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.


Telstra circles NBN

Telstra executive Nikos Katinakis says its 5G network now covers over 40% of the Australian population, with 75% coverage expected to be achieved by June 2021: “We’re now in more than 2000 sites across the country, and in over 60 cities and towns, and 1400 suburbs that have 50 per cent coverage or more,” Mr


Labor’s childcare policy not as good as it appears

The Grattan Institute has given a ‘tick of approval’ to Labor’s $6.2 billion childcare policy, which proposes to increase the maximum Child Care Subsidy from 85% to 90%, slow down the rate at which the subsidy tapers off, and remove the annual cap: It’s economic reform, not welfare As veteran commentator John Durie points out: “When a


Public servants want to keep working from home

Australia’s overlords are furiously trying to force public servants to discontinue working from home (WFH) and return to the office. At the end of last month, the Australian Public Service Commission directed agencies to start bringing employees back to their usual place of work. Prime Minister Scott Morrison also urged public servants to return to


NSW overtakes VIC in new COVID-19 infections

Australia has recorded 25 new COVID-19 infections, comprising 13 in NSW and 12 in Victoria: Fortunately, only one is from an unknown source and six were international arrivals in hotel quarantine: Metro Melbourne’s infection rate has begun to creep up: And the 14-day moving average has risen slightly to 10, double the target of 5


Lies, damned lies and population statistics

Demographic researcher, Mark McCrindle, has taken scaremongering over Australia’s lower projected population growth to new lows: Australia could finish the decade with up to 1.7 million fewer people than had previously been forecast as a result of the “large and likely long-lasting” effects of the global coronavirus pandemic… In McCrindle’s first scenario, “the snap back”,


Early superannuation withdrawals slow some more

APRA has published its early superannuation release data for the week ended 4 October, which revealed that only $242 million was withdrawn from Australia’s superannuation system, taking the total amount withdrawn early to $34.1 billion: According to APRA: Over the week to 4 October, superannuation funds made payments to 33,000 members, bringing the total number


Dan Andrews has no excuse to continue lockdown

In yesterday’s daily press conference, Victorian Premier Daniel Andrews swatted away a question about easing Victoria’s draconian lockdowns (watch from 37 minute mark in above video): Question: “Have you heard the comments from the WHO about lockdowns and encouraging governments to not use lockdowns as the primary source of suppressing the virus? Especially when the


Labor: Extend ProfitKeeper wage subsidy scheme to all

Labor, crossbenchers and the Greens are reportedly threatening to block the Morrison Government’s JobMaker program unless it is extended to all age groups: Scott Morrison’s $4bn wage subsidy scheme for new employees aged up to 35 could be derailed in the Senate by Labor, crossbenchers and the Greens, with the government staring down pressure to


NSW games Herr Depressionberg’s infrastructure fail

Via Domain: NSW ministers have been told to spend their share of the Berejiklian government’s $3 billion COVID-19 acceleration fund on fulfilling their election promises instead of new projects. A directive from the Premier’s office, dated June 29 this year, said it was the responsibility of all ministers to ensure that they honoured the pledges


Booming education exports take food from Aussie poor

Via The Fake Left: Demand for food relief has risen by 47% on average during Covid-19, Australian charities say, with the trend driven by growing numbers of international students and casual workers asking for help. In a report to be released on Monday, Foodbank surveyed about 500 charities once a month between April and September,


The great Aussie household deleveraging

Data released this month suggests Australian households are deleveraging at a furious pace. First, the latest credit aggregates data from the Reserve Bank of Australia (RBA) revealed that the stock of personal credit collapsed by 12.5% in the year to August – the biggest decline in recorded history: Second, new car sales data from the Federal


Austrian Government: Will do more of same when unstimulus fails

It’s ineptitude on a grand scale. First, put forth a policy that defies all basic economic logic, from Domain: Small business is cautious about hiring more people during the pandemic despite incentives in the federal budget aimed at a business-led recovery from the recession. …Peter Strong, head of small business advocates COSBOA, says the $4


