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.


COVID cases fall as Melburnians rejoice

Victoria has recorded another 1750 locally acquired COVID cases over the past 24 hours alongside nine deaths, after Melbourne reopened yesterday: By comparison, NSW has recorded 332 locally acquired cases and two deaths: The next chart plots the daily cases across the two states: Next are active cases: Enjoy your weekend of freedom, Melburnians.


Retailers tip strong pre-Christmas sales

From Roy Morgan Research: Australia’s largest peak body for retail, the Australian Retailers Association (ARA), and strategic partner Roy Morgan are predicting this year’s pre-Christmas spending will broadly match last year’s high and be significantly above 2019 pre-pandemic spending. The ARA-Roy Morgan 2021 pre-Christmas Retail Sales predictions forecast that overall spending will come in at


Fair Work Ombudsman overrun by migrant wage thieves

The Fair Work Ombudsman’s (FWO) annual report shows that it launched 76 wage underpayment cases in 2020-21, compared with 54 in the previous financial year. The FWO also recovered more than $148m on behalf of victims of wage theft during the financial year, compared with just $30m three years earlier. The annual report notes that


Vaccination dramatically lowers COVID cases, hospitalisations and deaths

Fairfax has compiled interesting data from NSW illustrating how COVID vaccines have dramatically helped to lower COVID cases, hospitalisations and deaths: According to the most recent data from NSW Health’s COVID-19 surveillance report, more than 10 per cent of new cases in the week ending October 2 were fully vaccinated. Despite rising vaccination coverage among


Australian economy gets dumber and dumberer

Deloitte Access Economics has released a report entitled Australia remade: a country fit for the age of disruption, which claims that Australia is “not as successful an economy as we think we are” and lacks sophistication: [The] Deloitte Economic Sophistication Index ranks countries and their economies based on two measures: the value added to the goods


Victorian COVID cases soar before reopening

As Melbourne prepares to exit lockdown tonight, Victoria recorded a whopping 2232 new locally acquired COVID cases and 12 deaths: Reported yesterday: 2,232 new local cases and 3 cases acquired overseas (currently in HQ). – 37,824 vaccines administered – 79,544 test results received – Sadly, 12 people with COVID-19 have died More later: #COVID19VicData


Australia’s broken visa system keeps delivering wrong skills

Late last week, The AFR ran an article bemoaning so-called skills shortage among accountants, which therefore necessitates a big lift in the nation’s ‘skilled’ migration program: “It’s the tightest job market I’ve ever seen,” said associate partner Priscila Crawford, who specialises in high-level roles at recruitment firm Kona & Co. She agreed that Australian firms


Fair Work Commission struggles to keep up with wage theft claims

Another day, another university wage theft story. This time the Nat­ional Tertiary Education Union (NTEU) contends that RMIT University has been underpaying casual academics since 2014. The union alleges that casual staff have received the ‘standard’ rate of pay for marking students’ work, rather than the ‘academic judgment’ rate of pay. The NTEU’s Victorian assistant


QLD to open border by Christmas, WA slams door shut

Premier Annastacia Palaszczuk has urged Queenslanders to get vaccinated against COVID-19 as soon as possible, after confirming that fully-vaccinated people arriving from interstate hotspots will no longer have to quarantine from 17 December. Modelling undertaken by the QIMR Berghofer Medical Research Institute highlights the potential risks associated with this policy. In a worst-case scenario, the


Josh Frydenberg revs mass immigration engine

As expected, Treasurer Josh Frydenberg has indicated that the federal government will ramp-up Australia’s migrant intake to boost ‘growth’: Treasurer Josh Frydenberg said a change in immigrant numbers and composition was being considered… “This [immigration] will impact upon the economy, and including the ageing and the demographics of our population because we know that migrants


Leading index continues swoon

Westpac with the note. Given the recession and now reopening, this looks more like a trailing index, no? This is the first negative read – signalling below trend growth – since September last year when the economy was moving out of COVID lockdowns. In the following months of October, November, and December the Index surged


Business lobby accidently demands big immigration cut

Australian Chamber of Commerce & Industry (ACCI) CEO Andrew McKellar has today called for Australia to double its ‘skilled’ migrant intake to 200,000 people a year to address purported skills shortages and boost growth [my emphasis]: One of the country’s leading business groups says annual skilled migration must nearly double to 200,000 over the next


