The November trade figures are out and its an absolute stinker with a big blowout, wiping out the plus half billion surplus expected by market economists with big revisions to the October print. BALANCE ON GOODS AND SERVICES In trend terms, the balance on goods and services was a deficit of $194m in November 2017, a
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.
This is a known known for those who follow the reality behind the facade that is the security policy – Australia’s defence forces really can’t defend Australia. And it’s not just because of a half century long clinging to an American apron spring, its yet another failure to plan suitable risk management and logistics. This
Well it seems we all had a good Christmas as the AIG released its latest PSI indicating that in December, the services sector grew once again making good on its gains in 2017. Here are the details: The Australian Industry Group Australian Performance of Services Index (Australian PSI® ) lifted by 0.3 points to 52.0
Cross posted from The Conversation by David Blowers Energy Fellow, Grattan Institute Politicians are told never to waste a good crisis. Australia’s electricity sector is in crisis, or something close to it. The nation’s first-ever statewide blackout, in South Australia in September 2016, was followed by electricity shortages in several states last summer. More shortages are anticipated over coming summers.
Hold on to that champagne, the New Year is rolling in a near 1% decline in house prices in Sydney! Eek! From the Oz: The market in the east coast capitals is showing cracks, with clamps on interest-only loans hitting Sydney’s investor-driven market particularly hard. Home values in Sydney fell 0.9 per cent last month
By Leith van Onselen After his superb recent demolition of treasurer Scott Morrison over Australia’s mass immigration ‘Big Australia’ policy (video above), the ABC’s Carrington Clarke has followed-up today with a superb article explaining how flooding the labour market through mass immigration is eroding workers’ wages: The Treasurer has a new favourite mantra — “1,000
Cross-posted from The Conversation: Australia is falling behind other nations and international bodies in measuring inequality, particularly the concentration of wealth. This also means we are in the dark about the trends affecting Australia’s middle class. The main source of local data is the Australian Bureau of Statistics (ABS), which publishes a Survey of Income
By Leith van Onselen For more than a decade, the Productivity Commission (PC) has debunked the common myth that immigration can overcome population ageing. For example: PC (2005): “Despite popular thinking to the contrary, immigration policy is also not a feasible countermeasure [to an ageing population]. It affects population numbers more than the age structure”.
By Leith van Onselen After Melbourne’s population surged by an insane 556,000 in the five years to 2016, and by 1.1 million people over the past 12 years: We learnt in October that the Victorian Government has been forced to remove seating from trains to accommodate surging passenger growth. Now, a Monash University study has
By Leith van Onselen The Australian Bureau of Statistics (ABS) yesterday released its quarterly labour force report, which breaks-down employment at the industry level to November 2017. Below are some key charts, which present the changes in employment aggregates on a trend basis. First, the quarterly change in employment by industry: As you can see,
By Leith van Onselen In the wake of last week’s population data from the ABS, which showed immigration into NSW and VIC hitting an all-time high 185,500 (combined) in the year to June: And confirmed that Australia’s population is growing faster than almost every other developed nation: Several experts (including yours truly) have lambasted Australia’s
By Leith van Onselen The Australian Council of Trade Unions (ACTU) has unleashed on the revised Trans-Pacific Partnership (TPP) trade agreement (dubbed “TPP11”), which will reportedly allow employers unfettered access to ‘skilled’ migrant workers from member nations. From The Guardian: The revived Trans-Pacific Partnership trade deal will allow at least six countries to access temporary
By Leith van Onselen MLC has released its latest Wealth Sentiment Survey, which paints a picture of a very cautious (nervous) consumer. First, many Australians are struggling to save any of their income: Being able to save has been a challenge for a number of Australians – almost 1 in 5 of us have been
Please find above the latest in MB’s primer presentation series, which are aimed at getting newer readers up to speed, as well as providing an easy-to-digest reference point on various topics. Today’s presentation covers Australia’s household debt – a key theme that has been thrashed-out on MB over recent years. Watch as the MB Fund’s
The latest RBA Minutes have been released: International Economic Conditions Members commenced their discussion of the global economy by noting that growth in global industrial production was likely to have increased further in October. The pick-up had been broadly based geographically. Survey measures suggested that conditions in the manufacturing sectors of Australia’s largest trading partners
