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.


Drought slashes Australian farm output to record low

Some interesting analysis from Australia’s hottest and driest year on record has slashed crop production, with summer output expected to fall to the lowest levels on record, according to official projections… The country’s agriculture department said it expects production of crops like sorghum, cotton and rice to fall 66 percent—the lowest levels since records


Immigration ponzi fleeces NSW taxpayers for another $3b

Incessant claims that Australia just needs to ‘plan better’, invest more and build more, ignore the increasingly costly and constrained options for further infrastructure in the face of such unprecedented numbers of people pouring into our major cities. In already built-out cities like Sydney and Melbourne, the cost of retrofitting new infrastructure to accommodate greater


Retailers: Traffic down 20% at some shopping centres

The Australian Retailers Association’s (ARA) executive director Russell Zimmerman says that foot traffic at some shopping centres has fallen by up to 20% due to factors such as the bushfires and the coronavirus. He has raised the issue with the Shopping Centre Council of Australia’s executive director Angus Nardi, but says retail landlords are unwilling


PwC: 13% of Aussie workers are underpaid

The Australian Payroll Association has challenged the view that wage theft is endemic across the Australian economy. It has conducted 39 audits of company pay processes in the last 18 months and found evidence of staff being overpaid in 27 instances: The APA’s review found overpayments, involving employers with between 200 and 25,000 staff, ranged


Wage theft turns to truth theft

At Domain comes a freshly uploaded press release from some lobby or other: The chief executives of two of the nation’s largest retail employers have blamed incorrectly configured software as a key cause of staff underpayments, arguing this issue also often leads to businesses overpaying workers. Rob Scott, who heads up Bunnings, Kmart and Target


Labor wants Budget to move beyond GDP

Labor’s Shadow treasurer, Jim Chalmers, is the latest to question the usefulness of Gross Domestic Product (GDP) as a welfare measure, and has called for the federal budget and Intergenerational Report to adopt broader measures of welfare: Many of you know Robert Kennedy told a Kansas audience in 1968 that GDP measures everything ‘except that


One in eight Aussies living in poverty

A new report by the University of New South Wales (UNSW) and the Australian Council of Social Service (ACOSS) claims 13.6% of Australians live in relative poverty after housing costs are taken into account. ACOSS CEO Cassandra Goldie says the depth of poverty in Australia is getting worse, with households in poverty on average living


Immigration spruiker bemoans jobless elderly she put out of work

Cognitive dissonance certainly runs strongly through the veins of the ANU’s Dr Liz Allen (“Dr Demography”), who has spent years vigorously promoting/defending Australia’s mass immigration ‘Big Australia’ policy. Hilariously, Allen is now complaining that older Australians are unable to find jobs: “I see lots of women in their mid-40s who take redundancies that look financially


Recessionberg chokes NDIS for surplus

The economy is quietly falling apart as stall speed meets multiple shocks. It needs a fiscal boost. But L-plate Treasurer Josh Recessionberg has other ideas. Namely, less spending, via Domain: NSW and Victoria have accused the federal government of prioritising a budget surplus over people with a disability by refusing to release $1.6 billion in


Youth labour market goes from bad to worse

Yesterday’s ABS labour force release for January revealed a mixed outcome for Australia’s youth labour market – i.e. those aged 15 to 24 years old – with annual jobs growth falling, and unemployment and underemployment near record highs. The trend headline unemployment rate rose further to 11.91% in January: Total employment growth for those aged


CBA Flash PMI heads into recession

The CBA not-so-Flash PMI: Service sector business activity fell for the third time in the past four months in February, and at the quickest rate on record. New business, employment and backlogs of work also fell across the sector, albeit marginally. The rate of input cost inflation meanwhile eased further in February, down to a


Exclusive: Gerard Minack on Australia’s double shock

Exclusively from Gerard Minack at Minack Associates: Australia remains stuck with the macro blahs: tepid growth in aggregate and stagnation per person.  The risks are skewed to the downside.  The key to the downside unfolding is not whether there’s a fluky one quarter GDP decline, but whether the labour market weakens.  Falling employment would trigger


CommSec: High immigration is lowering wages

CommSec senior economist, Ryan Felsman, has broken rank and linked high immigration levels with slow wage growth: ‘So why is wage inflation contained, despite strong job creation? The simple answer is that Australia has an excess supply of workers,’ he said. ‘Population growth remains elevated and workforce participation has lifted to record highs, driven by


