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.


Phil Lowe paid $1 million to attack executive pay

RBA Governor, Phil Lowe, has taken aim at the exorbitant pay of Australia’s executives, which comes at a time when Australian households are suffering seven years of stagnant real disposable incomes: From The AFR: Reserve Bank of Australia governor Philip Lowe has criticised the business community for extraordinary high salaries saying people should be happy


International students flood universities with cash

The Centre for Independent Studies (CIS) recent report on Australia’s international student industry warned that universities had badly lowered entry and teaching standards to attract the highest share of international students in the developed world: Australian universities routinely compromise admissions standards to accommodate international students. Preparatory programs for students with lower English language test scores


Self-serving planners decry Big Australia “debacle”

David Williams – chief executive officer of the Planning Institute of Australia, which represents qualified urban and regional planners across the country – has penned an article in The SMH decrying that Australia is “sleepwalking towards a three-megacity debacle” courtesy of Australia’s mass immigration policy: The Planning Institute of Australia agrees: population growth and infrastructure


Coalition’s Canada-style visa system doomed to fail

It is fascinating watching our political masters play mental gymnastics and contort themselves over how to accommodate the extra 17.5 million people projected to arrive under the mass immigration ‘Big Australia’ policy: Instead of addressing excessive population growth at the source by winding immigration back to historical levels: Our policy makers throw up self-defeating schemes


Can bullshit jobs be high paid?

Economic blogger Jason Murphy says they can at Crikey: Australia’s services industry is booming. But the transition away from traditional industries (manufacturing etc) is making some people extremely nervous. The old good jobs are going, they say. This idea is the prime focus of a 2018 book by Jennifer Rayner, titled Blue Collar Frayed. Rayner


Why Chinese international students turned backs on Australia

Several commentators have warned that Australia’s long boom in Chinese international students is finally coming to an end, brought about by the US-China trade war, a weakening Chinese economy and yuan, as well as souring relations between Australia and China. Here’s Bloomberg’s Michael Heath: Australia is losing its appeal for Chinese tourists and students as


Lib/Labs blow population smokescreens at Aussie voters

With immigration into Australia continuing to run rampant: And Australia’s population projected to balloon by another 17.5 million people over the next 48 years, driven purely by mass immigration: Both Labor and the Coalition continue to throw up smokescreens to alleviate voters’ concerns. Today, Population Minister Alan Tudge has again spruiked the Coalition’s ‘migrants to


NSW Planning Minister rejects mass immigration madness

Two years ago, NSW Planning Minister, Rob Stokes, pushed-back against the federal government’s blind march towards a ‘Big Australia’, claiming it is leaving Sydney forever struggling to keep pace: Rob Stokes said the state government was left trying to retrofit the NSW’s infrastructure and services to an expanding population, without a clear, transparent trajectory of


What Saudis can teach Australia about coal

Via Jacob Brown, Future Energy Leader – Institution of Chemical Engineers (IChemE) from  The World Economic Forum: On 18 May this year, Australia had the most surprising election upset in decades. The coal-supporting Liberal-National coalition wrenched victory from the jaws of defeat in what had been termed the ‘unloseable election‘ for the opposition. Against all


CBA Australian Flash PMI bounces along bottom

Via CBA: Business activity in the Australian private sector returned to growth in September, according to the latest Commonwealth Bank Flash Composite PMI®. The rebound reflected an improved picture among service providers, but manufacturers posted a first decline in the health of the sector since the survey began in May 2016. Overall, new order growth


International student exploitation rife among migrant employers

Like Groundhog day, another report has emerged about wage theft from international students, who have been “unpaid and intimidated” by unscrupulous employers: An Indian international student claims he was intimidated, exploited and cheated by his employer who threatened to get him deported if he complained to anyone… Sriman Mottala arrived in Melbourne in July 2014


UK pops Australia’s Indian international student bubble

It is fair to say that India has become Australia’s key growth market for international students. In 2018-19, Indian student enrolments at Australian educational institutions surged by 29,000 (39%), easily surpassing student enrolments from China (8,400) and Nepal (16,000) over the same period: India has also led growth in student visa applications, according to the


Youth underemployment hits all time high

Yesterday’s ABS labour force release for August revealed a mixed Australian youth labour market – i.e. those aged 15 to 24 years old – with falling unemployment offset by a record rise in underemployment. The trend headline unemployment rate fell slightly to 11.80% in August: Total employment growth for those aged 15-24 years rose marginally