Past time Victoria opened

At MB we’ve been patient with lockdowns but that time has passed. Victoria has contained the virus and it’s time to open up: Local cases are very small and consistent: Unknown source cases are tiny: Based upon NSW experience, total cases should be containable at this level with contact tracing, especially coming into summer: Manchurian


Herr Frydenberg is Austrian not Australian

At Murdoch’s Coalition Propaganda HQ the budget is a cash splash with no equal: Millions of workers will have a pay cheque boost within weeks after the federal budget was rushed into law — including tax cuts projected to inject $7bn into the economy by mid-2021. Scott Morrison’s economic ­recovery plan, which passed both houses


Peta Credlin probes Dan Andrews in public questioning

Sky News’ Peta Credlin has crashed Premier Daniel Andrews’ daily COVID-19 briefing to probe him on his government’s hotel quarantine lies and obfuscation. In the video below, Credlin asks Andrews why Victoria’s Emergency Management Commissioner Andrew Crisp won’t be stood down after admitting yesterday that he failed to brief the Police Minister and Emergency Services


Victoria’s contact tracing still a confusing mess

In August’s Four Corners report on Victoria’s bungled hotel quarantine, Australian Medical Association (AMA) president, Julian Rait, described Victoria’s contact tracing system as shambolic: STEPHANIE MARCH: As the number of new cases climbed the state’s contact tracing system was failing to keep up… There are multiple accounts of the contact tracing system’s dysfunction… PAT McGRATH,


Don’t fret over the national debt

The usual suspects are fretting over the Australian Government’s ballooning debt, claiming we will leave a nasty legacy for future generations: “On very optimistic projections, we don’t think Australia will be debt-free until the early 2080s,” said Cian Hussey, research fellow at conservative think tank the Institute of Public Affairs. The Federal Government has committed


Australia records 21 new COVID-19 infections

Australia recorded 21 new COVID-19 infections, down from 25 yesterday: Victoria recorded 11 new infections, with Melbourne’s 14-day average falling marginally to 9.4, still nearly double the 5 required to remove draconian restrictions on 19 October: NSW recorded 10 new infections with 5 locally acquired: There are now 245 active cases in Australia, with 195


Victoria embroiled in another hotel quarantine bungle

Last week it was reported that private security guards had been pulled from a Melbourne quarantine hotel and replaced by police after a health worker raised fears about infection control breaches: Staff employed by Spotless were pulled from the floor of the last remaining “hot” quarantine site – the Novotel in Southbank – mid-shift. The


Population dishonesty spews from Aussie media

The Australian media has already begun to spread a web of lies over the federal budget’s population projections, warning of a dire population collapse. According to The Age, the latest budget forecasts will see “Victoria’s population down 400,000“: The state worst-hit by the pandemic is now expected to have almost 400,000 fewer people by the


Transurban pummeled by plunging traffic volumes

Toll road giant, Transurban, continues to be hammered by plunging traffic volumes from COVID-19: Toll roads operator Transurban has updated the market on the September quarter, unveiling an average daily traffic figure down 25.2 per cent for the period… Still, chief executive Scott Charlton said in a speech released to the ASX ahead of the


Why the OECD should tell Cormann to bugger off

Via the AFR: Prime Minister Scott Morrison has asked Labor to support nominating Finance Minster Mathias Cormann to become the next secretary-general of the Organisation for Economic Co-operation and Development. Mr Morrison will announce later on Thursday morning that the government will nominate the outgoing Finance Minister for the Paris-based role which has a tenure


There’s a recession, but it’s not “pink”

Women’s groups have attacked the federal government for failing to support women during what they call a “pink recession”: “Women are nowhere in this budget, and where is the vision and foresight? I expected more reform – they knew it was a pink recession, what were they thinking?” prominent non-executive director Ming Long said. “The


COVID-20 Winter is coming

Cross-posted from Swiss Medical Weekly. Summary A novel coronavirus (SARS-CoV-2) first detected in Wuhan, China, has spread rapidly since December 2019, causing more than 100,000 confirmed infections and 4000 fatalities (as of 10 March 2020). The outbreak has been declared a pandemic by the WHO on Mar 11, 2020. Here, we explore how seasonal variation