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.
By Leith van Onselen First it was MB. Then it was Judith Sloan. Now The Australian’s Henry Ergas has joined the chorus slamming the Australian Treasury’s propaganda supporting mass immigration: …the goal of migration policy is not to increase population density for its own sake. Nor is its purpose to increase gross domestic product, or
By Leith van Onselen Professor Peter Whiteford has penned an article in The Conversation questioning the notion that Australia’s Millennial generation are really worse-off than their parents: …millennials might be feeling a little hard done by, but Australians aged from 25 to 34 have actually enjoyed increases in their incomes compared to the population average.
By Leith van Onselen Yesterday, Fairfax published an alarming report warning that Melbournians will have an extra five hours of peak our traffic congestion by 2030 as rapid population growth continues to overrun the city’s infrastructure: Drivers could spend 20 per cent more time sitting in traffic as congestion significantly worsens over the next 12
By Leith van Onselen Yesterday’s ABS labour force release for March revealed a weakening Australian youth labour market – i.e. those aged 15 to 24 years old. The trend headline unemployment rate rose from 12.41% in February to 12.47% in March: Total employment growth for those aged 15-24 years of age has also begun to
By Leith van Onselen It’s going to rain jobs, according to Fairfax’s Eryk Bagshaw: Future farmers, nurses and teachers are in for a jobs bonanza in the next six years as millions of baby-boomers retire to make way for a new generation of workers in rapidly expanding industries… Free trade agreements, an ageing population and
By Leith van Onselen As summarised earlier, the Australian Bureau of Statistics (ABS) today released its labour force report for March, which registered a 4,900 increase in total employment and a steady headline unemployment rate (still 5.5%). In trend terms, the unemployment rate rose marginally from 5.54% to 5.56%: Again, total employment rose by a
Just in from The ABS: A soft report on the surface, with jobs growth and hours worked remaining weak. Analysts expected 20,000 jobs growth over the month, so this was a big miss. Detailed report to come…
By Leith van Onselen You know Australia’s immigration intake is way too high, and that the community mood has turned, when even Bernard Salt – the self proclaimed “unabashed supporter of a bigger Australia” – believes Melbourne is growing too fast and argues that immigration needs to be moderated. From Nine News (here and here): Melbourne’s
By Leith van Onselen Let’s recall Prime Minister Malcolm Turnbull’s lies last week about the causes of Sydney’s and Melbourne’s population pressures: Malcolm Turnbull: The thing that is driving the increase in foreigners in Australia – which is included in this term net overseas migration (NOM) – is foreign students, who are not part of
By Leith van Onselen The Australian Bureau of Statistics yesterday released its overseas short-term arrivals and departures figures for February, 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 rose a seasonal 30.2% in February in original terms, whereas
Via the AFR: State Labor governments are expected to support the Turnbull government’s National Energy Guarantee at Friday’s Council of Australian Governments energy council meeting, but are keen to ensure a future Labor government can increase carbon emission reduction targets. In what is shaping as a major victory for federal Energy Minister Josh Frydenberg –
Via Martin North: The latest Digital Finance Analytics Household Finance Confidence Index for March 2018 shows a further slide in confidence compared with the previous month. The current score is 92.3, down from 94. 6 in February, and it has continued to drop since October 2016. The trend is firmly lower. Across the states, confidence
Queen Lucy’s plan for a Sydney dystopia cops more flack from urban planner Chris Brown today: Nauseatingly, the plan boasts of “new thinking” that simply rehashes ideas borrowed from elsewhere. Concepts like the “30-minute city”, “green grid” or “liveability” are not new…The approach is supported by the highly questionable claim that the plan will “align land
From Westpac: The growth rate in the Leading Index remains in positive territory signalling above trend growth over much of the remainder of 2018. Drivers of the slowdown in the month have been from the domestic components – a slowing labour market; and some weakness in housing while rising short term interest rates have reflected
By Leith van Onselen I have argued previously how Australia’s mass immigration ‘Big Australia’ policy is placing incredible strain on the western suburbs of Sydney and Melbourne, with these areas experiencing easily the fastest population growth in the decade to 2016: Well, today Fairfax reports that Melbourne’s ‘Blue-ribbon’ inner-east is also experiencing manic immigration-led growth:
By Leith van Onselen The Australian Bureau of Statistics (ABS) has released visitor arrivals and departures data for the month of February, which again posted turbo-charged net annual permanent and long-term arrivals. In the year to February 2018, there were 788,260 permanent and long-term arrivals into Australia – up 3% from February 2017 and an
By Leith van Onselen Fairfax’s Matt Wade is the latest to question the Turnbull Government’s boast of record jobs growth, claiming it amounts to little when the population is also increasing so fast: As Malcolm Turnbull keeps reminding us employment has increased by more than 400,000 in the past year “the largest number on record”.
