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.
The Australian’s Robert Gottliebsen has written an interesting article, based on research by former ANZ Bank director John Dahlsen, explaining how Australia’s housing obsession has diverted resources from the real economy and is stifling the nation’s productivity: In the decade before the 1987-89 crash banks poured vast sums into business credit but they were enticed
Last week, Australia passed the 95% single vaccination threshold for the 16-plus population, with 92.6% double vaccinated. This has put Australia among the world’s leaders on vaccination, with 76% of the entire Australian population now double vaccinated and a further 4% single dosed: Despite its high vaccination rate, Australia is also now one of the
By Gareth Aird, head of Australian economics at CBA: Key Points: The flood of new daily cases of COVID-19 since late 2021 has caused significant economic disruption that looks likely to be sustained over the next few months. Production, hours worked and consumption will all be hit over early 2022 due to COVID-related isolation requirements
Queensland recorded 15,962 new COVID cases over the past 24 hours alongside a record 16 deaths: The next chart plots the flow of daily cases across Queensland: Active cases are steady at 86,561: Whereas hospitalisations have risen to 819, with 50 in ICU: Queensland has recorded 45 deaths since the state border opened on 13
The reopening of Australia’s international border saw a solid increase in overseas arrivals and departures in November, according to new data published today by the ABS: There were 197,000 overseas arrivals to Australia and 229,000 overseas departures from Australia in December 2021, the highest volumes since international travel restrictions were introduced in March 2020, according
Ah yes, freedom Morrison Government style. Freedom for mates that is: The shortage of rapid antigen tests for consumers is being exacerbated by state and federal governments and large corporates placing mammoth orders for the kits, causing stock to be diverted from online retailers and pharmacies. Australia is in the middle of a huge Omicron
Treasurer Josh Frydenberg has kicked off the election cycle by scaremongering over Labor’s “class warfare”: “Anthony Albanese has spent his whole career arguing for higher taxes whether it was the retirees tax or the housing tax or the super tax, and a big supporter of the carbon tax and the mining tax”… “Anthony Albanese has
From the ANZ: ANZ Roy Morgan Australian Consumer Confidence dropped 7.6% last week, to its lowest reading since October, as Omicron case numbers surge. #ausecon @DavidPlank12 @RoyMorganAus pic.twitter.com/5fFBMqvpqi — ANZ_Research (@ANZ_Research) January 17, 2022 Hoocoodanode that the people of Australia would react so badly to being sprayed by plague while their government withdrew all health
NSW recorded 29,830 new COVID cases over the past 24 hours alongside 36 deaths: Victoria recorded 20,180 new cases and 22 deaths: Daily cases since the beginning of the Delta waves last winter are plotted below: Active cases across both NSW and Victoria seem to have passed their peak: Hospitalisations are still rising in NSW:
Anyone with a memory longer than a goldfish will know that the last time Australia was fighting a combined falling commodity price and rising wages outlook was in the late 1980s: The Prices and Incomes Accord was an agreement between the Australian Council of Trade Unions and the Australian Labor Party government of Prime Minister Bob Hawke and Treasurer (later Prime Minister) Paul Keating in 1983. Employers
At the same time as employer groups are complaining of acute “skills shortages”, and are begging the federal government to open the immigration floodgates, they are pushing back against the unions’ “unsustainable” demands for 3% wage rises: Key unions have vowed to pursue “significant” annual pay rises of at least 3 per cent in 2022…
South Australia has recorded another 3829 new COVID cases over the past 24 hours: The next chart plots daily cases across South Australia: There are 33,703 active cases across South Australia: Whereas hospital admissions have have retraced to 227: Across the smaller jurisdictions: Tasmania recorded 1037 cases, up from 825 yesterday; ACT recorded 1601 cases,
Driving around Melbourne’s streets over the past fortnight has been an eerie experience. Despite stunning summer weather, the roads are dead and shops/cafes are open but largely devoid of clientele. Last Saturday evening at around 5pm my family visited Easton Mall in Oakleigh – a famous mall of Greek restaurants and cafes. Our car was
WES with the warning today: OMICRON cases will peak soon but they will also remain elevated for months given the private sector lockdown and second stage surge as schooling resumes. So expect a slew of similar warnings. I remain of the view that Q1 will return us to the “Morricession“, the phenomenon in which a
