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.


Construction sector faces critical supply squeeze

The Morrison Government’s HomeBuilder subsidy, alongside similar state government programs, have been too much of a success in stimulating the construction industry. As illustrated in the next chart, loans for dwelling construction have soared to unprecedented highs: The Housing Industry Association has reported similar booms across new home sales and renovations, whereas the Australian Bureau


Aussie job postings one-third higher than before COVID

The V-shaped recovery in the Australian labour market rolls on, with new data from global jobs site Indeed showing that job postings are now tracking 32.9% above their pre-COVID level: According to economist Callam Pickering via Twitter: Australian job postings continued to strengthen throughout the first half of March. By March 19, job postings were


Death of enterprise bargaining agreements a good result

Domino’s Pizza Enterprises has ruled out returning its employees to the enterprise bargaining system after the Senate rejected key elements of the federal government’s industrial relations omnibus bill. Rival fast-food group McDonald’s has also indicated that its workforce will remain on the industry award after it abandoned the enterprise agreement system in 2020. Business Council


Turns out, Aussies aren’t fleeing from cities to the regions

Since the COVID-19 pandemic began, there has been anecdotal evidence suggesting that Australians are fleeing from capital cities to the regions. For example, the Australian Bureau of Statistics (ABS) latest internal migration data shows that Australia’s capital cities lost around 22,000 residents in the June and September quarters of 2020, led by sharp falls across


Hospitality industry demands visa slaves while sacking Aussie workers

Restaurant and Catering Industry Association of Australia (RCIAA) chief executive Wes Lambert was one of the first lobby groups to praise the government-led Joint Standing Committee on Migration’s recommendations to allow Australian businesses easy access to cheap foreign labour. To recap, the Committee recommended: Significantly watering down or outright abolishing labour market testing rules, depending


Why do mutual obligations only apply to the unemployed?

Last week, Tasmanian Liberal MP Bridget Archer broke rank to attack the Morrison Government’s mutual obligations changes to recipients on JobSeeker. Under changes passed last week by the Australian Senate, JobSeeker recipients will have to apply for 15 jobs a month from 1 April, which will be increased to 20 jobs per month from 1


Telstra sets sights on NBN acquisition

Telstra continues to maneuver its way into purchasing the National Broadband Network (NBN) from the federal government. Telstra has announced that it plans to split into four operating businesses under a new holding entity to be known as Telstra Group, subject to the approval of its shareholders. The four new businesses will include InfraCo Fixed,


How severe is Australian vaccine hesitancy?

I have recorded at length the sad and sorry policy process that led the Morrison Government to hang its hat on the Astra Zeneca vaccine, which included politically driven timelines and dubious Liberal Party connections, mistakes and questionable data at the trial stage, and failure to anticipate all kinds of logistical challenges including for doctors.


The rise and rise of Aldi

Aldi is arguably one of the biggest disruptors to hit the Australian economy over the past 20 years, single handedly busting open the Woolworths/Coles supermarket duopoly. Aldi now has 570 stores nationwide, capturing a 10% market share, and is expected to open another 20 stores this year. In the process, Aldi has expanded its footprint


Get ready for a ‘caring’ jobs boom

The National Skills Commission (NSC) has released its employment projections for the five years to November 2025. The NSC forecasts that total employment will rise by 991,600 (7.8%) by November 2025. Healthcare and social assistance (249,500) are the sectors that will record strong growth in jobs, followed by hospitality (139,900); professional, scientific and technical services


How Labor should reform Australia’s skilled visa system

Last week, the Coalition-led Joint Standing Committee on Migration recommended radical reforms to Australia’s skilled visa system to make it much easier for businesses to bring foreign workers into Australia. In a nutshell, the recommendations included: Watering down or abolishing labour market testing requirements. Lowering business costs and speeding up approval times for importing foreign


Coalition to remodel ‘JobTaker’ in budget

Treasurer Josh Frydenberg has advised that the federal government’s May 2021 Budget will include changes to the eligibility criteria for its JobMaker hiring credit scheme. The program has performed well below expectations to date, with just 521 new jobs being created in its first six weeks – way below the Australian Treasury’s projection of at


New report uncovers systemic migrant slavery on Aussie farms

For years we have seen abundant evidence of temporary migrant workers being ruthlessly exploited on Australian farms. Over the past year, we have also witnessed the horticultural industry incessantly complain that Australia’s closed international border is causing acute labour shortages, despite these same farms refusing to employ locals because they must be paid a legal


Labor rejects Coalition’s wage-crushing immigration plan

Last week, the Coalition-dominated parliamentary committee into skilled migration released its Interim Report, which recommended sweeping changes to Australia’s immigration system to enable employers to easily employ foreign workers. The key reforms proposed by the committee were: Relax market testing requirements for Medium and Large businesses, and abolish market testing altogether for smaller businesses. Eliminate


John Kehoe has no idea on wages

The AFR’s John Kehoe has tried to argue that the Senate’s rejection of the Coalition’s Industrial Relations (IR) Omnibus Bill would somehow drive wages lower: Wage growth is incredibly weak. The gutting by the Senate of the Morrison government’s already-modest industrial relations reforms will not help. Parliament’s failure to legislate changes to award simplification, bargaining


Office developer Lendlease demands workers return to office

There’s nothing like the smell of vested interest on a Friday afternoon. In classic rent-seeking fashion, office developer Lendlease has declared that companies must get their staff back into city offices to ensure business and productivity goals are achieved. At the same time, Lendlease is forging ahead with giant skyscrapers in Sydney and Melbourne and desperately


Trans-Tasman travel bubble back on!

The one-again, off-again Trans-Tasman Travel Bubble is on again, with officials from both New Zealand and Australia hinting that it could be in place by mid-April, thus allowing unrestricted two-way travel between both nations. New Zealand Deputy Prime Minister Grant Robertson made the declaration yesterday, which was supported by Tourism Minister Dan Teehan: “We were


Aussie youth join labour market rebound

The Australian Bureau of Statistics (ABS) yesterday released labour market data for the month of February, which revealed that the youth labour market (i.e Australians aged 15-24) has joined the broader market rebound. Australia’s youth unemployment rate was 12.9% in February, down from 14.0% in January. This compares to an unemployment rate of 4.5% across


Coalition declares open immigration war on workers

A few weeks back, Prime Minister Scott Morrison flagged that the federal government would restore Australia’s mass immigration program at the earliest possibility, noting that temporary migrants would be imported to fill jobs that locals supposedly don’t want to do: “We must re-look at the role that temporary visa holders play in meeting our economy’s


Population growth turns negative as migrants head home

It’s official. Australia has recorded its first quarterly decline in its resident population since World War 1 in 1916. Yesterday’s population data for the September quarter of 2020 revealed that Australia’s population declined by 4,200 people on the back of a heavy 34,800 loss of net overseas migrants: All major jurisdictions experienced negative net overseas


CBA: Lower immigration will lift wage growth

By Gareth Aird, head of Australian economics at CBA: Key Points The sharp drop in net overseas migration due to international border closures raises the likelihood that wages growth lifts as the labour market tightens. Skill shortages have more chance of manifesting themselves while net overseas migration is low. We expect the unemployment rate to


90% of companies banked JobKeeper profits

Data from Ownership Matters shows that nearly 90% of Australian-listed companies that received JobKeeper payments in the first half of 2020-21 booked a profit during the period. The wage subsidy accounts for more than half the earnings of some companies, including AMA Group and Tyro Payments, while many companies that benefited from JobKeeper also had