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.
NSW Health recorded another 1331 locally acquired COVID cases and 6 deaths: NSW recorded 1,331 new locally acquired cases of COVID-19 in the 24 hours to 8pm last night. pic.twitter.com/grk9EBZHVi — NSW Health (@NSWHealth) September 18, 2021 The age breakdown of deaths was as follows: One person was in their 40s One person was in
Victoria has recorded an outbreak high 535 locally acquired COVID cases and one death: Reported yesterday: 535 new local cases and 0 cases acquired overseas. – 45,537 vaccines administered – 61,622 test results received – Sadly, 1 person with COVID-19 has died More later: https://t.co/eUcG50Y3T0#COVID19Vic #COVID19VicData [1/2] pic.twitter.com/85OfKkUeYl — VicGovDH (@VicGovDH) September 17, 2021 Almost
The RBA has released a new Bulletin report entitled “The Financial Cost of Job Loss in Australia”, which estimates that losing one’s job has long-term implications on one’s earning capacity: Workers who lose a job tend to experience large and persistent earnings losses. On average, real earnings are around one-third lower in the year of
NSW Health has recorded another 1284 locally acquired COVID cases and 12 deaths: NSW recorded 1,284 new locally acquired cases of COVID-19 in the 24 hours to 8pm last night. pic.twitter.com/dLQxxhoiBB — NSW Health (@NSWHealth) September 17, 2021 An age breakdown of the deaths are as follows: Two people in their 20s Three people in
Victoria has recorded 510 new COVID cases over the past 24 hours alongside one death: Reported yesterday: 510 new local cases and 1 new case acquired overseas (currently in HQ). – 43,993 vaccines administered – 55,476 test results received – Sadly, 1 person with COVID-19 has died More later: https://t.co/OCCFTAtS1P#COVID19Vic #COVID19VicData [1/2] pic.twitter.com/wUJpxXCugD — VicGovDH
Yesterday’s employment report from the Australian Bureau of Statistics (ABS) revealed that Australia’s youth – defined as those aged 16 to 24 – have been hit hard by lockdowns. Total youth jobs fell 75,400 in August, driven by an 80,000 reduction in part-time jobs, partly offset by a 4,500 increase in full-time jobs. Accordingly, youth
Victorian Premier Dan Andrews has today announced some modest easing of restrictions for Melburnians, namely: Outdoor gatherings will be allowed. But it’ll depend on your vaccine level — those with no vaccine or one dose: limited to groups of two. Fully vaccinated: groups of five (but from two households) An increase of the radius for
The Productivity Commission (PC) has released research studying the impacts of ‘work from home’ (WFH), which has accelerated courtesy of the coronavirus pandemic. The PC estimates that about 40% of Australians are now working from home, compared with just 8% prior to the pandemic, and describes it as “one of the biggest changes to the
As already reported, Australia’s unemployment rate fell 0.1% in August to 4.5% – the lowest reading since December 2008: However. total jobs fell by 146,300 to 13,022,600 people in August, with full-time jobs falling 68,000 and part-time jobs falling 78,200: The reason why the unemployment rate fell despite the heavy loss of jobs is because
The ABS has released its August labour market survey, which reported a 146,300 decline in jobs but a 0.1% reduction in the headline unemployment rate to 4.5% off a big 0.8% fall in participation: The number of hours worked also dived by 3.7% and the underemployment rate rose by 1.0% to 9.3%. According to Bjorn
NSW Health has reported another 1351 locally acquired COVID cases and 12 deaths: NSW recorded 1,351 new locally acquired cases of #COVID19 in the 24 hours to 8pm last night. pic.twitter.com/oy8YFT3F2B — NSW Health (@NSWHealth) September 16, 2021 The age breakdown of the deaths are as follows: A man in his 40s A man in
By Gareth Aird, head of Australian economics at CBA: Key Points: CBA data indicates the increase in government payments via the “COVID‑19 disaster payment” to households in lockdown states has been bigger than the fall in wages and salaries. Our partial read of household income, which comprises wages & salaries plus government benefit payments, is
Victorian has recorded another 514 locally acquired COVID cases over the past 24 hours – a new outbreak high: Reported yesterday: 514 new local cases and 0 cases acquired overseas. – 41,758 vaccines administered – 61,961 test results received More later: https://t.co/OCCFTAtS1P#COVID19Vic #COVID19VicData [1/2] pic.twitter.com/AV5ugLP8J6 — VicGovDH (@VicGovDH) September 15, 2021 Most are mystery cases.
