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.
Tweet thread from Jim Bianco to raise the hair on one’s neck: 2/15 The US reported over 61k cases Sat. The data has a strong day of the week pattern. Y’day was the most amount of Sat cases in 3-mos, worrisome. The 7-day avg is up 65% in the last week (green). Maybe distorted from
All the fuss over vaccine mandates and scaremongering by the media is being lost in the data that capital cities are actually returning to normal, according to mobile data, and vaccination rates across the country are nearing complete levels. Here’s the latest take from Roy Morgan, where both Sydney and Melbourne are back to nearly
The latest Roy Morgan Business Confidence survey showed a significant dip for November, falling 2% to 113 points, despite lots of lockdowns lifted across the country: Business Confidence in November 2021 is still 3.9pts (+3.6%) higher than a year ago in November 2020 (109.1) but is just below the long-term average of 113.8. Businesses remain
Not new but some texture around the Liar’s fantastic vaccine ineptitude: New emails reveal how “enthusiastic” Pfizer was to engage with Australia about its COVID-19 vaccine, months before the federal government agreed to buy any doses. Doses were in limited supply during the deadly outbreaks in Victoria and New South Wales this year. The Pfizer-BioNTech
NSW and Victoria are seeing a short term surge in new daily COVID cases, with over 400 and 1300 respectively with Queensland yesterday have one new locally acquired case Most hospitalised cases and particularly those in ICU are still in Victoria:
The Reserve Bank of Australia held interest rates at record lows yet again in its latest meeting this afternoon, now popping off for a couple months holiday until February 2022 while it keeps the printers churning until then. Here’s the statement from the high horse’s mouth: At its meeting today, the Board decided to: maintain
More special pleading from the Australian Industry Group: The federal opposition was fast out of the blocks this week with a major education and training policy announcement, but our severe and growing skills shortages and labour mismatches should be beyond partisan politics. The federal government has invested hugely in skilling in recent years as well.
The latest Victorian COVID update showed another 7 deaths overnight, with daily case numbers still above 1000, with 1185 new cases: Meanwhile NSW has seen 2 deaths and nearly 300 new cases: Queensland’s update yesterday saw 3 new cases – none locally acquired – while vaccination rates are slowly getting to the 80% double level:
Via AIG: Where goes property goes Australia. Full report.
Australian new car sales dived 8.1% year-on-year in November on the back of the supply disruptions, according to the Federal Chamber of Automotive Industries (FCAI). Only 80,639 new cars were sold in November compared with 95,205 in November 2020 and 84,708 in November 2019. The next chart plots new car sales in rolling annual terms
Victoria has reported over 1500 new cases yesterday, with six new deaths: Vaccination rates continue to climb, although still a bit short of NSW’s fully vaccinated percentage. New cases in NSW pipped just above 200, with vaccination rate almost past the 93% level: Queensland had six new cases yesterday, with vaccination rates lagging, still only
Below is a briefing note that I prepared for Sustainable Population Australia (SPA), which is a non-partisan, special advocacy group that seeks to establish an ecologically sustainable human population. Is there a shortage of skilled workers? Summary Recently there have been calls for a large increase in the skilled migrant intake as borders reopen. This
MB has long argued that Australia’s skilled visa program is poorly targeted with the majority of visas granted to professions experiencing an oversupply of workers. According to the federal government’s own historical skills shortage data, engineering has not been in shortage. Yet, the federal government has kept engineers on the skills shortage list, thereby ensuring
Wednesday’s national accounts release for the September quarter posted another 4.2% quarter-on-quarter increase in company profits, which hit a fresh record annual high of $579 billion: By comparison, total compensation of employees only rose by 0.5% over the quarter. The divergence between workers and bosses since the pandemic began is stark and illustrated in the
Via AIG: New orders weak everywhere except infrastructure. Full report.
The Herald-Sun has published a spruik piece on how Melbourne’s suburbs will enjoy a “jobs and high-rise population boom” following the construction of the Suburban Rail Loop: The Suburban Rail Loop project linking middle-ring suburbs will spark a jobs and high-rise population boom, helping to ease Melbourne’s “unsustainable” urban sprawl. Suburbs such as Cheltenham, Glen
Victoria has recorded another 1419 new COVID cases and 10 deaths: By comparison, NSW has recorded 271 COVID cases and zero deaths: As shown in the next chart, it was Victoria’s highest daily case count since 1 November: Active cases have also rebounded in Victoria, from a low of 9,420 on 23 November to 12,728
Yesterday’s national accounts for the September quarter showed that Australian households are bulging with savings. The hard lockdowns experienced across NSW, Victoria and the ACT over Q3 prevented households from spending at the same time as billions of dollars of additional income support was provided to households (chart from Deloitte): The inevitable result was that
A new report from Findex suggests “The Great Resignation” has arrived in Australia with one quarter of SMEs experiencing higher than usual staff turnover: The Great Resignation is “no longer looming but very much here”, according to new data from financial services firm Findex which has found one in four SMEs are already experiencing a
The Australian Bureau of Statistics (ABS) today released the national accounts for the September quarter, which registered a 1.9% fall in real GDP over the quarter and a 3.9% rise through the year. On a per capita basis, real GDP fell by 2.0% over the quarter to be up 3.5% over the year. The fall
The Australian Bureau of Statistics (ABS) has released the country’s national accounts for the September quarter, with real GDP falling 1.9% over the quarter to be 3.9% higher year-on-year: The result beat analysts expectations of a 2.7% quarterly decline and 3.0% growth year-on-year. According to Acting Head of National Accounts at the ABS, Sean Crick:
Westpac is excited: Australia’s record breaking run of quarterly current account surpluses continues – with, as we have highlighted previously, more to come. In the September quarter, the current account surplus grew to a fresh record high of $23.9bn, up a touch from $22.9bn for June (upgraded from $20.5bn). As a share of the economy,
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Victoria has recorded another 1179 new COVID cases and six deaths: By comparison, NSW recorded 251 new cases and zero deaths: Daily cases spiked across both jurisdictions – a common occurrence mid-week: Active cases are also rising again in Victoria, but are tracking sideways in NSW: More importantly, hospitalisations have fallen sharply across both states:
Nothing to write home to mother about: Employment nowhere. Full report.
S&P Global Ratings contends that Victoria will emerge from the pandemic in the weakest financial position of all the states and territories, and will have more than triple the debt it did before the pandemic. S&P tips that the majority of the states and territories will have more than double the debt they did in
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The Herald-Sun reports that Melbourne is set to become Australia’s largest city by 2027 with a population of 5.7 million: In late January 2027, experts forecast that Melbourne will overtake Sydney to become the number one metropolis as its population approaches 5.7 million. According to federal government data it might have happened significantly earlier had
Victoria has recorded another 918 new COVID cases and six deaths: By comparison, NSW recorded 179 new cases and three deaths: The next chart plots daily cases, which continue to trend track sideways: Active cases are shown below: Most importantly, hospitalisations are well under control: NSW has reportedly now recorded four Omicron cases – all
Only a week ago, Prime Minister Scott Morrison announced that all fully vaccinated international arrivals would no longer need to quarantine from 1 December – a move that was cheered by the edu-migration and business lobbies: All students stuck overseas should know that the Australian PM’s statement today includes all countries! For Japan and Korea
