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.


May retail sales come in soft

The Australian Bureau of Statistics (ABS) has released its preliminary retail sales data for May, which recorded only 0.1% growth – well below analyst’s expectations of a 0.4% rise: Retail sales were 7.4% higher year over year, with turnover still running way above the pre-COVID trend: According to the ABS: May saw offsetting movements at


RBA: Pandemic stimulus unprecedented

The Reserve Bank of Australia (RBA) has released its June Bulletin, which includes an interesting report on the unprecedented stimulus undertaken by the world’s economies. The first chart below shows the ramp-up in debt across advanced and emerging economies, which was driven higher by pandemic stimulus: These direct measures, including those that are expected to


Abul Rizvi: immigration system is being used to lower wages

In April last year, Abul Rizvi – former Deputy Secretary of the Department of Immigration and one of the architects of Australia’s faux ‘skilled’ migration program – penned a spurious article arguing that Australia’s economy would suffer badly from the reduction in temporary migrants: If 50% of long-term temporary entrants depart, Australia would experience negative


WestConnex to gouge NSW taxpayers even more

MB has frequently questioned the efficacy of Sydney’s WestConnex toll road and tunnel project – the $16.8 billion 33 kilometre motorway under construction that is more expensive per kilometre than the Chanel Tunnel. This hideously expensive project will see existing free public roads like the state-owned M4 (that have already been paid off) being tolled


Australia’s youth benefitting from negative immigration

Yesterday’s employment report from the Australian Bureau of Statistics (ABS) revealed that Australia’s youth – defined as those aged 16 to 24 – continue to benefit from the closure of Australia’s international border. While overall youth employment is yet to return to its pre-COVID level, with total jobs still down 17,400 from their pre-COVID peak


RBA demands low immigration for higher wages

The most revered economist in Australia, RBA governor Phil Lowe, has become the defacto best union official in the country, arguing for higher wage inflation for quite some time. In yesterday’s Keynote Address at the Australian Farm Institute Conference, Lowe concluded that “the Board wants to see the recent recovery transition into strong and durable


It’s official: Australia has lost 74k migrants during pandemic

It’s official. Australia has lost 73,900 migrants since the start of the coronavirus pandemic, according to Q4 population data released yesterday by the Australian Bureau of Statistics (ABS): As shown above, Australia has recorded three consecutive quarters of negative net overseas migration (NOM), specifically: -7,800 in Q2 2020 -41,200 in Q3 2020 -24,900 in Q4


ABS employment in detail: mega boom!

The Australian Bureau of Statistics (ABS) today released its labour force report for May, which registered another 0.3% fall in the official unemployment rate to 5.1% off a whopping 0.9% increase in the number of jobs: Full-time jobs rose by 97,500 in May whereas part-time jobs rose by 17,700: The labour force participation rate rose


Restauranteurs confess: immigration kills wages

Yesterday, CBA’s head of Australian economics, Gareth Aird, released data showing that the coronavirus pandemic has reduced the number of non-resident workers in Australia from 521,000 in Q1 20 to 235,000 in Q1 21: In turn, this has driven unemployment and labour underutilisation down, which will soon likely result in stronger wage growth: According to


Australia the new Japan as inflation goes nowhere

Deutsche with the note that should make AUD bulls shiver: For global markets, the US April CPI was by far the most eye-catching inflation release, but there are enough indications from individual country data and now the latest PMI reports, that bottleneck price pressures are a global phenomenon. Which begs a few questions: what are


Jobs market booms post JobKeeper

The ABS has just released its labour force survey for May, which reports cratering unemployment (to 5.1%) and underemployment (7.4%) on a whopping 115,200 monthly increase in jobs and a 1.4% increase in hours worked. The result smashed analysts’ expectations of a 30,000 increase in jobs and a 5.5% unemployment rate. Below are the key


Job postings strong ahead of ABS employment release

Indeed economist Callam Pickering has updated his Australian job postings series, which tracks the level of job postings since the beginning of the pandemic. According to Pickering, Australian job postings are tracking were tracking 45.5% higher than their pre-pandemic level as at 11 June; although the level of postings has stabilised: Despite Victoria’s latest hard


Contradictory employers cry foul at 2.5% minimum wage increase

For months we have witnessed Australia’s employer groups lobby the federal government for easier access to foreign workers due to purported crippling labour shortages. However, when it comes to actually paying more to attract Australian workers into their respective industries, they are firmly opposed. In the lead-up to yesterday afternoon’s minimum wage decision by the


