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.


Blood sucking capitalists fasten on international students

The extraordinary growth in international student numbers (see below chart) has led to accusations that Australia’s tertiary education providers are using them as “cash cows” to be milked for easy fees and profits: And it’s not hard to see why. As illustrated in the next chart from the NSW Auditor-General, fees from international students roughly


Roy Morgan unemployment 9.2% in June

The latest Roy Morgan Research (RMR) unemployment estimate for June fell 1.1% to 9.2%, but was up 0.5% year-on-year: Labour underutilisation also fell to 18.6%, down 0.3% year-on-year: Below are the key points from the release: In June 1.25 million Australians were unemployed (9.2% of the workforce) with an additional 1.28 million (9.4%) now under-employed.


Ports sack hundreds as import slump bites

As noted yesterday, Australian imports have stalled over the past year or so as domestic demand crashed: Now the job losses are here, via the AFR: DP World has cut 200 jobs as a new wave of industrial action hit its terminals, sparking outrage from the maritime union. The stevedore announced on Thursday it would


Youth labour market deteriorates

Yesterday’s ABS labour force release for June revealed a deteriorating Australian youth labour market – i.e. those aged 15 to 24 years old – with both full-time and total jobs growth falling and unemployment and underemployment rising. The trend headline unemployment rate rose to 12.0%: Total employment growth for those aged 15-24 years has dived:


ABS employment in detail: Turning point

As summarised earlier, the Australian Bureau of Statistics (ABS) today released its labour force report for May, which registered a weak 500 increase in total employment and a flat headline unemployment rate (still 5.2%),  driven by a 0.05% fall in labour force participation. However, the underemployment rate fell by 0.4%. In trend terms, the unemployment


Blundell-Wignall: Houses and holes won’t save us

From University of Sydney adjunct professor Adrian Blundell-Wignall: Years of rapid debt accumulation have left China facing a “major financial danger”, which in turn poses an economic threat to Australia’s future prosperity, University of Sydney adjunct professor Adrian Blundell-Wignall warns. …”Just because we dig holes in the ground and we build houses, we think we are a


Aussie jobs market stalls in June

The ABS is out with June Labor Force and the news is soft: SEASONALLY ADJUSTED ESTIMATES Employment increased 500 to 12,871,700 persons. Full-time employment increased 21,100 to 8,815,600 persons and part-time employment decreased 20,600 to 4,056,100 persons. Unemployment increased 6,600 to 711,500 persons. Unemployment rate remained steady at 5.2%. Participation rate remained steady at 66.0%.


Welcome to Slavestralia

At Domain: Staff at a restaurant in Chinatown were paid as little as $5 an hour, slept on milk crates in the kitchen and were sacked via social media, according to a complaint to the workplace watchdog. A union has alleged to the Fair Work Ombudsman that Hochi Mama workers were underpaid by thousands of


Indians behind surge in high-risk international student visas

A jump in the number of high-risk student visa applications from India have driven lengthy delays in student visa processing across New Zealand: The majority of offshore student visa applications received by Immigration NZ since November last year have been high risk. Since November 2018, only 16 percent of the 3800 visa offshore student applications


Former Howard Minister laments loss of car industry

Former Howard Government minister, Nick Minchin, has lashed the Abbott Government for allowing the car industry to go under: “It’s extremely disappointing that it was the first Coalition governm­ent elected after Labor’s interregnum in 2013 that presided over the closure of the car industry. It would not have taken much to ensure that maybe not


Aussie tourism industry killed by mass immigration

Roy Morgan has released new research showing that Australia’s tourism industry is growing only because of strong population growth: It’s Official: Australian population growth since 2000 is powering the travel industry as proportionally fewer Australians are taking a holiday today than two decades ago. In 2000/01 some 10.7 million Australians each year had at least


“Day zero” approaches for drought affected towns

Regional communities across Australia are staring down the barrel of what authorities dub “day zero”: Almost a dozen towns across regional New South Wales and southern Queensland are staring down the battle of a crisis that’s been dubbed “day zero”. It describes the looming risk of running out of drinking water, as the ongoing drought


Aussie leading index lifts to mediocre

Via Westpac: • The six month annualised growth rate in the Westpac– Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, rose from –0.47% in May to –0.02% in June. These monthly movements can be choppy. Nevertheless the index growth rate remains


Temporary skilled migrant visas scam Australian workers

On Monday, employer lobby the Committee for Economic Development of Australia (CEDA) released spurious ‘research’ claiming that the surge in temporary migration into Australia has had no adverse impacts on wages, is unambiguously good for the Australian economy, and calls for the expansion of temporary migration: CEDA’s analysis shows that contrary to some concerns, recent


Expert: International student numbers are peaking

Abul Rizvi, a former senior Immigration Department official, believes that international student arrivals to Australia will soon slow, whereas student departures will also increase, leading to a fall in overall numbers. From The ABC: Abul Rizvi, a former senior Immigration Department official… said “somewhat faster growth in student departures is more likely”. He added that


Hypocrite Coalition tells states to lift game on infrastructure

Urban Infrastructure Minister Alan Tudge has called on the states to lift their investment in infrastructure to help stimulate the Australian economy, claiming they have greater capacity than the Commonwealth. From The AFR: The federal government is prepared, where possible, to fast-track infrastructure projects but says the states have the greatest capacity to pick up


Corrupt Treasury blames workers for dud wages

Via The Australian: Stubborn employees who ­refuse to move into more productive companies are a major cause of the nation’s record-low wages growth, new Treasury research will reveal today. Workers who stay with unproductive companies instead of switching to more dynamic firms are dragging down pay increases across the economy, with Australia’s top economic advisers


Chinese visitor arrivals rebound

The Australian Bureau of Statistics on Friday released its overseas short-term arrivals and departures figures for May, which showed a continued trend worsening in Australia’s ‘tourism balance’. The number of short-term visitor arrivals fell by 4.6% in May in original terms, whereas short-term resident departures tanked by 10.6% over the month. The ratio of annual


Kouk: Economy set for rebound

Via the Kouk: The weak economy is turning higher In the space of a couple of months, the rhetoric on the economy has gone from strong to weak. Curiously, both assessments are wrong. The economy was actually weak during the first half of 2019 and, if the leading indicators are correct, late 2019 and 2020


Universities launch international student propaganda drive

Innovative Research Universities (IRU) – a collaboration between Charles Darwin University, Flinders University, Griffith University, James Cook University, La Trobe University, Murdoch University and Western Sydney University – met yesterday to commence talks on undertaking collective action to “counter media and public concerns” surrounding international students and to further grow the market by expanding into


Australia CPI preview

Via Westpac: Westpac is forecasting a 0.5% rise in the June quarter CPI lifting the annual pace to 1.5%yr from 1.3%yr. The June quarter tends to be a seasonally soft quarter with the ABS projecting a seasonal factor of +0.2ppt. The seasonally adjusted CPI is forecast to rise 0.7%. The trimmed mean is forecast to


Jobs growth all non-cyclical

Via Westpac’s Justin Smirk: In the year to 2019 Q2, total employment grew by 364.2k or 2.9%yr. The lion’s share of this gain came from the 136.8k rise in business and household services industries. The next largest contribution was retail & wholesale, +107.9k, while leisure & hospitality added 71.5k and education & health added 69.7k.