Retirees aren’t worried about their retirement

While a lot of Australians fear retirement, they don’t appear to mind the reality, according to the latest NAB wellbeing index: Not having enough money to finance retirement remains the top cause of financial anxiety for Australians, but the concern greatly diminishes once people retire, National Australia Bank’s latest wellbeing survey shows… But NAB’s survey


Unemployment in detail: Broad deterioration

As summarised earlier, the Australian Bureau of Statistics (ABS) today released its labour force report for January, which registered a 13,500 increase in total employment but a sharp increase in the headline unemployment rate (from 5.1% to 5.3%). In trend terms, the unemployment rate remained steady at 5.1%: Again, total employment rose by a seasonally


Aussie unemployment jumps

Via the ABS just now: TREND ESTIMATES Employment increased by 20,000 to 12,996,700 people. Full-time employment increased by 14,600 to 8,879,300 people and part-time employment increased by 5,400 to 4,117,300 people. Unemployment increased by 600 to 709,600 people. Unemployment rate remained steady at 5.2%. Participation rate remained steady at 66.0%. Monthly hours worked in all


Don’t blame “complexity” for wage theft

Wesfarmers CEO Rob Scott says the complexity of the industrial relations system has contributed to the wage underpayments scandal that has embroiled a number of large employers: Wesfarmers says the ­“incredible complexity” of the ­industrial relations system has contributed to Target underpaying employees by $9m over the past decade… Chief executive Rob Scott said… the


Retailpocalypse claims ISHKA

At Nine: Victorian-based homewares retailer ISHKA has become the latest victim of Australia’s deepening retail crisis, collapsing after almost 50 years in business. Specialising in handmade craft, gifts, clothing and homewares, ISHKA operates 60 stores and employs over 450 staff. The retailer said an “unusually challenging summer period” and $3 million worth of Christmas stock


Frydenberg lathers lipstick on wages pig

Yesterday’s wages data from the ABS was another sour report for Australian workers and the Morrison Government, with falling wage growth once again shattering budget forecasts: It also follows a long run of Australian household income growth lagging other OECD developed nations: However, this unambiguously poor result didn’t stop Treasurer Josh Frydenberg from putting lipstick


S&P: COVID-19 will hit Australia hard

Via S&P: China’s health emergency will disrupt economic activity throughout Asia-Pacific. S&P Global Ratings anticipates the region’s GDP will expand by 4.3% in 2020, 0.5 percentage points (ppt) lower than our pre-outbreak forecast. Our forecasts are subject to much more uncertainty than normal. We expect significant growth drags of 1 ppt or more in Hong


Australian wages remain a ward of the state

Yesterday’s labour price index for the December quarter, released by the ABS, confirmed that the public sector is still driving wage growth across the Australian economy: As shown above, public sector wages grew by 2.32% in the year to December, versus a 2.16% increase across the private sector. This continues a long-running trend, with real


Australian airport traffic craters

No surpise, really, but worth noting: ANZ data show a steep drop in spending in major Australian airports in Feb reflecting #coronavirus travel bans and lower demand for international travel. Steadier spend in smaller airports suggests this is limited to international travel. @Adelaide__T #ausecon @DavidPlank12 — ANZ_Research (@ANZ_Research) February 19, 2020


Liberal MP call to drop luxury car tax

Tim Wilson, Craig Kelly and Jason Falinski are among the Liberal MPs who argue that the federal government’s luxury car tax should be abolished, given that it was introduced to protect local car manufacturers. The tax on imported vehicles raised some $675m in 2018-19, and this is expected to rise to $750m by 2022-23. Meanwhile,


Immigration ponzi overloads Sydney’s public transport system

If you want bonafide evidence that Sydney is not planning for it’s booming population, look no further than its public transport system. Growth on NSW’s public transport network has soared past long-term government predictions, with 93 million more trips taken on buses and trains in 2019 than what was forecast for 2031: A report used


Australian wage growth plummets

The Australian Bureau of Statistics (ABS) has just released its Labor Price Index for the December quarter of 2019, which revealed falling wage growth: According to the ABS, wages grew by just 0.53% (both s.a. and trend) in the December quarter. Private sector wages grew by 0.53% (both s.a. and trend) over the quarter, whereas


If Albo wants to boost jobs for oldies, he must cut immigration

In a plea for the grey vote, Labor leader Anthony Albanese has promised to keep older Australians in work: More than 72,000 Australians aged 55 to 64 are unemployed, and over-45s who lose their job struggle to get work again, [Albanese] says. Instead, they face “spiralling down towards a pretty lean retirement”… In 1927, just