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.


Youth underemployment hits all time high

Yesterday’s ABS labour force release for August revealed a mixed Australian youth labour market – i.e. those aged 15 to 24 years old – with falling unemployment offset by a record rise in underemployment. The trend headline unemployment rate fell slightly to 11.80% in August: Total employment growth for those aged 15-24 years rose marginally


Government needs a lot more jails for bosses

A lot more. Via Domain: Attorney-General Christian Porter says he is prepared to legislate “significant” wage theft penalties – likely to be up to 10 years’ jail – to deter the “unacceptable” practice of persistently underpaying workers, as the government grapples with stagnant wages and a slowing economy. In a wage theft discussion paper to


Unemployment has much futher to rise

Some charts from Damien Boey at Credit Suisse offering a lead on the labour market after yesterday’s weakening read: I can see this coming as: dwelling construction crashes; infrastructure starts to plateau; the NDIS roll out halves; and consumption remains weak. If we get anywhere zero employment growth then the unemployment rate will spike straight


Temporary visa deluge fuels modern slavery

The OECD’s annual review of migration trends has revealed that Australia and New Zealand have the largest temporary migrant workforces in the world, which is raising competition for lower-income workers and suppressing wages: Australia had almost 750,000 permits for temporary migrants on issue in 2017, second in total number only to the US. As a


Net immigration surges to 250,000

The Australian Bureau of Statistics (ABS) yesterday released its Australian Demographic Statistics for the March quarter of 2019, which revealed that Australia’s population continues to grow manically led by surging net overseas migration (NOM), mostly into Sydney and Melbourne. According to the ABS, Australia’s population rose by 1.6% in the year to March 2019, well


What Scott Morrison should tell Donald Trump

This is what Australians are up against. The nation’s leading business paper has completely lost faith in its own system. From the AFR editorial: …where we really part company with Washington is that we don’t accept that China is a strategic competitor that must be contained. Mr Morrison has instead revived the Menzian formula of


Australian CEOs bask in “culture of entitlement”

Recently, average CEO pay packets in the top 100 Australian companies surpassed $5 million, according to research from The Australia Institute: Now, the latest CEO pay report from the Australian Council of Superannuation Investors (ACSI) shows that Australia’s top earning CEOs were paid 280-times the average Australian full-time salary of $85,000, which ACSI describes as “a


ABS employment in detail: more wages gloom

As summarised earlier, the Australian Bureau of Statistics (ABS) today released its labour force report for August, which registered a 34,700 increase in total employment but an increase in the headline unemployment rate (from 5.2% to 5.3%) due to a 0.09% increase in labour force participation. However, the underemployment rate rose by 0.2% in seasonally


Business Council shill: ‘Big Australia’ will save economy

Adam Boyton, chief economist of the Business Council of Australia (BCA), has penned a spurious article claiming that mass immigration will prevent the Australian economy from experiencing the economic declines experienced in places like Japan and Europe: One difference between the US on the one hand and the eurozone and Japan on the other is


Australian unemployment climbs

Via the ABS just now comes Labour Force for August: AUGUST KEY POINTS TREND ESTIMATES Employment increased by 22,000 to 12,921,100 persons. Full-time employment increased by 7,200 to 8,828,400 persons and part-time employment increased by 14,700 to 4,092,700 persons. Unemployment increased by 2,700 to 715,700 persons. Unemployment rate increased by less than 0.1 pts to


Vic Minister: No more dams, but 5m more people great!

Victoria water minister has ruled-out building any new dams, claiming that climate change and lack of rain fall will render them useless. From The Australian: Water Minister Lisa Neville says water in the state’s rivers will halve by 2065, citing this forecast in her refusal to build even one dam, even though over that period


Go long Recessionberg stupidity

Via Reuters: The government will publish its “Final Budget Outcome” for the 2018/19 fiscal year ended on June 30 on Thursday, Treasurer Josh Frydenberg told Australia’s parliament. The report will also include revised estimates and outlook for the current financial year. “It will show an improvement on what was forecast, not only in the 2018/19


SEEK: Job ads tank in Sydney and Melbourne

Via Domain: Job advertisements in Sydney and Melbourne are falling at double digit rates, prompting concern unemployment may be increasing despite cuts in official interest rates and the Morrison government’s tax cuts for low and middle income earners. Figures to be released today by SEEK show overall job ads have fallen by 8.6 per cent


