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.


Australian unemployment trends higher

Labour Force for April is out and unemployment is lifting again: Employment increased 22,600 to 12,501,000. Full-time employment increased 32,700 to 8,543,400 and part-time employment decreased 10,000 to 3,957,700. Unemployment increased 10,600 to 741,000. The number of unemployed persons looking for full-time work decreased 17,100 to 506,100 and the number of unemployed persons only looking


RBA: Increasing minimum wage won’t hurt jobs or hours

By Leith van Onselen The Reserve Bank of Australia (RBA) has released research suggesting that an increase in the minimum wage will not result in job cuts or a reduction in hours worked. The RBA’s economic research department found that people who received a higher award wage increase between 1998 and 2008 generally had a


You’re a bloody disgrace, Greg Jericho

Australia’s great worker class pretender is at it again today. Greg Jericho, card-carrying fake leftie who only looks after his own skin: Have you heard the joke about the treasurer who walks into parliament and says that wages within two years will grow faster than 3%? OK, it’s not exactly a side splitter, but the latest


Real private sector wages are stuck in the donut zone

By Leith van Onselen Yesterday’s wages price index released by the ABS revealed continued weak wages growth, with ongoing divergence between the private and public sectors: When adjusted for underlying inflation, real wages increased by a measly 0.1% in the year to March: However, there is a big disconnect between the private and public sectors.


Weak wages growth shatters Budget forecast

By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released its Labor Price Index for the March quarter of 2018, which revealed a weakening in wages growth from already anaemic levels: According to the ABS, wages grew by just 0.47% (both s.a. and trend) in the March quarter. Private sector wages grew


Australian consumer sentiment falls again

The RBA’s booming consumer is really cranking up, not: • The Westpac Melbourne Institute Index of Consumer Sentiment declined 0.6% to 101.8 in May from 102.4 in April. This is a disappointing update. Despite what appears to have been a well-received Federal Budget, consumer sentiment has continued to drift lower. The survey detail points to


Personal insolvencies surge in NSW, hit record high in WA

By Leith van Onselen The Australian Financial Security Authority (FSA) has released personal insolvency statistics for the March quarter, which reveals that total personal insolvencies hit a record quarterly high in WA (1,020) and the highest level since the September quarter if 2014 in NSW (2,372). Debt agreements also hit a record quarterly high in


Fake Left censors furiously as population ponzi drives up poverty rates

By Leith van Onselen From The Guardian comes news that poverty rates in Australia are surging on the back of skyrocketing housing costs: Housing costs alone are responsible for pushing a further 229,000 Australian children below the poverty line, a new analysis shows. Researchers on Tuesday released the first longitudinal analysis of homelessness in Australia,


Visitor data suggests Chinese boom may be stalling

By Leith van Onselen The Australian Bureau of Statistics yesterday released its overseas short-term arrivals and departures figures for March, 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 fell a seasonal 4.6% in March in original terms, whereas


Long-term migrant arrivals hit record high in March

By Leith van Onselen The Australian Bureau of Statistics (ABS) has released visitor arrivals and departures data for the month of March, which again posted turbo-charged net annual permanent and long-term arrivals. In the year to March 2018, there were 796,500 permanent and long-term arrivals into Australia – up 4% from March 2017 and an


Neil Mitchell demolishes Malcolm Turnbull on immigration

By Leith van Onselen After Scott Morrison last week spun a disgraceful web of lies about Australia’s immigration intake on Neil Mitchell’s 3AW Radio Program, Prime Minister Malcolm Turnbull tried to repeat the lies this morning only to be destroyed by Mitchell: Malcolm Turnbull: “Permanent migration is a smaller percentage of the total movements in


Deutsche: Straya poorly prepared for next shock

Via Bloomie: “The U.S. Federal Reserve doesn’t typically manage to engineer a soft landing once the unemployment rate has fallen through full employment,” Deutsche said in a research report Monday, noting the U.S. is likely past that point with a jobless rate at just 3.9 percent. “So the next global downturn is more likely to


Construction pipeline increased in April

By Leith van Onselen CoreLogic has released its Cordell Construction Monthly report, which reveals that both the number and value of projects moving into construction, as well as  the total number of new projects collected, rose in April. Specifically, the overall value of construction of new projects captured over the month was $14.8 billion, up


Planning professor: “We’ve lost control of our cities to developers”

By Leith van Onselen I have previously labelled RMIT planning professor, Michael Buxton, a housing BANANA (“Build Absolutely Nothing Anywhere Near Anything”) because he has spent much of the past decade simultaneously opposing moves to expand Melbourne’s urban growth boundary (UGB), while also opposing high rise development across the CBD and inner areas, as well as voicing


TPP needs independent assessment before parliament votes

By Leith van Onselen The Minerals Council of Australia (MCA) has released the results of modelling suggesting that the Trans-Pacific Partnership (TPP) will boost Australia’s GDP by about 0.54% a year, which equates to a $15 billion increase in economic activity. CEO, David Byers, claims the 11-nation trade deal will bolster jobs, wages, economic growth


Australia’s rat wheel economy won’t spew magic wage rises

By Leith van Onselen Following his stellar effort last week destroying Australia’s “just add people dogma” of mass immigration and a ‘Big Australia’, The Saturday Paper’s National Correspondent, Mike Seccombe, returned with another handy article shaming the Turnbull Government’s “jobs and growth” mantra: The treasurer’s No. 1 boast related to job creation. “The Australian Bureau of


Australian household financial confidence slip slides away

Via Martin North: The latest edition of our Household Finance Confidence Index, to the end of April 2018, released today, shows that households remain concerned about their financial situation. This is consistent with rising levels of mortgage stress, as we reported recently. The index fell to 91.7, down from 92.3 in March. This remains below the neutral 100