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.


Queen Lucy’s economic apartheid cuts Sydney along “latte line”

Via The Conversation: Sydney’s so-called “latte line” divides the city in two by jobs. Specifically, our research shows residents are segregated by both overall access to jobs and access to white-collar jobs. This highlights the jobs inequality underlying residential segregation. The white-collar jobs, in general, are concentrated in the north and east of the city


2700 jobs go as Toys’r’us liquidates

No greater fool apparently: Failed toy retailer Toys R Us will kick off it’s closing down sale this morning, stripping prices down by as much as 30 per cent in a fire sale that will send shockwaves through the nation’s $3.7 billion toy and games industry as it is forced to digest the liquidation. The


Immigration into Sydney and Melbourne stays at insane levels

By Leith van Onselen The ABS has released its Australian Demographic Statistics for the December quarter of 2017, 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 1.59% in the year to December 2017


Telstra shreds 8000 jobs

Via the AFR: Telstra will split out its infrastructure assets into a new wholly-owned business for the potential to demerge the new division or bring in strategic investors. The plan is one aspect of a range of sweeping changes, labelled Telstra2022, which chief executive Andy Penn will present later on Wednesday, including the sale of


Chinese visitor arrivals continue to boom

By Leith van Onselen The Australian Bureau of Statistics yesterday released its overseas short-term arrivals and departures figures for April, which continued to show a trend rise in the number of inbound visitors, with Chinese arrivals continuing to boom. The number of short-term visitor arrivals fell a seasonal 22.1% in April in original terms, whereas


Good news: Chinese millennials turn off Australia

Via the AFR: For Australian entrepreneur Andrea Myles, Prime Minister Malcolm Turnbull dropped what she refers to as his “Mandarin bomb” at exactly the wrong time. It was December last year, around the time Myles was recruiting participants for the third “China Australia Millennial Project”, which puts young Australian and Chinese entrepreneurs in a room


Long-term migrant arrivals hit record high in April

By Leith van Onselen The Australian Bureau of Statistics (ABS) has released visitor arrivals and departures data for the month of April, which again posted turbo-charged net annual permanent and long-term arrivals. In the year to April 2018, there were 800,240 permanent and long-term arrivals into Australia – up 4% from April 2017 and an


Ghettoisation of Australian cities IS THE PLAN

Ghettoisation of Australian cities is the plan. It’s quantitative peopling and it’s going swimmingly right across the Sydney’s and Melbourne’s west at astonishing speed. Via The Australian: Demographic shifts driven by Australia’s immigration program threaten to lock Sydney’s western suburbs and parts of Melbourne into a bleak future, as low-income ethnic clusters struggle to cope


Why Huawei is banned

Some more top notch Aussie politicians at work today at the AFR: Controversial Chinese telco Huawei is hitting back aggressively over spy agencies’ efforts to veto it on national security grounds from involvement in the construction of the 5G wireless network, lobbying federal parliamentarians directly that its exclusion would push up costs for consumers, result


Employment in detail: Good from afar but far from good

By Leith van Onselen As summarised earlier, the Australian Bureau of Statistics (ABS) today released its labour force report for May, which registered a 12,000 increase in total employment and a decrease in the headline unemployment rate to 5.4% from 5.6%, driven by falling labour force participation. In trend terms, the unemployment rate fell marginally


Australian jobs market continues to soften

The ABS is out with May jobs and the news is more softening: SEASONALLY ADJUSTED ESTIMATES (MONTHLY CHANGE)  Employment increased 12,000 to 12,518,300. Full-time employment decreased 20,600 to 8,521,400 and part-time employment increased 32,600 to 3,996,900. Unemployment decreased 26,800 to 714,600. The number of unemployed persons looking for full-time work decreased 11,200 to 494,300 and


Coalition mulls basic English test for permanent migrants

By Leith van Onselen The Australian reports that the Turnbull Government is considering a basic English test for all new permanent migrants amid concerns that by 2021, more than one million ­people in Australia could have ­little or no English skills: The move to consider mandating English language tests beyond citizenship applicants and apply a basic


Big Australia destroys Aussies’ happiness

By Leith van Onselen NAB’s latest Australian Wellbeing Report has revealed that Australian wellbeing fell to a new survey low 62.8 points in Q1 2018, with home ownership holding the key: Australians who live in and own their house or apartment report much higher levels of overall wellbeing than those who rent, according to new research released


Household financial security pukes with house prices

Cross-posted from Martin North: The latest Digital Financial Analytics Household Financial Confidence Security Index for May 2018 is released today.  The index tests households attitudes to their finances, based on our 52,000 rolling household survey. The index dropped to 90.2, down from 91.7 last month. Property-related sentiment is hitting hard, especially in New South Wales and


Credit Suisse: Aussie credit crunch has begun to bite

Via MB favourite Damien Boey: Loan approvals recover slightly in April Housing finance approvals data came in slightly ahead of expectations. Owner-occupier loans rose by 0.2% in April, while investor loans fell by 0.9%. Together with the housing finance release, the ABS now also publishes complete data for lending finance as well. Across all sectors,


Why women have dominated jobs growth

By Gareth Aird, Senior Economist at CBA: Key Points: Employment growth has been much stronger for females than for males over the past year. Strong growth in the services sector, particularly health, is behind the big lift in female employment. The rise in female employment has been accompanied by a lift in participation. There are


Stutchbury: Aussies “whingers” about wages growth

“Are you seriously saying people who are uncomfortable with their wage growth are whingers?”, asks @farrm51, as the Insiders panel discuss the impact of wage growth. #Insiders #auspol @barriecassidy @annabelcrabb — Insiders ABC (@InsidersABC) June 10, 2018 By Leith van Onselen We all know that The AFR’s Editor, Michael Stutchbury, has a pro-business bias. But