VIC and NSW COVID cases lift

Victoria has recorded 1841 locally acquired COVID cases and 12 deaths: Reported yesterday: 1,841 new local cases and 1 case acquired overseas (currently in HQ). – 38,881 vaccines administered – 78,928 test results received – Sadly, 12 people with COVID-19 have died More later: #COVID19VicData — VicGovDH (@VicGovDH) October 19, 2021 By contrast,


Another day, another university wage theft story

While Melbourne University Vice Chancellor Duncan Maskell dines on a salary of around $1.5 million, tutors at the university continue to do unpaid work, according to The ABC: Students at the prestigious University of Melbourne only receive the support they need during remote learning because their tutors work unpaid, says a staff member who is


Consumer confidence rises for 6th straight week

From ANZ Research: Six weeks of gains in consumer confidence Consumer confidence increased 1.3% last week, its sixth straight gain. With the reopening of Greater Sydney and the imminent end of Melbourne’s lockdown earlier than anticipated, confidence rose in the major cities of Sydney, Melbourne, Brisbane and Perth. The subindices registered mixed results. ‘Current financial


COVID cases fall again

Victoria has recorded another 1749 new locally acquired COVID cases and 11 deaths: Reported yesterday: 1,749 new local cases and 0 cases acquired overseas. – 36,751 vaccines administered – 68,702 test results received – Sadly, 11 people with COVID-19 have died More later: #COVID19VicData — VicGovDH (@VicGovDH) October 18, 2021 By comparison, NSW


Employers choosing migrants over older Australians

The ABC has published a report bemoaning that “ageism is rife in Australian workplaces”, where many older Australians are being shunned for jobs in favour of younger workers: A recent survey of 5000 people over 50 by Australian Seniors found many older people want to participate in the workforce, but they are not being given opportunities: Eighty-nine


How business lobbyists drove $40b in JobKeeper waste

Callum Foote and Michael West have made explosive allegations that the business lobby pressured the federal government not to amend JobKeeper when it was discovered by Treasury three months in that billions was being paid to companies with neutral or rising turnover. Accordingly, the federal government kept the fiscal tap wide open, showering businesses with


Victoria’s COVID cases rise, NSW’s cases fall

Victoria has recorded another 1903 locally acquired COVID cases and seven deaths: Reported yesterday: 1,903 new local cases and 0 cases acquired overseas. – 32,405 vaccines administered – 69,825 test results received – Sadly, 7 people with COVID-19 have died More later: #COVID19VicData — VicGovDH (@VicGovDH) October 17, 2021 By comparison, NSW recorded


Victoria’s COVID outbreak dwarfs NSW

Victoria has recorded 1838 locally acquired COVID cases and seven deaths over the past 24 hours: Reported yesterday: 1,838 new local cases and 0 cases acquired overseas. – 38,977 vaccines administered – 73,501 test results received – Sadly, 7 people with COVID-19 have died More later: #COVID19VicData — VicGovDH (@VicGovDH) October 16, 2021


COVID update: Cases fall across VIC and NSW

Victoria has recorded another 1993 locally acquired COVID cases and seven deaths over the past 24 hours: Reported yesterday: 1,993 new local cases and 0 cases acquired overseas. – 40,386 vaccines administered – 79,214 test results received – Sadly, 7 people with COVID-19 have died More later: #COVID19VicData — VicGovDH (@VicGovDH) October 15,


The Kouk: Perrottet’s 2 million migrants plan “horribly misguided”

Stephen Koukoulas (“The Kouk”) has done a terrific job tearing apart NSW Premier Dominic Perrottet’s plan to import 2 million migrants into Australia over five years, describing it as “horribly misguided”: To be frank, the proposal is a lazy, irresponsible and a horribly misguided recommendation that deserves to be shot down before significant damage is


Australia’s youth smashed by lockdowns

Yesterday’s employment report from the Australian Bureau of Statistics (ABS) revealed that Australia’s youth – defined as those aged 16 to 24 – have been hit hard by lockdowns. Total youth jobs fell 81,300 in September, driven by an 83,600 reduction in part-time jobs, partly offset by a 2,300 increase in full-time jobs. Accordingly, youth


Victoria’s COVID cases surge, NSW’s plummet

Victoria has recorded another 2179 locally acquired COVID cases – the second highest daily tally on record – alongside six deaths: Reported yesterday: 2,179 new local cases and 0 cases acquired overseas. – 38,752 vaccines administered – 73,942 test results received – Sadly, 6 people with COVID-19 have died More later: #COVID19VicData —