Bellamy’s must be blocked

Via the always CCP happy clappy AFR: The a2 Milk Company chief executive Jayne Hrdlicka has dismissed suggestions that Chinese authorities delayed approving a licence for rival Bellamy’s Australia to drive down its share price. She said Chinese regulators had taken a “logical and sensible” approach to managing the country’s infant formula market. Ms Hrdlicka,


Australia’s international student stranglehold ends

Over the past five years, Australia has experienced an unprecedented boom in international student enrolments, which hit an all-time high 712,000 as at June 2019: Moreover, Australia now has by far the highest concentration of international students in the developed world, with per capita enrolments roughly 2.5 times second-placed United Kingdom and three times third-placed


DSSFB jobs leading indicator falls away

Via Department of Employment, Skills, Small and Family Business: The Monthly Leading Indicator of Employment (the Indicator) has fallen for the sixteenth consecutive month in September 2019, after nine consecutive monthly rises. The Indicator’s fall this month is attributed to declines in four of its five components—reflecting tighter financial conditions in the USA, soft domestic


Population ponzi to swallow Sydney’s golf courses

With Sydney’s population projected to balloon to nearly 10 million people over the next 48 years, driven entirely by mass immigration: Rather than slowing the deluge by cutting immigration, the government wants to canibalise Sydney’s golf courses: Long parklands and shared areas on golf courses will help Sydneysiders make the most of our green space


CEDA contradicts itself again on mass immigration’s ‘benefits’

You have got to love the clowns at the business lobby, the Committee for Economic Development of Australia (CEDA), which continues to contradict itself on the ‘benefits’ arising from the “Big Australia” mass immigration policy. In 2015, CEDA released a report estimating that in the next 10 to 15 years, more than five million jobs


CBA: Retail boomed in August

From CBA: Retail Trade Preview – August 2019 ■ We estimate that the value of retail trade rose by 0.9% in August. ■ CBA’s Household Spending Intentions (HSI) measure, based on a sample of more than 2½ million households combined with relevant search information from Google Trends, indicates tax rebates are being spent. ■ The


Australian leading index falls away

No surprise here, via Westpac: Last month’s improved signal has been very short lived with the Index growth rate back firmly in negative territory where it has been stuck for eight of the last nine months. The major contributors to the sharp fall in the growth rate over the month came from substantial drags from


LvO talks “bullshit” services jobs on Radio 2GB

This morning I was interviewed by Luke Grant from Radio 2GB to discuss yesterday’s article on Australia’s “bullshit” services jobs boom. Below is the exerpt: Leith Van Onselen, from Macrobusiness – the ‘Unconventional Economist’, about his article ‘Australia’s services “bogus” jobs boom He writes ‘the types of services jobs that have been created are more


17.5m more migrants will suck Australia’s water dry

The Australian has published a report warning that Australia’s water supply is running far behind the nation’s rapid immigration-driven population growth: It’s the worst drought in generations… But the story goes back much further: a progressive slowdown in construction of dams over the decades has led to a crisis that might have been avoided had


Governments open temporary visa floodgates

It never ceases to amaze how our dishonest governments pull the wool over voters’ eyes on immigration. In Australia, we’ve recently witnessed the Morrison Government wax lyrical about reducing immigration to “relieve congestion in the cities”, only to then see the number of temporary visas balloon to unprecedented levels, as illustrated below: Accordingly, net overseas


1,000 Chinese international students extorted

On Monday, Fairfax reported that around 1,000 Chinese international students studying in Australia have fallen victim to extortion by Chinese criminal syndicates: Chinese students are being forced to pretend they’ve been kidnapped, taking photos of themselves bound and gagged, in an alarming scam sweeping the country. Almost 1000 people have reported falling victim to scams


Miners break “skills shortage” panic button

Via the AFR: An imminent return to boom-time employment levels in the Australian mining sector is likely to accelerate labour cost inflation that is already evident in the industry’s most active hubs in Western Australia and Queensland. A landmark review of near-term investment intentions by the Australian Mines & Metals Association has identified $41 billion


Hypocrite feds blame states for water crisis

Water Minister, David Littleproud, has hypocritically attacked Australia’s states for failing to build enough dams to provide for Australia’s ballooning population: The federal government has sounded a warning about falling water security, saying the states have failed to match water storage with population growth over the past two decades. At the current rates, water storage