in February. Services activity continued to fall, while manufacturing growth softened. New orders were also unchanged in March, while job creation was the slowest in the
By Leith van Onselen The ABS has released its Australian Demographic Statistics for the September quarter of 2018, which revealed that Australia’s population continues to grow rapidly led by turbo charged net overseas migration (NOM), mostly into Sydney and Melbourne. According to the ABS, Australia’s population rose by 1.6% in the year to September, well
By Leith van Onselen Yesterday’s ABS labour force release for February revealed a steady Australian youth labour market – i.e. those aged 15 to 24 years old – with both full-time and total jobs growth flatlining. The trend headline unemployment rate fell marginally to 11.2%: Total employment growth for those aged 15-24 years of age
Via Westpac: Employment growth slowed in February lifting 4.6k less than what the market was looking for (median +15k) but a touch better than Westpac’s forecast of –5k. So far 2019 has had a sound start for the labour market with a three month average gain of 21.1k/per month. Through 2018 total employment grew 274.5k,
By Leith van Onselen As summarised earlier, the Australian Bureau of Statistics (ABS) today released its labour force report for February, which registered a small 4,600 increase in total employment and a 0.1% fall in the headline unemployment rate (to 4.9%) because of a 0.2% rise in labour force participation. In trend terms, the unemployment
Via the excellent Damien Boey at Credit Suisse: Our argument is as follows: Policy makers clearly feel that easing is necessary, but question the means by which it should be delivered. RBA Assistant Governor Bullock said as much in her speech about lending standards yesterday. Bullock highlights that the period of mandated credit tightening by
February ABS Labor Force is out and the news is a weakening market: TREND ESTIMATES Employment increased 20,600 to 12,762,800 persons. Full-time employment increased 12,300 to 8,743,400 persons and part-time employment increased 8,200 to 4,019,300 persons. Unemployment increased 1,800 to 673,100 persons. Unemployment rate remained steady at 5.0%. Participation rate remained steady at 65.6%. Monthly
By Leith van Onselen For years, MB has questioned the efficacy of the Migration Council of Australia, which purports to be an “an independent, non-partisan, not-for-profit body established to enhance the productive benefits of Australia’s migration and humanitarian programs”. The Migration Council is chaired by one of Australia’s biggest business lobbyists, Innes Willox, who is
By Leith van Onselen Earlier this week, MB attacked the Coalition’s fake cut to Australia’s immigration intake, noting that it has been more than offset by opening multiple pathways for foreign workers to gain entry into Australia, as well as an explosion of migrants on bridging visas while they await claims for permanent residency. Today, several
We know she has one because from time to time it is glowing, usually when she escapes the clutches of the lunatic RBA. Like today: …here’s also another, less visible, reason behind the rising share of capital. And that’s housing. Rapidly rising rents, along with home prices, have increased the returns to investment in housing.
By Leith van Onselen There is a long history of public officials going into well-paid private sector jobs in the very industries that they used to regulate. In 2017, the NSW Government sold the land titles registry for $2.6 billion to pay for two new useless footy stadiums. At the time, I described the sale as
By Leith van Onselen MB has gone to great lengths highlighting the many contradictions of vocal mass immigration booster, Professor Peter McDonald (for example here and here). As expected, McDonald has attacked Prime Minister Scott Morrison’s tiny cut to Australia’s permanent migrant intake to 160,000. Let’s examine his arguments. Professor Peter McDonald, told The New
By Leith van Onselen Bizarrely, Australia’s so-called third biggest export industry, education, will reportedly soon begin receiving taxpayer subsidies. From The Australian: International students, who now number more than 500,000, would be offered an extra year of temporary residency in Australia if they study in regional institutions and $15,000 scholarships would be offered to up
By Leith van Onselen Languishing in the polls and under attack over the federal government’s mass immigration ‘Big Australia’ policy, the Coalition is planning to announce several fast rail projects in next month’s Federal Budget. Here’s AAP: Fast rail projects connecting Melbourne, Sydney and Brisbane could receive a boost in the upcoming federal budget. The
Via The Economist Intelligence Unit: The Economist Intelligence Unit (The EIU) today launches the latest findings of its Worldwide Cost of Living Survey. Here are the findings for Australasia. Weaker local currencies have pushed all five Australian and two New Zealand cities surveyed down in the ranking. While Asian cities have largely risen in cost-of-living terms, many
Some nice work from Greg Jericho: 2018 saw a surge in people working in secondary jobs that has led to the first time there being more than one million people working multiple jobs. The surge was most pronounced in the last half of 2018 where 30% of the new jobs created were going to those
By Leith van Onselen International consultancy firm, Boston Consulting Group (BCG), has released a new report examining transport in the Australasian region’s major cities and has found that rapid population growth (driven by immigration) is having a deleterious impact on travel times: Cities in Australia and New Zealand are growing and changing at a significant
By Leith van Onselen Master Grocers Australia (MGA) have demanded a 1.2% minimum wage increase, which would result in real pay cuts for low-paid workers if endorsed by the Fair Work Commission (FWC). From The Australian: Master Grocers Australia, whose members include Cellarbrations, Bottle O and Duncans, said it was not economically feasible for the
By Leith van Onselen The Australian Bureau of Statistics yesterday released its overseas short-term arrivals and departures figures for January, which continued to show a trend rise in the number of inbound visitors, with both Chinese arrivals and student arrivals hitting an all-time high. The number of short-term visitor arrivals dived by a seasonal 30.9%