By Leith van Onselen The luke warm recovery in skilled vacancies continues to plod along, according to the Department of Jobs and Small Business: Improving, but still nowhere near 2008 and 2011 levels. [email protected]
This morning I was interviewed by Sydney Radio 2GB’s Michael McLaren where we discussed Treasury’s dodgy pro-immigration propaganda. Below is the summary extract: Joint research by Treasury and the Department of Home Affairs has attempted to quash concern about our skyrocketing immigration levels, reporting that a cut to migrant intake would be economically disadvantageous. The
Via The Australian: Chinese students have defied unspecified ‘‘safety’’ warnings from their government amid fears of undue Chinese influence, flocking to Australia in larger numbers this year than ever before. Official figures to be released today show 173,000 Chinese students enrolled in Australian universities, colleges and schools in the first two months of 2018, 18
Via The Australian: “We’ve already seen what happens when states pursue different strategies, and it’s obvious we need a single, united approach,” Cement Concrete and Aggregates Australia chief executive Kim Slattery said. “Having these individual targets in addition to the broader framework will just create duplication, confusion and through that duplication you have additional costs.
By Leith van Onselen Michael Pascoe has ended his tenure at Fairfax with one final immigration spruik. Let’s take a look at his key arguments: The latest NOM figures are for the year to the end of September. They totalled 250,100 – representing close to one per cent of the Australian population. If the trend
Via Domainfax: Jamie Oliver’s dream of buying back the farm in Australia is over. The Jamie Oliver Restaurant Group (Australia) Pty Ltd collapsed on Monday, with the company being placed in the hands of voluntary administrators less than 12 months after the British celebrity chef visited Australia to relaunch the six local restaurants bearing his
By Leith van Onselen One of the common arguments against ‘urban sprawl’ is that it endangers Australia’s food bowl – the food producing farms that sit beyond the urban fringe of our major cities. In recent times we have witnessed alarmist reports from various bodies, such as the University of Technology Sydney, warning that Sydney
By Leith van Onselen The Australian Treasury has reportedly provided briefing to the Turnbull Government spruiking the economic benefits of mass immigration and warning against any cut to the migrant intake. From The Age: The migrant intake from 2014-15 alone will provide a $10 billion boost to the budget over the next five decades, the
By Leith van Onselen Last week, I published an article on the diminishing value of having a university degree, whereby due to exploding student numbers on the back of the uncapping of Australian university places, the economy has become massively oversupplied with university graduates: Leading to poor employment outcomes, despite the massive cost to the Budget
By Leith van Onselen MB has noted previously (here and here) how the Scanlon Foundation is a front organisation for property developers that are pro-mass immigration and ‘Big Australia’. This view is based on the fact that founder, Peter Scanlon, is a major real estate developer and has a clear vested interest in mass immigration,
By Leith van Onselen A survey of employers by law firm Herbert Smith Freehills (HSF) shows that around 60% of employers will push for a wage freeze or only a modest increase in wages. From The AFR: The firm’s bargaining survey of about 60 key clients, including large private sector companies across construction, infrastructure, mining,
Australian manufacturing has been put out of business by two irresistible forces. The first is the power of the mining lobby and the second the power of the banking lobby. These two between them have scuttled, shaped, bullied and destroyed the Australian polity to their own ends so successfully that Australia now has the most
By Leith van Onselen With the Coalition set to deliver on the first part of the Abbott Government’s promise in October-2013 to deliver one million jobs over five years: The ABC has published a report assessing the jobs growth: Australia’s population is rapidly increasing, driven by high immigration, and the economy has been growing continually for
