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.

1

RBA: Newstart lift would stimulate economy

In a Q&A after Tuesday’s address to ACOSS, assistant RBA Governor, Guy Debelle, admitted point blank that lifting Newstart would provide the economy with stimulus: Guy Debelle: “Newstart has been constant in real terms for the past five or six years. Sorry, 25 years… If those people got higher income, would they spend it? Probably

7

David Jones confirms crushed consumer

Via JSE Woolworths on David Jones: WHL: WOOLWORTHS HOLDINGS LIMITED – Trading update: 20 weeks ended 17 November 2019 Trading update: 20 weeks ended 17 November 2019 Woolworths Holdings Limited (Incorporated in the Republic of South Africa) Registration number 1929/001986/06 Share code: WHL Share ISIN: ZAE000063863 Bond code: WHLI (`the Group´) TRADING UPDATE: 20 WEEKS

0

Actual capex records minor fall

The Australian Bureau of Statistics (ABS) today released data on capital expenditures (capex) for the September quarter, which registered a 0.2% seasonally adjusted fall in capex volumes over the quarter and a 1.3% decrease over the year (see below table). The 0.2% quarterly decline missed market expectations of 0.0%. The first chart below shows actual

2

Capex intentions ring alarm bells

More alarm bells for the Aussie economy with business investment begin to waver: Total capital expenditure Estimate 4 for total capital expenditure for 2019-20 is $116,692m. This is 2.5% higher than Estimate 4 for 2018-19. Estimate 4 is 3.4% higher than Estimate 3 for 2019-20. Mining Estimate 4 for Mining for 2019-20 is $38,386m. This

3

Aussie towns lash Coalition’s regional visa farce

Predictably, Australia’s towns are unhappy about the Morrison Government’s farcical deeming of Perth and the Gold Coast as “regional” despite being bonafide metropolitan areas: Small regional towns like Swan Hill in Victoria are now competing for migrant workers against cities like Perth and the Gold Coast… Jason King’s business needs workers with skills, but it’s

14

Uber, not mass immigration, blamed for traffic gridlock

With Melbourne’s population having soared by around 600,000 people over the past five years: And the city turning into one giant construction site, a Victorian parliamentary committee is trying to pin the blame for Melbourne’s growing congestion on ride sharing services like Uber: The growth of ride-share vehicles since Victoria’s taxi industry was deregulated two

29

Australia aggressively targets Indian international students

Over the past five years, Indian international student enrolments across Australia’s educational institutions has skyrocketed by 138% to 126,000 as at August 2019: The number of Indian student visa applications granted has also soared by 125% over the past three years alone, signalling a further lift in enrolments: This explosion in Indian student enrolments is

3

Desperados wait for infrastructure Godot

It’s amusing to watch the dunderheads wait the infrastructure Godot, from the HIA: “The impact of the credit squeeze that caused the rapid deterioration in building conditions over the past 18 months is evident in today’s construction data,” stated Angela Lillicrap, HIA Economist. “This is the right time in the economic cycle for governments to

21

80% of accountants to be automated. So why is Australia importing them?

The CEO of ASX-listed accountancy software company Xero believes 80% of accountancy jobs will be automated: According to data from asset manager Schroders, there’s an 80 per cent probability that a given accountancy job will be automated within 20 years. So if the profession is to survive, it will have to evolve, warns Steve Vamos.

60

Ross Gittins: High immigration is wrecking the Aussie way of life

Ross Gittins has done a great job covering Sustainable Population Australia’s (SPAs) new discussion paper entitled “Population growth and Infrastructure in Australia: the catch-up illusion”, of which I was the lead author: …despite the growth in the economy, on average our material standard of living is stagnant. All that immigration isn’t making the rest of

9

Australian residential construction work dives

The ABS has released data on the value of construction work done for the September quarter of 2019, which registered another 0.4% seasonally-adjusted decline in total construction activity over the quarter – the fifth consecutive quarterly decline – and a 7.9% decrease over the year: However, the result beat analysts’ expectations of a 1.0% decline

4

Surge in ‘low-skilled’ visas delivers low productivity economy

Dr Bob Birrell and David McCloskey have released a an excellent report, entitled Australia’s ‘Jobs and growth’ strategy: pathway to a low productivity economy, which argues that surging low-skilled migration is undermining wage growth and creating a low-productivity economy. Below are key extracts: Attempts to kick start growth in the Australian economy have so far

