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.


Property boom drives record increase in household wealth

A few months back, the Credit Suisse Global Wealth Report declared Australian households the worlds richest thanks to their expensive property assets: Yesterday, the ABS has released its Finance and Wealth statistics for the June quarter, which revealed a record increase in household wealth on the back of the property boom: Total household wealth increased 5.8


Dan’s wasteland: Victorian project costs blowout by $6b

Victoria’s Auditor-General Andrew Greaves has revealed that the cost of 42 major infrastructure projects across the state has risen by $5.95 billion. His audit report shows that the cost of another 27 projects has fallen by a combined $1.04 billion. Greaves assessed some $99 billion worth of major projects in the report, which was tabled


RBNZ tightens macro-prudential screws. RBA delays

The Reserve Bank of New Zealand (RBNZ) today announced that it will tighten lending rules for mortgages from 1 November, but expects banks to comply with the “spirit” of the new rules immediately. Specifically, the new rules will see banks now restricted to just 10% of the new lending for mortgages that make up over


Casual workers bear brunt of lockdowns

The ABS has released fortnightly data on payroll jobs, which reveals that jobs have fallen: 1.3% in the fortnight up to 28 August 2021; and 0.4% in the previous fortnight (to 14 August 2021). As expected, falls have been driven by the lockdown jurisdictions of Victoria, NSW and the ACT: Specifically, the largest shares of


NSW records 1063 COVID cases, 6 deaths

NSW Health has recorded another 1063 locally acquired COVID cases and six deaths: NSW recorded 1,063 new locally acquired cases of COVID-19 in the 24 hours to 8pm last night. — NSW Health (@NSWHealth) September 23, 2021 Of those who died, four people were not vaccinated. One person – a woman in her 90s


Abul Rizvi: Australia becoming a “low-skilled guest worker society”

Abul Rizvi – former Deputy Secretary of the Department of Immigration and one of the architects of Australia’s faux ‘skilled’ migration program – has warned that recent visa changes risk turning Australia into a low-skill guest worker society: Dr Rizvi has warned that the recent removal of limits on overseas students’ working hours risks subverting


Victoria records 766 COVID cases, 4 deaths

Victoria’s COVID outbreak continues to worsen with the state recording a pandemic high 766 cases and four deaths: Reported yesterday: 766 new local cases and 0 cases acquired overseas. – 40,957 vaccines administered – 62,408 test results received – Sadly, 4 people with COVID-19 have died More later: #COVID19VicData — VicGovDH (@VicGovDH) September


Border closures devastating for tourism industry

Callam Pickering, economist at global jobs site Indeed, has published interesting data showing the devastating impact state border closures are having on the local tourism industry. Using ABS data, Pickering shows that tourism-related employment is still down 9.3% from December 2019, with the decline in jobs much larger across key areas such as accommodation: According


Tracking Australia’s vaccine rollout

After a slow start, Australia’s vaccination rollout continues to gather pace. 58.4% of Australia’s population has now received a single vaccine dose, with 38.3% now double vaccinated: NSW is the vaccine leader, with 66.8% of the state’s population now at least single vaccinated. This is followed by Victoria (59.4%), Tasmania (58.9%), SA (51.9%), Queensland (50.7%),


Aussie household savings balloon to $230b

The June quarter national accounts showed that Australian households were flush with savings, accumulating a whopping $162.5 billion of household income in the year to June 2021 – double the previous peak of $80.5 billion saved by households in 2015: Commonwealth Bank estimates that household savings will swell to $230 billion by the end of


NSW records 1035 COVID cases, five deaths

NSW Health has recorded another 1035 locally acquired COVID cases: NSW recorded 1,035 new locally acquired cases of COVID-19 in the 24 hours to 8pm last night. No new cases were acquired overseas, and 14 previously reported cases have been excluded following further investigation. — NSW Health (@NSWHealth) September 22, 2021 The age breakdown


Deloitte: Retail faces tepid COVID recovery

Below is Deloitte’s Weekly economic briefing, which assesses the prospects facing Australia’s retail sector. The latest issue of Deloitte Access Economics’ Retail Forecasts brings an all too familiar story for Australia where, in the September quarter, COVID-related restrictions have eaten away at the relatively solid start to the year. Lockdowns have been particularly hard for


