Via The Australian: Small and medium-sized businesses employing eight million workers will be given up to $25,000 in cash, and instant asset writeoffs will be extended to 3.5 million businesses, under a stimulus package worth almost $18bn. Pensioners will also be the key beneficiaries of a household cash payment to be announced on Thursday, under
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.
The entire border. Coast-to-coast. Nobody but Australians in and out. And if they are returning then they must go into three weeks quarantine with jail if violated. Why? Because there is no point doing half measures with COVID-19. If the virus gets in then it is going to wreak havoc. The entire private sector, and
The latest credit aggregates data from the RBA revealed that both personal and mortgage credit growth has collapsed, with personal loan growth declining by 5.0% in the year to January 2020 and mortgage growth tracking at just 3.1% – just above lowest level in recorded history: The decline in mortgage credit growth comes at the
Welcome to Australia’s ScoMo-prime housing bust. Here’s the blowoff: Inspired by the Realty PM, who promised rising house prices forever and, to ensure it, guaranteed the deposits of sub-prime FHBs. Needless to say, he got them very excited, driving up auction clearances: Sending house prices back to the moon: And driving the average new loan
The Australian Bureau of Statistics (ABS) has released its experimental labour market accounts for the December quarter, which reveals that healthcare and social assistance continued to drive jobs growth in calendar year 2019, with the number of jobs in this industry surging 5.3% year-on-year: Much of this latest increase can be attributed to the ongoing
Via FTAlphaville: In the first of what we imagine will be many targeted fiscal policies to alleviate the economic stress from the Coronavirus panic, news from quarantined Italy this Tuesday morning. Via the FT’s Miles Johnson: Italy’s deputy finance minister has said the government will suspend mortgage payments and other household bills across the entire country
While ordinary Australian households tread water financially, experiencing zero growth in household disposable income over more than seven years: Australia’s ultra-wealthy population is projected to balloon further over the next five years, according to the Knight Frank Wealth Report: The data shows Australia’s ultra-high-net-worth-individual (UHNWI) population will rise to 4,881 by 2024, up from 3,796
Via The Guardian: The University of Tasmania will slash hundreds of courses from its curriculum as part of a major overhaul driven in part by an “overreliance on China” and the impact of the coronavirus. On Tuesday, the university’s vice chancellor Rufus Black told staff the university was “facing sustained headwinds” to being sustainable, and would cut
The Australian’s Adam Creighton has taken direct aim at Australia’s rent-seeking, bloated university sector, calling on policy makers to bring them to heel: For waste and perverse incentives it’s hard to go past the nation’s 39 universities… whose swollen bureaucracies have become ground zero for highly paid BS jobs in “strategy, engagement, culture” et cetera.
John Daley and Matt Cowgill have penned a thoughtful analysis of the coronavirus on the Grattan Institute’s Blog, arguing that the Australian Government must take decisive action now to limit social gatherings in order to slow the spread of the virus and prevent it from becoming a full blown pandemic: Australia currently has 100 diagnosed
Via Westpac: • The Westpac-Melbourne Institute Index of Consumer Sentiment fell 3.8% to 91.9 in March from 95.5 in February. The worsening coronavirus outbreak and associated rout in financial markets have had a major impact on sentiment this month. The Index has hit a five year low. In fact it is the second lowest level
A glimpse inside northen Italy hospitals: Jason Van Schoor @jasonvanschoor Registrar in Anaesthesia & ICM | NIHR UCL Academic Clinical Fellow From a well respected friend and intensivist/A&E consultant who is currently in northern Italy: 1/ ‘I feel the pressure to give you a quick personal update about what is happening in Italy, and also give some
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Slowly but surely, Australia’s commentariat is coming to the conclusion that Australia’s population ponzi economy is failing to deliver rising living standards for the incumbent population. Over the weekend, Ross Gittins delivered the following harsh assessment: The greatest single factor driving household disposable income is income from wages… And we also know that, for five
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With Australian new car sales plummeting for 23 consecutive months: Martin Ward, CEO of car dealership AP Eagers, which has a network of 200 dealerships across Australia, claims the Australian automotive sector needs a special stimulus package from the federal government. Ward says measures the sector would like to see the government consider include accelerated
2020 was already shaping as a tough year for Australia’s construction industry. According to the ABS, dwelling approvals collapsed in the 2019 calendar year, down 28% from peak, with commencements following close behind: Now, picture has worsened with Australian Shop & Office Fitting Industry Association CEO, Gerard Ryan, claiming its members are looking at delays
From NAB: Both confidence and conditions declined this month (after a period of stabilisation in conditions), though it appears too early to fully quantify the effect of the coronavirus with around 50% of firms reporting no impact to date. That is surprisingly small but, in our view, will clearly deteriorate going forward. Even so confidence
Via ANZ: Consumer confidence fell 4.2% last week. This was the third consecutive fall, for a cumulative decline of more than 8%, taking the index to a low last seen in May 2014. ‘Current economic conditions’ fell 8%, adding to the massive 16.6% decline in the previous reading. ‘Future economic conditions’ bucked the trend with
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An important post from Rodney Lay at LiveWire: A near unprecedented crash in equities, oil smashed, 10Y Treasury futures soaring, and also for the first time in over a decade in that market, locked limit up for about an hour prompting a brief trading interruption. And, the entire US Treasury curve – including the 30Y
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Via Bill Evans at Westpac: Westpac has revised its growth forecasts for the Australian economy in 2020 to take into account the expected impact from the Coronavirus. The numbers are based on a “no fiscal stimulus package” basis. The Government is set to announce its policy response later in the week and it will be
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Via The Australian: Scott Morrison has jettisoned the budget surplus to fund a coronavirus stimulus package of almost $10bn in a bid to stave off a recession. Treasurer Josh Frydenberg conceded in meetings last week the forecast $5bn surplus this financial year would need to be sacrificed for a “substantial” fiscal package to inject short-term
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