Do vaccine mandates help or hinder recovery? In the case of the US, both, according to Goldman: Last week, President Biden announced vaccine requirements for 100mnworkers, with mandates for all federal employees and most healthcare workers, and a vaccine or testing requirement for all workers at large private firms with100+ employees. We estimate that the
The OECD has released its 2021 Australian Economic Survey, which calls for widespread tax reforms to reduce the overreliance on personal income taxes: Tax reform is needed. Australia’s heavy reliance on taxation of personal incomes adds to the vulnerability of public finances to an ageing population. Fortunately, there is a clear path for tax reforms
The OECD has released its 2021 Australian Economic Survey, which highlights that Australia’s unemployment payments are pitifully low and should be raised: Recently, the working-age unemployment benefit was raised by AUD50 per fortnight. However, the benefit for a single person in the first month of unemployment in Australia, at just 29% of the average wage,
From Deloitte’s Weekly Economics Briefing: New payroll data indicates that Australia’s labour market has once again fallen from its perch, after an impressive recovery during the first half of the year. Released late last week, the ABS data revealed that total payroll jobs fell 3.5% between the week ending 19 June, before Sydney’s latest lockdown
NSW Health has recorded another 1259 locally acquired COVID cases and 12 deaths: NSW recorded 1,259 new locally acquired cases of COVID-19 in the 24 hours to 8pm last night. Two new cases were acquired overseas, and 36 previously reported cases have been excluded following further investigation. pic.twitter.com/BADIDtqn2Z — NSW Health (@NSWHealth) September 15, 2021
Westpac monthly consumer sentiment: The resilience of consumer sentiment in a period when Australia’s two major cities have been locked down and the economy has been contracting is truly remarkable. The Index is still comfortably above the reads seen over the five years prior to the pandemic and is only 0.9% below its June print
Victoria has recorded another 423 locally acquired COVID cases and two deaths: Reported yesterday: 423 new local cases and 0 cases acquired overseas. – 41,856 vaccines administered – 54,649 test results received – Sadly, two people with COVID-19 have died More later: https://t.co/OCCFTAtS1P#COVID19Vic #COVID19VicData [1/2] pic.twitter.com/SMkSBLYqyt — VicGovDH (@VicGovDH) September 14, 2021 Most are mystery
After a slow start, Australia’s vaccination rollout continues to gather pace. 54.5% of Australia’s population has now received a single vaccine dose, with 34.2% now double vaccinated: NSW is the vaccine leader, with 63.3% of the state’s population now single vaccinated. This is followed by Tasmania (54.2%), Victoria (54.0%), SA (48.3%), NT (46.7%), Queensland (46.5%)
19 months on from the pandemic and there are still around 40,000 Australians stuck overseas and unable to return home due to: 1) prohibitive arrivals caps and quarantine limits; and 2) extortionately expensive airfares and quarantine costs. Rather than developing solutions to bring stranded Australians home, our politicians are more interested in importing cheap migrant
From ANZ: Confidence rebounds Consumer confidence jumped 3.1% last week, as the NSW government released its much anticipated “roadmap to freedom”, which sets out the plan for easing of restrictions once 70% of adults in the state have been fully vaccinated. Four out of the five subindices made significant gains. ‘Current financial conditions’ rose 2.0%,
NSW recorded 1,127 locally acquired COVID cases over the past 24 hours – the lowest number in nearly a fortnight: NSW recorded 1,127 new locally acquired cases of COVID-19 in the 24 hours to 8pm last night. pic.twitter.com/QS809aYxhy — NSW Health (@NSWHealth) September 14, 2021 Two people died with COVID over the past 24 hours:
Victoria has recorded another 445 locally acquired COVID cases and two deaths: Reported yesterday: 445 new local cases and 0 cases acquired overseas. – 36,615 vaccines administered – 42,694 test results received – Sadly, two people with COVID-19 have died More later: https://t.co/eUcG50Y3T0#COVID19Vic #COVID19VicData [1/2] pic.twitter.com/BUjGKZWPBP — VicGovDH (@VicGovDH) September 13, 2021 Most are mystery
The federal government’s plan to reopen the economy once 80% of Australians aged 16+ have been fully vaccinated against COVID-19 is based on advice from the Doherty Institute. However, we are slowly being conditioned to remain locked down until a 90% vaccination threshold is reached. A case in point is the following article from The
A new survey of retail sales expectations shows that 21% of Aussies expect to spend less this Christmas than last year versus only 9% that expect to spend more: Nearly half of all sales will also be conducted online: With 58% of Aussies expected to purchase more Christmas gifts online than last year: Despite these
Thanks to the rebound in Australian inflation courtesy of the ‘base effect’: Australia’s welfare recipients will soon receive solid increases in payments: From next week, the maximum single age pension rate will rise by $14.80 to $967.50 a fortnight, while age pensioner couples will receive an extra $22.40 combined, taking their fortnightly payment to $1458.60.
Friendly Jordies (Jordan Shanks) has launched an all out assault on the NSW planning system, claiming “property developers are the shadow government of NSW”. Shanks claims Sydney is being destroyed by mass overdevelopment as thousands of ugly, tacky high-rise apartments mushroom across the city. In turn, Shanks blames the NSW Government, which he claims has
Morgan Stanley has an excellent note today that summarises the entire business cycle ahead for mine: Reason 1 to stay long USD: Peak bearishness on US growth? Our US economists have revised down their 3QGDP estimates for the US to 2.9%Q SAAR compared to 6.5% previously. The impact of the Delta variant has been clear
