The July NAB business survey is out and is poor: Confidence was OK. Conditions were ordinary. Employment continues to soften: Leading indicators remain weak: Capacity utilisation is crumbling: The consumer is fooked. Mining does not see what’s coming: The consumer is royally-fooked in fact: Time to smash wages, ScoMo? Full report.
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 latest Roy Morgan Research (RMR) unemployment estimate for July fell 0.5% to 8.7%, and was up 1.3% year-on-year: However, underemployment has risen by 1.0% over the past year to 9.6%, with labour underutilisation tracking at 18.3% (unchanged from a year ago): Below are the key points from the release: The workforce, which comprises employed
Since the Global Financial Crisis (GFC) struck in 2008, the lion’s share of Australia’s jobs growth has come from Healthcare & Social Assistance, which has accounted for 590,000 jobs created: The Department of Employment has released its Australian Jobs Report, which projects that Healthcare & Social Assistance will continue to dominate jobs growth, alongside other population-driven
An Infrastructure Australia audit of the nation’s requirements across areas like roads, rail, schools, electricity and water has found that almost two-thirds of the burden from population growth will fall on the mass immigration epicentres of Sydney and Melbourne. The report also predicts that traffic delays on roads and public transport will balloon despite $200
Recall Reserve Bank of Australia (RBA) governor, Phil Lowe’s, testimony on Friday to the House of Representatives Standing Committee on Economics, whereby Lowe wrongly claimed that increased labour force participation from older Australians is one of the key reasons for excess capacity in Australia’s labour market and why wage growth has stuck to historically low
Over the past few years, the New South Wales Government has come up with a range of policy band aids to overcome overcrowding at schools, which are at “breaking point”; NSW Education enrolment data for 2018, released to 9 News under freedom of information laws, reveals 636 schools in NSW have between 100 percent to
Sydney boss, Ryan Graham, claims that lazy young Aussies are turning down tradie jobs paying up to $884,000 a year, forcing him to employ migrant workers: Young Aussies are turning their backs on jobs with salaries of up to $17,000 a week because they’re too lazy to put in the hard yards. That’s according to
When I and other graduates arrived at the Australian Treasury in 2003, we were inducted by Secretary Ken Henry and his deputy secretaries who drilled into us the Treasury’s rich history of giving “frank and fearless” advice to the federal government, based upon rigour and evidence. We were told to examine issues rationally with a
The Grattan Institute has released a new report, entitled Risks and rewards: when is vocational education a good alternative to higher education?, which recommends that male students with lower school results would be better off doing vocational education and training (VET) rather than going to university: Vocational diplomas in construction, engineering, and commerce typically lead
Hoocoodanode? Via Domain: A broadly anticipated ‘sugar hit’ has failed to combat bitter trading conditions for Australian retailers, which could spell bad news ahead of full-year results later this month. But for cult-favourite ice-cream seller Messina, the only sugar hits in sight are the ones it’s serving up to customers. “It’s made no difference to
Could it be that hubris has overcome the ScoMo Government already? Via the AFR: The briefing, for MPs who entered Parliament in 2016 and 2019, was held when Parliament sat the week before last and was organised by Liberal MPs Tim Wilson, Jason Falinski and Andrew Bragg. It was designed to inform MPs from the
Via Domain: Subway has said it could terminate franchisees that do not pay staff properly after it emerged the US sandwich giant is under investigation by the Fair Work Ombudsman over underpayment of local employees. The troubled franchise is under pressure after an investigation by The Age and Sydney Morning Herald revealed it is closing
In testimony on Friday to the House of Representatives Standing Committee on Economics, Reserve Bank of Australia (RBA) governor, Phil Lowe, blamed increasing labour supply from females and older Australians for holding down Australian wages: What’s happened is that increased demand for labour has been met with more labour supply, especially by women and older
The fallout from last month’s protests at the University of Queensland, which saw nationalist Chinese students attack Hong Kong students protesting in favour of independence, continues to fester across Australia’s universities. In the weeks following these protests, we have witnessed pro-Hong Kong Lennon boards across Australia’s university campuses, which offer messages of support in favour of
