Deloitte’s weekly economic briefing notes that a key reason why retail sales rebounded so strongly after shutdowns is because “there wasn’t much else that households could spend on, especially with both international and interstate travel off the cards”. However, Deloitte also sees the sales “windfall” as temporary and believes that 2021 will see a “transition
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 Australian Bureau of Statistics (ABS) today released its labour force report for February, which registered a huge 0.5% fall in the official unemployment rate to 5.8% off a 0.7% increase in jobs: Full-time jobs surged by 89,100 in February whereas part-time jobs fell by 500: The labour force participation rate also rose by 0.05%
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It was only a few years ago that one vote on the cross-bench killed Malcolm Turnbull’s horrific Trumpian corporate tax cut as the indomitable Senator Tim Storer refused to bow to absurd trickle-down economics. History is repeating today. This time it is Stirling Griff that has the bit between his teeth and won’t let go,
The weekly ANZ-Roy Morgan Consumer Confidence Index is out for the weekend of 13/14 March with confidence falling 0.9% to 110.9 points, to be tracking around the 2021 average (110.5) and 10.9 points higher than the same week a year ago (100.0): The key points of the release are: Headline consumer confidence was down 0.9%,
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For months MB has called for quarantining of international arrivals to be shifted out of dense city hotels to low density accommodation in regional areas. The logic is obvious: packing overseas arrivals into hotel rooms with shared ventilation and corridors greatly increases the risk of spreading the virus among workers, guests and the wider community.
The Australian Bureau of Statistics (ABS) has released its Weekly Payroll Jobs and Wages in Australia survey to 27 February 2021, which suggests the labour market has basically recovered back to its pre-COVID level. According to the ABS, payroll jobs are now only 0.2% below their pre-COVID level on 14 March 2020, whereas total wages
Treasurer Josh Frydenberg says the $9 billion worth of income tax cuts in 2020 have boosted households’ balance sheets and consumer confidence. He adds that households will benefit from a further $12 billion worth of accelerated income tax cuts by the end of September: [Frydenberg said] tax cuts had already “helped to boost household balance
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Independent senator Rex Patrick believes there is little chance that the upper house will pass the federal government’s industrial relations omnibus bill in the next week. He says it could be passed in May or June, but only with substantial amendments. Meanwhile, One Nation will push for 12 amendments to the bill in return for its
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