Government needs a lot more jails for bosses

A lot more. Via Domain: Attorney-General Christian Porter says he is prepared to legislate “significant” wage theft penalties – likely to be up to 10 years’ jail – to deter the “unacceptable” practice of persistently underpaying workers, as the government grapples with stagnant wages and a slowing economy. In a wage theft discussion paper to


Unemployment has much futher to rise

Some charts from Damien Boey at Credit Suisse offering a lead on the labour market after yesterday’s weakening read: I can see this coming as: dwelling construction crashes; infrastructure starts to plateau; the NDIS roll out halves; and consumption remains weak. If we get anywhere zero employment growth then the unemployment rate will spike straight


Temporary visa deluge fuels modern slavery

The OECD’s annual review of migration trends has revealed that Australia and New Zealand have the largest temporary migrant workforces in the world, which is raising competition for lower-income workers and suppressing wages: Australia had almost 750,000 permits for temporary migrants on issue in 2017, second in total number only to the US. As a


Net immigration surges to 250,000

The Australian Bureau of Statistics (ABS) yesterday released its Australian Demographic Statistics for the March quarter of 2019, which revealed that Australia’s population continues to grow manically led by surging net overseas migration (NOM), mostly into Sydney and Melbourne. According to the ABS, Australia’s population rose by 1.6% in the year to March 2019, well


What Scott Morrison should tell Donald Trump

This is what Australians are up against. The nation’s leading business paper has completely lost faith in its own system. From the AFR editorial: …where we really part company with Washington is that we don’t accept that China is a strategic competitor that must be contained. Mr Morrison has instead revived the Menzian formula of


Australian CEOs bask in “culture of entitlement”

Recently, average CEO pay packets in the top 100 Australian companies surpassed $5 million, according to research from The Australia Institute: Now, the latest CEO pay report from the Australian Council of Superannuation Investors (ACSI) shows that Australia’s top earning CEOs were paid 280-times the average Australian full-time salary of $85,000, which ACSI describes as “a


ABS employment in detail: more wages gloom

As summarised earlier, the Australian Bureau of Statistics (ABS) today released its labour force report for August, which registered a 34,700 increase in total employment but an increase in the headline unemployment rate (from 5.2% to 5.3%) due to a 0.09% increase in labour force participation. However, the underemployment rate rose by 0.2% in seasonally


Business Council shill: ‘Big Australia’ will save economy

Adam Boyton, chief economist of the Business Council of Australia (BCA), has penned a spurious article claiming that mass immigration will prevent the Australian economy from experiencing the economic declines experienced in places like Japan and Europe: One difference between the US on the one hand and the eurozone and Japan on the other is


Australian unemployment climbs

Via the ABS just now comes Labour Force for August: AUGUST KEY POINTS TREND ESTIMATES Employment increased by 22,000 to 12,921,100 persons. Full-time employment increased by 7,200 to 8,828,400 persons and part-time employment increased by 14,700 to 4,092,700 persons. Unemployment increased by 2,700 to 715,700 persons. Unemployment rate increased by less than 0.1 pts to


Vic Minister: No more dams, but 5m more people great!

Victoria water minister has ruled-out building any new dams, claiming that climate change and lack of rain fall will render them useless. From The Australian: Water Minister Lisa Neville says water in the state’s rivers will halve by 2065, citing this forecast in her refusal to build even one dam, even though over that period


Go long Recessionberg stupidity

Via Reuters: The government will publish its “Final Budget Outcome” for the 2018/19 fiscal year ended on June 30 on Thursday, Treasurer Josh Frydenberg told Australia’s parliament. The report will also include revised estimates and outlook for the current financial year. “It will show an improvement on what was forecast, not only in the 2018/19


SEEK: Job ads tank in Sydney and Melbourne

Via Domain: Job advertisements in Sydney and Melbourne are falling at double digit rates, prompting concern unemployment may be increasing despite cuts in official interest rates and the Morrison government’s tax cuts for low and middle income earners. Figures to be released today by SEEK show overall job ads have fallen by 8.6 per cent


Bellamy’s must be blocked

Via the always CCP happy clappy AFR: The a2 Milk Company chief executive Jayne Hrdlicka has dismissed suggestions that Chinese authorities delayed approving a licence for rival Bellamy’s Australia to drive down its share price. She said Chinese regulators had taken a “logical and sensible” approach to managing the country’s infant formula market. Ms Hrdlicka,


Australia’s international student stranglehold ends

Over the past five years, Australia has experienced an unprecedented boom in international student enrolments, which hit an all-time high 712,000 as at June 2019: Moreover, Australia now has by far the highest concentration of international students in the developed world, with per capita enrolments roughly 2.5 times second-placed United Kingdom and three times third-placed