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.
After weeks of heavy falls, Roy Morgan’s business confidence index has rebounded following the release of roadmaps by the NSW and Victorian Governments out of lockdowns: This month, September 2021, Roy Morgan Business Confidence increased 3.1pts (+3.1%) to 104.6. Business Confidence has increased for the first time since May following the outlining of re-opening plans
By Gareth Aird, CBA’s head of Australian economics Key Points: Household deposits have risen by more than household credit over the pandemic due to the extraordinary size of government transfer payments. Fiscal stimulus due to the COVID shock has been indirectly funded by RBA bond buying (QE), which constitutes money creation. We expect the potent
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NSW Health has reported another 863 locally acquired COVID cases and 15 deaths: NSW recorded 863 new locally acquired cases of COVID-19 in the 24 hours to 8pm last night. Three new cases were acquired overseas, and seven previously reported cases have been excluded following further investigation. pic.twitter.com/wAVOsYlxxY — NSW Health (@NSWHealth) September 29, 2021
Yesterday I reported on a draft strategy on Sydney’s future water supply, which warned that the city faces acute water shortages as its population swells on the back of mass immigration: This draft strategy followed similar warnings from the Productivity Commission that our cities face chronic water shortages in the decades ahead as their populations
I have been warning about this for the last six months or so. 2022 is not shaping well for the Australian economy. We’ll be reopening and that’s a big positive but it will be troubled as it takes time for households to adjust to the new normal of endemic illness. Moreover, a series of shocks
The Australian’s Robert Gottliebsen has demanded a rapid return to mass immigration to back fill the oversupply of property investment and infrastructure: Our nation is structured on migration plus overseas students covering a declining birthrate, but migration and student intake have stopped. We will need to start them again… Around Australia we are building large
Victoria’s COVID outbreak continues to worsen, recording 950 locally acquired COVID cases and seven deaths: Reported yesterday: 950 new local cases and 0 cases acquired overseas. – 34,028 vaccines administered – 61,322 test results received – Sadly, 7 people with COVID-19 have died More later: https://t.co/OCCFTAtS1P#COVID19Vic #COVID19VicData pic.twitter.com/U59hwEnpLx — VicGovDH (@VicGovDH) September 28, 2021 The
Yesterday saw Victoria’s daily COVID cases (867) overtake NSW’s (863), with the two jurisdictions also travelling on a very different trajectory: Once you adjust for other factors, however, Victoria’s COVID outbreak is vastly worse than NSW. First, NSW’s daily cases have been recorded off a testing base that is more than double Victoria’s: Over the
Chief Health Officer (CHO) Paul Kelly has given evidence to the Senate COVID-19 inquiry explaining how vaccination is working to prevent severe COVID infection: Only 3 per cent of intensive care admissions are vaccinated. He says no one 16-69 who is vaccinated has been admitted to intensive care… “The strongest possible incentive to be vaccinated
From ANZ-Roy Morgan: Consumer confidence increased slightly by just 0.4% last week making it the third consecutive week of small gains. A fall in confidence in Melbourne, regional NSW and Queensland was balanced by increases in SA and WA. ‘Weekly inflation expectations’ rose 0.1ppt, reaching a fresh pandemic-high of 4.8%. The four-week moving average also
Earlier this year, the Productivity Commission (PC) released an alarming report warning that Australia’s cities face chronic water shortages in the decades ahead as their populations swell by a projected 11 million people: Looking ahead, climate change and population growth present significant risks to the security of Australia’s water resources. Drought conditions are likely to
The Australian Bureau of Statistics (ABS) has released retail sales data for August, which fell another 1.7% over the month and 0.7% year-on-year: The lockdown jurisdictions of NSW, Victoria and the ACT experienced the biggest declines: Discretionary retail also led the falls: According to Ben James, Director of Quarterly Economy Wide Surveys at the ABS:
NSW Health has recorded 863 locally acquired COVID cases and seven deaths: NSW recorded 863 new locally acquired cases of COVID-19 in the 24 hours to 8pm last night. pic.twitter.com/4JX5b6PIgL — NSW Health (@NSWHealth) September 28, 2021 The age profile of the deceased are as follows: One person was in their 40s One person was
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The NSW Government yesterday updated its reopening roadmap, which is far more generous than Victoria’s. Both roadmaps are based on achieving 70% and then 80% full vaccination thresholds, which NSW will hit first: On the Monday after NSW hits its 70% full vaccination threshold (11 October), fully vaccinated Sydneysiders will be allowed to have people
By Callam Pickering, economist at global jobs site Indeed: Key points: Christmas job postings per million postings for Australia on Indeed are tracking similarly to previous years, showing rising demand for labor extends to holiday and seasonal jobs. Search activity is also tracking well, with the strong demand for talent providing excellent opportunities for jobseekers.