49

Population growth and Infrastructure: the catch-up illusion

Yesterday, I flew up to Sydney to launch a new discussion paper with former NSW Premier Bob Carr, entitled “Population growth and Infrastructure in Australia: the catch-up illusion”, of which I was the lead author. This paper was commissioned by Sustainable Population Australia (SPA), which “is an Australian, non-partisan, special advocacy group that seeks to

30

Business Council turns Chinese central planner

Via Domain: The Morrison government must select 10 regional towns to power the economy outside of Sydney and Melbourne, Australia’s top business lobby has warned, calling for a list of cities with airports, universities and industry to be given special status to stimulate economic growth. Geelong, Ballarat, Newcastle, Wollongong, Toowoomba and Busselton would be among

36

Disgraceful Debelle pretends to care about wages

From the Lunatic RBA: Employment and Wages Guy Debelle Over much of the past three years, employment has grown at a healthy annual pace of 2½ per cent. This has been faster than we had expected, particularly so, given economic growth was slower than we had expected. Employment growth has also been faster than the working-age population

20

NSW Planning Minister: Population growth impossible to control

After last week attacking so-called “NIMBY baby boomers” for opposing high-rise development across Sydney, NSW Planning Minister, Rob Stokes, claims it is “a completely quixotic quest” to try and control Sydney’s growth [my emphasis]: In the next 17 years, Sydney’s population is expected to grow by 1.5 million people, a large percentage of whom will

9

Recessionberg destroys consumer confidence

It appears the Scummo/Recessionberg team is worse than the disastrous 2014 Abbott/Hockey Budget nightmare. Via ANZ: Confidence drops to four year low  The index continues its losing streak, falling 2.8% last week to its lowest level in more than four years. Weakness is across the board.  Current financial conditions fell 0.1%, while future

18

Dodgy ghost colleges target Indian international students

Another report has emerged on how private ghost colleges providing fake diplomas are targeting international students from India: In the recent past, Australia’s vocational education and training (VET) sector has been rocked with scandals that in worst cases have led to arrests, fraud and have unearthed the reality of ‘ghost colleges’ exploiting vulnerable international students.

17

MB Sydney Presentation: population growth and infrastructure

Tomorrow, I will be flying up to Sydney to launch a new research paper, entitled Population growth and infrastructure in Australia: the catch-up illusion, commissioned by Sustainable Population Australia (SPA): Former NSW Premier and SPA Patron, Bob Carr, will also be presenting at the conference. The event is free and can be booked at the

5

ANU: Coalition’s visa reforms won’t shift migrants to regions

MB has frequently ridiculed the push by the Morrison Government towards decentralisation, noting that this is a pipe dream based on the settlement pattern of new migrants, which have overwhelmingly chosen to flood the major cities: Well, the situation is even worse than presented above with new ANU research of settlement patterns showing that around

13

Make Sunshine Great Again

Via the Herald Sun: A new sports stadium, a second home for the National Gallery of Victoria and extra tram lines are part of former premier Steve Bracks’ vision to transform Melbourne’s inner west. Mr Bracks is leading the charge to create 50,000 new jobs in Sunshine, which he says should include government services being shifted from

12

Unions: ALP “completely sold out” working people on FTAs

Allen Hicks, the Electrical Trades Union’s (ETU) national secretary, claims Labor has “completely sold out” working people and betrayed its own policy platforms by backing free trade agreements (FTAs) with Indonesia, Hong Kong and Peru. Accordingly, the ETU has passed a resolution to cease providing donations to federal Labor; although it will continue to offer

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China is marching on Australia and we are horribly unprepared

Pretending to care is the bete noir of modern politics. As a singular globalisation ideology has moved inexorably foward, politicians and media have become little more than baubles adorning an unstoppable machine. They pretend to care about various interests groups impacted but nobody really challenges the status quo. Now this phony debate has taken a

8

Australia’s $37.6b international student export con

Australia’s Education Minister, Dan Tehan, issued a media release spruiking that Australia’s education ‘exports’ surged by $5 billion in 2018-19 to a record high $37.6 billion: International education contributed $37.6 billion to the Australian economy last financial year, which was a $5 billion increase. Australian Bureau of Statistics figures released yesterday found the economic contribution

21

Sydney schools run out of play space

The destruction of Australia’s once famed quality of life continues with Sydney’s schools fast running out of play space: Department of Education figures show 43 of the state’s 2200 schools have less than the required 10sqm of play space per student, although most were built decades ago in densely-populated inner city areas where land is