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.


Business lobby’s visa scab grab intensifies

At the beginning of the election campaign, business groups demanded easier access to foreign workers alongside a big lift in Australia’s permanent migrant intake to ease purported ‘skills shortages’: “Migrants are the backbone of the small business economy,” [Alexi Boyd, CEO of the Council of Small Business Organisations Australia] said. “There’s a number of industries


Immigration collapse delivers best jobs market in generations

On Thursday, the Australian Bureau of Statistics (ABS) released labour market data for March, which revealed that Australia’s unemployment rate (4.0%) and underemployment rate (6.3%) both fell to fresh 14-year lows: While stimulus certainly prevented the economy from sliding into a deep recession, it has merely filled the hole left by COVID lockdowns/restrictions and has


Builders collapse left, right and centre as costs soar

In late February, Australian Constructors Association CEO Jon Davis warned that the Australian construction sector “was not in good shape” and that more building firms could follow Probuild into administration, due to the increased cost of materials and labour and ongoing absenteeism because of COVID-19: “Everyone assumes that everyone’s making bucket loads of money,” Davies


Australian unemployment stays at 4.0% as jobs growth slows

The Australian Bureau of Statistics (ABS) has released labour force data for March with Australia’s unemployment rate remaining at its 14-year low of 4.0% after jobs growth (+17,900) missed analysts’ expectations (+40,000): Key movements are summarised below: unemployment rate remained at 4.0%. participation rate remained at 66.4%. employment increased to 13,389,900. employment to population ratio


Roy Morgan unemployment falls on record-breaking job ads

Ahead of the Australian Bureau of Statistics’ (ABS) March labour market report later today, Roy Morgan has released its own estimate, with unemployment falling another 0.7% to 7.8% – the lowest since October 2019. However, underemployment rose by 0.6% to 8.4%: The key changes are as follows: Unemployment fell 94,000 to 1.13 million Australians (7.8%


Training, not immigration, is the answer to skills shortages

The skilled labour shortage has heightened calls for an increase in Australia’s skilled migrant intake. For example, the Business Council of Australia wants the annual permanent skilled migration cap to be raised to 220,000 in the next two financial years before reverting to 190,000 in subsequent years. But Deloitte believes the solution to skills shortages lies


Consumer sentiment wilts as RBA heats up

Westpac consumer sentiment falling away before any RBA action. Just imagine what it will do if we see the 14 straight rate hikes interest rate futures are forecasting! — The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 0.9% to 95.8 in April from 96.6 in March. This modest decline follows the sharp 4.2% fall


Business confidence collapses

Roy Morgan has released its business confidence survey for March, which dived 13.8 points (-12.9%) after Russia invaded Ukraine and petrol prices spiked: There were falls across the index, although businesses are still broadly positive about the future with a majority of 50.5% of businesses expecting ‘good times’ for the Australian economy over the next


Household spending begins to buckle

If credit card usage is any guide that is. Given the moderation coincides precisely with the Ukraine war and inflation panic my bet is this si more related to fear of rising interest rates. Westpac with the note. — ― The Westpac Card Tracker Index nudged 0.7pts higher to 106.7 over the week to April 2.


Soft unions meekly push back against Indian FTA

The newly signed Indian Free Trade Agreement (FTA) is an absolute shocker for Australian workers that opens the immigration floodgates and greatly improves access for Indian workers and students to stay in Australia long-term. Under the deal, Australian and Indian architects, engineers and accountants will be recognised in each other’s countries. But the flow of


Labor jumps aboard ‘Big Australia’ immigration train

Anybody hoping the Labor Party would take a more balanced and sustainable policy on immigration would be disappointed by the latest statements from the party’s top brass. Yesterday, Labor leader Anthony Albanese hinted that the party would hand out more permanent residency visas for foreign workers, meaning Australia’s population would grow more strongly: Foreign workers


Pandemic reinvigorates Australia regions

Deloitte Access Economics’ weekly economic briefing has examined Australia’s latest population data, which shows that the regions have led the way on growth over the pandemic, reversing the long-term trend of migration to the cities: Prior to the pandemic, our capital cities were growing at a faster pace than regional economies – an average of


Immigration collapse drives up farm labour productivity

A recent report from the National Agricultural Labour Advisory Committee admitted that Australian farmers’ extreme reliance on cheap migrant labour is having detrimental productivity impacts by preventing farms from adopting new methods and investing in automation: In many ways, Australia is at a crossroads. Either its enterprises go all out to modernise by learning and


Melbourne ground zero for population ponzi economics

The lack of planning and foresight to cope with the immigration deluge into Australia’s big cities never ceases to amaze. In the first 20 years of this century, Melbourne’s population ballooned by an insane 1.6 million people, representing a 46% increase: Yesterday, Melbourne’s Lord Mayor and former Property Council chief, Sally Capp, launched a plan


Skills shortages are an Aussie worker’s best friend

Australian employers are relaxing their selection criteria to fill vacant positions amid the nation’s ongoing skills shortage. Many employers have become more willing to compromise when it comes to key criteria such as years of work experience, education qualifications and technical certifications. Companies have also become more willing to invest in training and upskilling. The


Business lobby’s immigration scab grab hits fever pitch

The great immigration scab grab has hit fever pitch, with business groups demanding easier access to foreign workers alongside a big lift in the permanent migrant intake to ease purported ‘skills shortages’: The single biggest problem currently faced by small businesses is worker shortages, Alexi Boyd, CEO of the Council of Small Business Organisations Australia


Indian FTA turns Australia into guest worker economy

I reported yesterday how the newly inked interim India-Australia Free Trade Agreement (FTA) has prized open the immigration floodgates, greatly increasing access for Indian workers and students to stay in Australia long-term: Australian and Indian architects, engineers and accountants will be recognised in each other’s countries under a new free trade deal between the two