Earlier this week, Victoria’s public sector union reached agreement with the Andrews State Government regarding a pay rise for public servants. A 2% pay rise was awarded, along with a mobility clause and 16 weeks’ parental leave for primary and secondary carers, which effectively increased the pay rise to more than 3%: Treasurer Tim Pallas
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.
Via the ABC: The widespread shutdown of global supply chains caused by COVID-19 has been good news for Adelaide metal printing company AML3D. “We’ve seen quite a reasonable increase, probably two-fold from what we would normally get,” founder and managing director Andy Sales said. His company makes metal parts, such as propellers and compressors for
The Melbourne Institute’s latest Taking the Pulse of the Nation survey shows that 45% of Australians are spending less now than prior to the onset of the COVID-19 pandemic. The survey also shows that 33 per cent of respondents still expect to be spending less at the end of 2020 compared to pre-coronavirus levels, while
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Nineteen new cases today: 19 new cases of #COVID19 have been diagnosed in NSW between 8pm on 21 July and 8pm on 22 July. For the latest list of COVID-19 locations, visit: https://t.co/6PUOQ3J3tO pic.twitter.com/LatYpL5uBO — NSW Health (@NSWHealth) July 23, 2020 More: That is freakin’ everywhere. The chart versus VIC is not encouraging though it
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Australian Medical Association (AMA) President Tony Bartone is calling for a nationwide mask policy, arguing Australia would not be in the position it was now if masks were more prevalent earlier in the pandemic: “We’re recommending that it should be extremely, ubiquitously recommended everyone wear a mask to reduce the spread,” he told Sky News.
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