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.
A Liberal-chaired parliamentary committee has renewed calls for a dedicated agriculture visa, claiming that easier access to migrant workers is needed to alleviate purported chronic skills shortages: The lower house’s standing agriculture committee on Monday released its findings from an inquiry into growing the sector to a $100 billion industry by 2030. WA Liberal MP
The on again, off again Trans-Tasman travel bubble has been approved in principle by New Zealand Prime Minister Jacinda Ardern. This means Australians will be able to travel to New Zealand without quarantining in by March 2021, provided the COVID-19 situation in both countries remains as it is currently. Jacinda Ardern said a commencement date
ANZ-Roy Morgan Australian Consumer Confidence: Most subindices at or higher than pre-pandemic levels, with the confidence in future economic conditions at an 18-month high. The exception is current financial conditions, which ~10% lower than mid-March and below neutral. #ausecon pic.twitter.com/7CppPfXuM6 — ANZ_Research (@ANZ_Research) December 14, 2020
The Bank for International Settlements (BIS) has released its global household debt statistics for the June quarter, which reveals that Australian households remain the second most indebted in the world and easily the most indebted among English-speaking nations: Australia also has the third highest debt repayment burden out of sampled nations and by far the
The Australian Bureau of Statistics (ABS) yesterday released arrivals and departures data for the month of October, which revealed that the number net long-term arrivals collapsed to only 107,440 over the year, down 64% from the peak of 297,040 recorded in August last year: Annual net long-term arrivals are now tracking at levels not seen
Data from the Australian Bureau of Statistics (ABS) shows that trade union membership across Australia has collapsed over the past 34 years, from 45.6% in 1986 to just 14.3% in 2020: This collapse has been driven by the private sector, where just 9.2% of workers are now members of unions, down from 12.1% in 2014
Via Domain: Migrant workers in Sydney are being systematically underpaid and a union analysis of more than 3000 foreign-language job ads reveals offers of illegally low wages as low as $8 an hour are rife. The analysis of Chinese, Spanish, Korean, Vietnamese, Nepalese and Portuguese ads from December 2019 until last August in NSW found
The ABS today released some extraordinary data on the $105 billion of fiscal support that has been lavished on Australian businesses in response to the COVID-19 pandemic: The JobKeeper wage subsidy continued to account for the majority of government business support in the September quarter, with total payments of $35.8 billion, following $35.1 billion in
On Friday, it was revealed that the federal government’s famed Global Talent Independent (GTI) visa program, which promised fast-tracked visas for 15,000 so-called highly-skilled specialists working “at the top of their field”, has been systematically defrauded: The [GTS] scheme is being lauded by some for its swift processing and flexibility. But as it gets up
During the beginning of the COVID-19 pandemic, Australia’s media and left-leaning think tanks were jumping up and down over the purported “pink recession” – the notion that women were being disproportionately impacted by the crisis. This “pink recession” claim originated from social and economic commentator George Megalogenis, who pointed out that unlike the 1990s recession
On Friday, the final national cabinet for the year was held in Canberra, where it was revealed that there are still 38,600 Australian citizens and permanent residents stranded abroad unable to get home. This comes as Australia’s states stepped-up lobbying efforts to bring international students into the country before all Australians have been repatriated –
The Property Council of Australia (PCA) has demanded national cabinet to restore migration flows and return workers to offices in order to support the CBD property market: Property Council of Australia CEO Ken Morrison says office occupancy in major CBDs is still well below pre-COVID levels, and most building owners or managers don’t expect that
As we know, Australia’s economy has been sliding in per capita terms since immigration was ramped-up significantly in the mid-2000s: This is illustrated by the collapse in GDP per capita, which has expanded by an average of only 0.5% per annum over the past decade: While the COVID-19 recession has obviously weighed down per capita
Fourteen years ago, the Australian Government agreed to implement the Tranche 2 global anti-money laundering (AML) rules for lawyers, accountants and real estate agents in a bid to prevent laundering of illicit funds, especially into Australian property. However, these reforms have been continually postponed amid fierce lobbying by shadowy vested interests negatively impacted by the
Via Martin North: Discussion:
The ABC runs a big (54,000 responses) annual survey called Australia Talks. This year’s survey has been released and reveals that a big majority (61%) of Australians believe that population growth is a problem for Australia, with nearly one quarter (24%) believing population growth is a major problem: A smaller majority of Australians (54%) also
After the global financial crisis of 2008 the Australian government responded with a large fiscal stimulus. Initially worth about $10 billion, it soon grew by $42 billion by February 2009. Out of this total about $21 billion came in the form of direct cash payments to households. At the same time the RBA reduced the cash rate,
Some economists argue that government spending on social housing is the best way to help the economy bounce back from the pandemic while also easing a shortage of affordable housing. The latest Victorian Budget announced a record $5.3 billion spend in the sector, whereas the NSW Government earmarked $812 million in its state budget. But
When the China-Australia Free Trade Agreement (ChAfta) was signed five years ago, both parties agreed to review the pact after five years. However, Australia is showing little enthusiasm to do so: The first five-year review of the historic free-trade deal between China and Australia appears dead in the water as the two countries continue their
A Labor-controlled Senate inquiry on COVID-19 has recommended permanently raising the rate of JobSeeker (sub titles added for clarity): Interim Finding; The rate of JobSeeker is inadequate at $40 per day. The committee is concerned that the Australian Government is withdrawing fiscal support too early in the recovery phase by reducing the Coronavirus Supplement at
Australia’s university chancellors have ordered a review into its peak lobby group – Universities Australia – because of its lack of success in influencing the Morrison Government: Education consultancy PhillipsKPA will assess Universities Australia’s core functions — and its relationships with key cabinet ministers and top public servants — handing its findings to vice-chancellors next
The Australian Bureau of Statistics (ABS) has released its Births 2019 survey, which reported that Australia’s fertility rate hit a new record low: The total fertility rate required for replacement is currently considered to be around 2.1 babies per woman to replace herself and her partner. Australia’s total fertility rate: was 1.66 babies per woman
More Chinese trade war on Australia today with timber and wheat joining various other agribusiness products. Yawn. It’s not all bad news by a long shot. The trade war has also played a key role in putting a rocket under the iron ore price as traders price in a geopolitical risk premium not unlike oil
Infrastructure Victoria yesterday released its Draft 30-Year Infrastructure Strategy, which forecasts that liveability in Melbourne will be destroyed as the population bulges from mass immigration: Victoria’s population boomed in the last decade, adding more than 1.2 million people… Over coming decades, pressures on Victoria’s transport system will only get worse as the population grows. Trips
Trade Minister Simon Birmingham says the federal government is considering “all dispute settlement options” in response to China’s recent move to ban a range of imports from Australia. Birmingham has also suggested that the targeted nature of the import bans raises questions about China’s adherence to the free-trade agreement (ChAFTA) that the two nations signed
The New Daily’s Rod Myer reports that people over the age of 65 have experienced the biggest increase in their wealth in the 16 years to 2018, whereas people aged between 18 and 34 experienced minimal improvement. Conny Lenneberg from the Brotherhood of St Laurence says one of the reasons for the intergenerational disparity in
Late last week, Immigration Minister Alan Tudge released the first annual Population Statement, which projects reduced population growth through to 2031. Specifically, the Statement projects average population growth of 1.1% over the coming decade, compared to the 1.6% (more than 400,000 per year) in the past decade: The Statement shows population growth in 2020-21 will
Callam Pickering, economist at global jobs site Indeed, has updated his job postings data, which is now running ahead of the same time in 2019: “Job postings in Victoria and the rest of Australia are a little above trend entering December, reflecting higher than normal Xmas hiring. A positive sign for the labour market –
Via Bill Evans at Westpac: • The Westpac-Melbourne Institute Index of Consumer Sentiment lifted by 4.1% to 112 in December from 107.7 in November. The surge in the Index continues. It is now 48% above the low in April and has reached its highest level since October 2010 – marking a ten year high. After
For 15 years, Australia’s left stood by silently or cheered while Australia’s immigration program was more than doubled: This mass immigration experiment was an unmitigated disaster for Australia’s working class – crushing their wages, pushing up their cost of living, and degrading their quality of life. However, it was a boon for the wealthy owners