Rupert Murdoch’s Herald Sun loves a bit wage theft. It’s good for profits after all: Shannon Bennett has lent his support to under fire chef George Calombaris, saying the former MasterChef judge will bounce back from his latest crisis. Bennett, who lives in Byron Bay, was yesterday at his Vue de Monde restaurant to launch
It’s a tradition. Or maybe a compulsion. Even an unwitting twitch. What it most certainly is not is a forecast, from the RBA’s new Statement on Monetary Policy: Domestic economic growth in the first half of the year was a little lower than expected at the time of the May Statement. As a result, the forecast
Reform of the vocational education and training sector will be high on the agenda at today’s Council of Australian Governments (COAG) meeting. Prime Minister Scott Morrison says the vocational education and training (VET) sector is about the people who want jobs and the people who want to employ them, not the providers, be they public
Over many years, Melbourne has lead the nation’s population growth, adding a ridiculous 1.3 million people (a 36% increase) in the 14 years to June 2018: When I worked at the Victorian Treasury in 2006, the State Government had just released “Melbourne 2030”, which projected that the city’s population would reach 5 million people by
Last year, the Morrison Government announced that it would cut Australia’s non-humanitarian permanent migrant intake by 20,000 to 160,000, in order to “relieve congestion in the cities”. From the outset, MB labelled this a ‘fake cut’, based on the fact that both temporary migration and net overseas migration (NOM) continues to increase, as illustrated in the
The aggression by Chinese international students at Australia’s universities continues to build. In the wake of recent violence inflicted against Hong Kong students at the University of Queensland, as well as the widespread vandalism of Hong Kong Lennon boards across Australian university campuses, a Chinese student group has demanded the University of Tasmania remove pro-Hong
“Unabashed supporter of a bigger Australia”, Bernard Salt, has spruiked new projections for Victoria’s population which he claims will make the state a “powerhouse”: Victoria’s Department of Environment, Land, Water & Planning released new projections in July showing a powerhouse of population growth and property (and infrastructure) demand unfolding over the coming generation… The previous
The 2008 Bradley review into higher education was concerned that the strict allocation of undergraduate university places over the prior 30 years would lead to a shortage of graduates for the so-called “knowledge economy”. Accordingly, it recommended the uncapping of university places and the implementation of the demand-driven system, which was implemented by the Gillard
Via Martin North: We are releasing the latest edition of our household financial confidence index today. This is an extract from our 52,000 rolling household surveys, were we ask about their level of confidence, compared with a year back. Any post election bounce is well past, as the two interest rate cuts are seen as
The Morrison Government has announced that it will make the Global Talent Scheme permanent after a 12-month trial, thus permitting start ups to employ cheap migrant workers: Under the program, two visa streams are available to fill specialised positions. Established businesses with a turnover of $4 million can apply for up to 20 visas for
Via an obtuse Deloitte: Deloitte Access Economics Investment Monitor: infrastructure to the rescue 8 August 2019: The slowdown in the global economy is flowing through to Australian investment conditions. Releasing the latest edition of Deloitte Access Economics’ quarterly Investment Monitor, Deloitte Access Economics partner and report lead author, Stephen Smith, said: “Measures of global business
The Regional Australia Institute (RAI) has released a new report warning that Sydney and Melbourne are facing dramatic increases in commute times if their populations are allowed to expand as projected by the Australian Bureau of Statistics (ABS): For most cities, ABS and state government projections have been released out to the mid-2030s. Our modelling
Over recent weeks, Chinese international students have been involved in incidents suppressing pro-Hong Kong protests. Late last month, violence erupted at the University of Queensland when a group of Hong Kong secessionist protestors were attacked by Chinese nationalist students. Hong Kong students were assaulted and reportedly subjected to further harassment and intimidation in the days following. Auckland
The Australian Bureau of Statistics (ABS) has released its cost of living indices for the June quarter, which revealed a rise in cost of living pressures across all five cohorts: According to the ABS, the cost of living for households headed by working Australians rose by 1.6% in the year to June – the same