Queensland has recorded 15,122 new COVID cases over the last 24 hours and seven deaths: Perversely, active cases have more than halved from 203.657 yesterday to 86,953 today: Finally, and most importantly, Queensland COVID hospitalisations have risen to a record high 702, of which 47 cases are in ICU (15 ventilated): Meanwhile, the Palaszczuk government
NSW has recorded another 29,504 positive COVID cases over the past 24 hours alongside 17 deaths: Victoria recorded 22,429 new cases and six deaths: The next chart plots daily cases across both states since the beginning of their respective Delta waves: Active cases look like they may have peaked in NSW and are starting to
Playing the Joker card worked a treat in the left and right weekend press for the Morrison Government: This immense distraction has only one purpose, to bury the lede of the collapse of government service delivery during Morrison’s “let it rip” recession. ACOSS has summed up what is missing: The ACOSS policy recommendations are organised
Queensland has seen three more COVID deaths, all from unvaccinated persons (two were people in their 70s and one was in their 60s), and nearly 24,000 new cases, taking the total national new case for today towards the 130,000 level. The peak is not yet in according to Queensland CHO Dr John Gerrard: That’s the question on
Westpac credit card data is the latest to record the shock: After hitting new post-COVID highs in the lead-in to Christmas, the Westpac Card Tracker Index has fallen away sharply since the turn of the year, average index reads over the weeks ending Jan 1 and Jan 8 down 10pts compared to the last two weeks of Dec.
The two most populous States have released their latest COVID statistics, with a combined 97,000 new cases, and 47 deaths in the last 24 hours:
Following a record day for COVID deaths in NSW, Queensland has reported six deaths for its highest one-day total, with nearly 15,000 cases officially reported: From ABC: Chief Health Officer John Gerrard said three of the deaths were people in residential aged care. Two of those who died were aged in their 70s, three in their 80s
The national economy is falling apart: Judo Bank chief executive Joseph Healy has warned the worst is still to come as omicron’s rapid spread and closed borders combine to stifle Australia’s economic recovery. Mr Healy slammed a lack of leadership from the top and said the federal government’s failure to articulate a clear course of
As the National Cabinet gets ready to meet at midday AEST time, some more sobering stats from the two most populous States sees daily deaths nearly pip the 50 level, with the deadliest day on record for NSW: As the RAT tests ramp up, NSW is recording nearly 100,000 new cases on its own –
Like the astronomer scouring the heavens for new phenomena, the observer of economic history only very occasionally has the chance to put his name to something. I managed it once in 2010/11 when I coined the term “disleveraging” to describe the use of an external boom to deflate domestic credit excess. But it never took
Gold! Gold for Straya! With Queensland reporting more than 20,000 in the last 24 hours, on the back of more than 70,000 new cases for Victoria and NSW, the other State’s have piled in to make it a century… Here’s the full picture from the ABC: Victoria: 40,127 new cases (PCR: 21,693, RAT: 18,434) and 21 deaths; 946 in
I’m on leave this week but managed to squeeze in a 10 minute interview with Radio 2GB explaining why the Big Australia mass immigration program should not be rebooted: Hopefully Labor will take a more sensible policy to the upcoming federal election, although I doubt it. Sadly, in the Kleptocracy of Australia, the vested interests
The two most populous States have seen a surge in COVID deaths in the last 24 hours with 42 Australians dying as case numbers continue to climb, now exceeding 70,000: Again its mainly younger cohorts reporting new cases (Victorian data below) The number of people in ICU/ventilators is thankfully not moving higher faster in NSW,
The other States put in there COVID stats this morning, with Tasmania first with nearly 1400 cases: Here is QLD: The Gold Coast cluster continues to be a sore point for Queensland health professionals. From ABC: Former National Health and Medical Research Council chairman Michael Good said he was very concerned about the Gold Coast
Classic pent-up demand coming out lockdowns. Via the ABS: The November 2021 seasonally adjusted estimate: Rose 7.3% month-on-month. Rose 5.8% compared with November 2020. All about the stuff we could no buy locked down: And Victoria! Alas, the Morrison recession is back as “let it rip” bunkers households: ANZ-Roy Morgan Australian Consumer Confidence starts 2022
Another 24 Australians died of COVID in Victoria and NSW yesterday with the total number of new cases in the two most populous states exceeding 60,000: In Victoria the number of people hospitalised continues to increase, now past the October Delta peak but no large uptick in those ventilated/ICU: But in NSW COVID-19 hospitalisations