By Leith van Onselen Ever since the 7-Eleven migrant worker scandal broke in 2015, there has been a conga-line of stories about the systemic abuse of Australia’s various migrant worker programs and visa system. The issue culminated last year when the Senate Education and Employment References Committee released a scathing report entitled A National Disgrace: The
By Leith van Onselen After open borders extremist, Peter Martin, penned an article earlier this month hailing the “powerhouse” Sydney and Melbourne economies, his Domainfax colleague, Matt Wade, has repeated the dose hailing the “creative class” descending on Sydney and Melbourne: Big cities across the globe are thriving and Australia’s twin urban giants – Sydney
By Leith van Onselen In early 2003, I joined the Australian Treasury where I was immediately introduced to the Department’s “Three P’s” framework, which effectively argued that Australia needed to: 1) boost productivity; 2) raise workforce participation; and 3) increase the population via skilled migration, if the nation was to continue to enjoy rising living
By Leith van Onselen The Australian Bureau of Statistics (ABS) today released new motor vehicle sales for the month of November, which registered a 0.1% seasonally adjusted increase in the number of sales over the month and a 2.1% increase over the year: Four jurisdictions reported seasonally adjusted increases in new car sales in November
Here’s an excellent dissection of the Australian economy by Westpac chief economist, Bill Evans: As we contemplate 2018 and 2019 there are a number of key themes that we believe will dominate economic and market developments. Our advice to customers throughout 2017 has been to expect Australia’s growth rate to be anchored below trend in
By Leith van Onselen In this year’s Federal Budget, the Coalition promised to impose a levy of up to $1,800 per annum on companies for each worker they employ on a temporary skilled visa. The measure is aimed at raising some $1.2 billion over four years, with the money to be used on skills training.
By Leith van Onselen After last month destroying the flimsy arguments for mass immigration perpetuated by the boosters at the RBA and the Australian Treasury, The Australian’s Judith Sloan has penned another article arguing that Australia’s record migrant intake is squeezing the life from Australia’s two major cities: The permanent migrant numbers are set at
Exclusively from Gerard Minack Australia seems set for another year of desultory growth, avoiding a statistical recession but experiencing per capita pain. Weak wages and a fading contribution from housing are now headwinds. Improved corporate sentiment suggests some upside risk to this scenario, but the most likely outcome is unchanged monetary policy, moderate A$ declines
Ponzi Peter Martin is back with more: The Bureau of Statistics has produced some shockers – wildly inaccurate employment statistics it has had to disown. But not this time. An apparent employment surge in one month might be a statistical fluke, the result of a dodgy sample or flawed bad seasonal adjustment. But not a
Black Hole Malcolm continues the Bennelong assault, via the AFR: Malcolm Turnbull has tried to blame Labor for an anti-Liberal backlash brewing among Bennelong’s Chinese-Australian community by claiming it was the Opposition which stirred the trouble. With the byelection on Saturday and polls showing Liberal candidate John Alexander a nose ahead of Labor’s Kristina Keneally,
By Leith van Onselen The Australian Bureau of Statistics yesterday released its overseas short-term arrivals and departures figures for October, 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 jumped 11.8% in October in original terms, whereas short-term resident
By Leith van Onselen Yesterday’s ABS labour force release for November revealed further good news for those aged 15 to 24 years old that are looking for a job. The trend headline unemployment rate fell slightly from 12.40% in October to 12.31% in November: Total employment growth for those aged 15-24 years of age has
At one end is Westpac: November’s headline employment gain exceeded expectations by a significant margin but we would caution before interpret this as suggesting an acceleration in labour demand. As we highlighted in our preview, the weaker than expected October print associated with a falling participation suggested that sample volatility may have been behind the
By Leith van Onselen As summarised earlier, the Australian Bureau of Statistics (ABS) today released its labour force report for November, which registered a strong 61,600 increase in total employment but no change in the headline unemployment rate (still 5.4%). In trend terms, the unemployment rate fell marginally from 5.43% to 5.40% – the lowest
By Leith van Onselen The ABS has released its Australian Demographic Statistics for the June quarter of 2017, which revealed that Australia’s population continues to grow strongly led by a surge in net overseas migration (NOM), mostly into Sydney and Melbourne, which have both seen record immigration flows. According to the ABS, Australia’s population rose