Net overseas migration stuck in negative

The Australian Bureau of Statistics (ABS) has released Overseas Arrivals and Departures data for April 2021, which confirmed that net migration into Australia remains negative. There were 23,290 net permanent & long-term departures in the 13 months since the beginning of the pandemic in March 2020, representing the first time that net arrivals have been


Trans-Tasman bubble boosts international travel

The introduction of the trans-Tasman travel bubble on 18 April 2021 has boosted international travel, according to new provisional travel statistics from the ABS. Arrivals of non-Australian citizens doubled in May to 71,060 from 35,210 in April: This was driven by a 32,000 increase in arrivals from New Zealand: In a similar vein, departures of


CBA: “Labour market tightening…wage growth forthcoming”

By Gareth Aird, head of Australian economics at CBA Key Points The ABS monthly labour force survey excludes overseas residents in Australia and therefore the survey has not accurately captured the impact of the international border closure on the labour market. The ABS quarterly labour account includes all people who contribute to Australian economic activity


Consumer economic confidence ebbing away

ANZ-Roy Morgan Australian Consumer Confidence increased 0.3% last week as Melbourne’s 2-week lockdown came to an end, although restrictions such as masks in public places and on travel and gatherings remain. #ausecon #ausretail @arindam_chky @DavidPlank12 @roymorganonline — ANZ_Research (@ANZ_Research) June 15, 2021


Morrison to green-light dedicated farm slavery visa

In March the federal government released a 327-page report from the National Agricultural Labour Advisory Committee, which explicitly admitted that the agricultural industry’s overreliance on cheap migrant labour is bad for productivity and unsustainable: Australia’s main competitors in agriculture are either ahead or running very close. In many ways, Australia is at a crossroads. Either its


Aussie housing values now four-times larger than economy

The ABS yesterday released its property price data for the March quarter, which valued Australia’s dwelling stock owned by households at $7.9 trillion, whereas the total housing stock was valued at $8.3 trillion. As shown below, the ratio of the dwelling stock owned by households against Australian GDP hit a record 4.0 times as at


Business Confidence hits 7-year high

Roy Morgan’s business confidence survey hit a seven year high in May, increasing 4pts (+3.2%) to 129.3 – the highest reading since January 2014 (131.5). This follows a whopping 39.4pts (+43.8%) increase on May 2020 when Australia was gripped by the coronavirus pandemic: Business Confidence in May 2021 was 15.5pts above the long-term average of


Deloitte: Retail to ride wave of spending

Deloitte Access Economics is upbeat about the outlook for Australian retailers, forecasting that consumer spending will remain strong as the domestic economy continues to rebound and COVID-19 restrictions ease. The firm’s quarterly Retail Forecast report notes that lockdowns and travel restrictions have boosted retailers’ sales, which should result in a “bumper year” for the sector


Aussie farm visa slaves paid just ‘$9 a day’

Earlier this year, the National Farmers Federation (NFF) called for a Dedicated Agriculture Visa program ease purported chronic labour shortages across the sector: To provide a stable and sustainable workforce for agriculture that is fair and equitable for both workers and employers, the NFF supports the introduction of a Dedicated Agriculture Visa program… providing a


Productivity not population key to Aussie living standards

Former ALP minister Craig Emerson has penned an article in The AFR calling on the Morrison Government to tackle Australia’s declining productivity growth, which is central to boosting the nation’s living standards: “Productivity growth has contributed 95 per cent of the improvement in Australians’ material living standards since 1901”. “From the turn of the century,


Westpac: Aussie jobs market slowing

Westpac with the note: The ABS Weekly Payrolls estimate of jobs lifted 0.3% in the two weeks to 22nd May and the fortnightly increase of the previous release (for the two weeks ending May 8) was revised from -0.3% to -0.1%. It is normal for Payrolls to be revised upwards in the weeks following the initial


Adair Turner exposes Treasury’s mass immigration myopia

Over the weekend, The AFR reported that the Morrison Government will use the Australian Treasury’s upcoming intergenerational report (IGR) as ammunition to reboot the mass immigration ‘Big Australia’ policy (see yesterday’s post). The IGR will reportedly “show the country is getting older, more indebted and reliant on taxing younger workers, and driving up spending”. Therefore,


Coalition, Treasury collude to reopen immigration floodgates

The Weekend AFR gave its strongest indication yet that the Morrison Government will use Treasury’s upcoming Intergenerational Report (IGR) as ammunition to reopen the mass immigration floodgates: This month’s Intergenerational Report will be “used to reinforce the government’s case to boost immigration once the pandemic ends”. “It will show the country is getting older, more