We all know that the real reason the Morrison Government is so keen to open the international border is to resume the wage-crushing mass immigration trade. In the last cycle, we saw floods of subaltern slaves rewrite the rules in the Australian labour market. Wage theft became commonplace, wages bills became profit centres via visa
NSW Health has reported 787 locally acquired COVID cases and 12 deaths: NSW recorded 787 new locally acquired cases of #COVID19 in the 24 hours to 8pm last night. pic.twitter.com/8Qkdwzp9qA — NSW Health (@NSWHealth) September 27, 2021 The age profile of the deaths are as follows: Four people were in their 60s Two people were
Victoria has recorded 705 new COVID cases and one death: Reported yesterday: 705 new local cases and 0 cases acquired overseas. – 29,657 vaccines administered – 51,252 test results received – Sadly, 1 person with COVID-19 have died More later: https://t.co/eUcG50Y3T0#COVID19Vic #COVID19VicData pic.twitter.com/rVOUjXT1BA — VicGovDH (@VicGovDH) September 26, 2021 It was the lowest daily case
NSW Health has recorded another 961 locally acquired COVID cases and nine deaths: NSW recorded 961 new locally acquired cases of COVID-19 in the 24 hours to 8pm last night. pic.twitter.com/YVkh2ESe5L — NSW Health (@NSWHealth) September 26, 2021 The age breakdown of the nine deaths are as follows: One person was in their 40s Two
Victoria has recorded another 779 locally acquired COVID cases over the past 24 hours and two deaths: Reported yesterday: 779 new local cases and 0 cases acquired overseas. – 34,280 vaccines administered – 46,322 test results received – Sadly, 2 people with COVID-19 have died More later: https://t.co/OCCFTAtS1P#COVID19Vic #COVID19VicData pic.twitter.com/8J2JOHhd7O — VicGovDH (@VicGovDH) September 25,
NSW Health has recorded another 1007 locally acquired COVID cases and eleven deaths: NSW recorded 1,007 new locally acquired cases of #COVID19 in the 24 hours to 8pm last night. pic.twitter.com/RnTjQmBwFW — NSW Health (@NSWHealth) September 25, 2021 The age breakdown of the deaths are as follows: One person was in their 40s One person
As Melburnians awake to another miserable cold Spring day and the 237th day of lockdown, they also learn that Victoria has recorded 847 locally acquired COVID cases and one death: Reported yesterday: 847 new local cases and 0 cases acquired overseas. – 37,220 vaccines administered – 59,342 test results received – Sadly, 1 person with
Monash University is the latest higher education institution to be embroiled in a wage theft scandal. Academic staff who are employed on a casual basis are owned some $8.6 million in backpay over a period of more than six years, and Ben Eltham from the National Tertiary Education Union (NTEU) warns that the final figure
Callam Pickering, economist at global jobs site Indeed, has updated job postings data to 17 September 2021, which shows that job postings have rebounded: At 48.6% above their level on February 1 last year they are just 1.9% below their peak. Despite lockdown, the Australian economy is still creating a lot of job opportunities and
The Aussie bond market is on the move and it is sending some pretty whacky signals. The long-end is backing up fast: Following the US: While ignoring China which has flattened out but yields are still trending down: This has jackknifed the Aussie bond curve higher signalling an imminent boom in something. Either growth or
NSW Health has recorded another 1043 locally acquired COVID cases and 11 deaths: NSW recorded 1,043 new locally acquired cases of COVID-19 in the 24 hours to 8pm last night. One new case was acquired overseas, and 18 previously reported cases have been excluded following further investigation. pic.twitter.com/gOLrGYJGWb — NSW Health (@NSWHealth) September 24, 2021
Yesterday, the ABS released labour market data for the August quarter, which provides a good snapshot of how the jobs market has changed over the pandemic. Australia lost 146,600 jobs over the August quarter as NSW, Victoria and the ACT were plunged into lockdowns. These losses were driven by Accommodation & Food Services (-65,000), followed
Victoria has recorded another 733 new locally acquired COVID cases and one death: Reported yesterday: 733 new local cases and 0 cases acquired overseas. – 41,029 vaccines administered – 56,520 test results received – Sadly, 1 person with COVID-19 has died More later: https://t.co/OCCFTAtS1P#COVID19Vic #COVID19VicData pic.twitter.com/hGe4LryS0q — VicGovDH (@VicGovDH) September 23, 2021 The next chart