Leading index plunges

Note from Westpac: The Leading Index has held up surprisingly well during this downturn but it seems likely that there is more weakness on the way. For example, while all components have contributed to the slowdown in growth since March, commodity prices and equities have been reasonably resilient. Developments in those markets in September are


Victoria’s COVID outbreak spirals further out of control

Victoria has recorded another 628 COVID cases and three deaths: Reported yesterday: 628 new local cases and 0 cases acquired overseas. – 43,056 vaccines administered – 60,829 test results received – Sadly, 3 people with COVID-19 have died More later: #COVID19VicData — VicGovDH (@VicGovDH) September 21, 2021 The next chart shows the rise


Don’t expect a swift economic recovery this time around

Two well known economists have given opposing views on the likely economic recovery once lockdowns in Sydney and Melbourne eventually end. Saul Eslake believes that the economic recovery will be swift: Independent economist Saul Eslake told The Age and The Sydney Morning Herald that Victoria and NSW were in recession but the states’ economies were


ACCC slams Transurban ‘monopoly’

As reported yesterday, the NSW government has sold the remaining 49% stake in the WestConnex toll road to a consortium led by Transurban for $11.1 billion. Transurban had purchased the initial 51% stake for $9.3 billion in 2018. Australian Competition & Consumer Commission (ACCC) chairman Rod Sims claims that the deal will entrench Transurban’s “monopoly” on


Banks: extend anti-money laundering rules to property

The Australian Banking Association, Fintech Australia and Bendigo & Adelaide Bank are among those calling for Australia’s anti-money laundering (AML) regime to be broadened. Expansion of the regime would see real estate agents, accountants and lawyers come under the same rules as banks, remitters and wagering firms. Fintech Australia has stated in its submission to


Australia fills permanent migration hole with unskilled

New figures show that the federal government issued 79,620 skilled migrant visas in 2020-21. Skilled visas accounted for about 50% of Australia’s permanent migrant intake, down from 70% in the previous financial year. However, this was offset by strong growth in family visas, which comprised 49.3% of the migrant intake in 2020-21. Australia’s permanent migrant


EBAs signal more wage pain for workers

New data from the Attorney’s General Department (AGD) shows that 1.24 million workers in Australia’s private sector are now covered by enterprise agreements, down from 1.44 million a year ago. Just 10.9% of private sector workers now have enterprise agreements, compared with about 25% in 2010. Specifically, wage increases in new private sector agreements has


Victoria’s COVID outbreak spirals to 6000

Victoria has recorded a pandemic high 603 new COVID cases over the past 24 hours, alongside one death: Reported yesterday: 603 new local cases and 0 cases acquired overseas. – 40,811 vaccines administered – 48,829 test results received – Sadly, 1 person with COVID-19 has died More later: #COVID19VicData — VicGovDH (@VicGovDH) September


Infrastructure sector demands visa slaves

Last month I warned that the Morrison Government’s new Agricultural Visa would usher an “immigration scab grab”, with other sectors of the Australian economy likely to step up and demand similar access to industry-specific visas under the guise of ‘skills shortages’: You could easily imagine a situation where the Morrison Government introduces a new ‘Serving


Hypocritical Victorian Government to flog monopoly motor registry

100 days out from the 2018 Victorian election, Premier Daniel Andrews claimed that privatisation had failed and that further asset sales were off the agenda: Premier Daniel Andrews will warn against privatisation, austerity and what he calls a “free market free-for-all” in Victoria in a speech laying out Labor’s agenda 100 days from a state election…


Déjà vu as ACTU decries ‘pink’ jobs recession

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


NSW daily COVID cases plummet

NSW recorded 935 new COVID infections over the past 24 hours and four deaths: NSW recorded 935 new locally acquired cases of COVID-19 in the 24 hours to 8pm last night. 1 case was acquired overseas, & 28 previously reported cases have been excluded following investigation. The total number of cases in NSW since the