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.


RBA admits migrant visa system is lowering wages

Over many years, MB has consistently argued that mass immigration is helping to hold down Australian wages. The economics is straightforward: when the working aged population continually increases via immigration, competition for jobs intensifies, worker bargaining power gets eroded, unemployment and underemployment remains elevated, and wages are held down. The situation in Australia is particularly


UBS: Jobs growth set to tumble

Via George Theranou at UBS: UBS Labour Demand Index at ~6-yr low, indicating jobs ~halving to ~1¼% y/y July ANZ job ads bounced 0.8% m/m, but are still down 9.1% y/y; and the PMI alleconomy employment component slumped to 44.4. Hence, the UBS Labour Demand Index is near a 6-year low, implying jobs growth ~halving


Are we ready for Chinese international student violence?

Late last month, we witnessed violent protests at the University of Queensland, where international students from Hong Kong protesting in favour of secession were attacked by pro-Chinese Communist Party international students. In the days following these protests, Hong Kong students reported repeated cases of intimidation and surveillance, with several too afraid to show their faces


ANZ job ads rise a second month

Via ANZ: ANZ Australian Job Ads rose for the second month in a row in July, posting growth of 0.8% m/m after the jump of 4.9% in June. These two consecutive gains followed the election-impacted plunge of 8.3% m/m in May and previous weakness. This means that despite the gain for the month, July job


“Quite scary”: Melbourne, Sydney water security tumbles

New scientific research reported by Fairfax warns that Melbourne and Sydney are facing chronic water shortages in the future: A paper published by Environment Research Letters shows a “substantially” amplified risk for Melbourne’s water availability if global temperatures rise 2 degrees above pre-industrial levels rather than the 1.5-degree target set by the Paris climate agreement.


Consumer panic as new car sales plunge to 7-year lows

The Federal Chamber of Automotive Industries (FCAI) has released its new car sales figures for July, which revealed a 2.8% year-on-year decline in overall car sales, with annual sales hitting the lowest level since November 2012: According to the media release: Sales of new vehicles in Australia fell for the 16th successive month in July,


Education agents at forefront of international student fraud

Last week, the Australian Skills Quality Authority (ASQA) released its strategic review into international education, which highlighted that unregulated education agents are behind around three-quarters of international student enrolments and were routinely misinforming, misleading and exploiting vulnerable students: There is no legal requirement under Australian law for providers or overseas students to engage an agent,


Why Australian infrastructure is so expensive

Allens partner David Donnelly has warned that tunnels are the most vulnerable to cost increases and delays and pose the biggest risk to Australia’s $288 billion infrastructure boom: Tunnels are considered the most risky projects, followed by rail then roads. Costs on the $11 billion Melbourne Metro project, which tunnels under Melbourne’s CBD, have been


Bosses struggling to find workers need to lift wages

The Australian has published a one-eyed propaganda piece entitled Job snobs ‘are leaving bosses in the lurch’, which claims that ‘lazy’ Australians are “actively snubbing work opportunities”. The article is based loosely upon a survey from the Department of Employment, which claims almost 60% of businesses looking for lower-skilled roles are finding it hard to


AFR: Corporate tax cut will cure cancer!

The AFR has shown its poorly concealed hand. Recently I noted that the editorial loves to preach good policy while lobbying for the opposite: The HILDA data instead confirms that Australian prosperity will only be rebooted through a revival in productivity growth. That in turn, requires a new pro-growth productivity agenda from Scott Morrison and Josh


Farm visa clamour grows despite worsening migrant exploitation

Last week I posted a detailed report on the systemic exploitation of migrant farm workers, which has been exposed repeatedly by a variety of studies. Despite this rampant exploitation, the Morrison Government has announced plans to grant farmers even more migrant workers through the expansion of the backpacker visa scheme to 13 additional countries, which comes


Australia’s economic dependence on China overblown

Today, Acting Director of the Australia-China Relations Institute (ACRI) – James Laurenceson – warned that Australia’s economic reliance on China is increasing from already extreme levels: The May export figures paint a stark picture of just how reliant Australia’s economy is on the Chinese boom. The money involved means if the Asian nation were ever to


Sydney’s wealthy elite are migrant NIMBYs

As we already know, Sydney is Australia’s primary entrant point for migrants: And Western Sydney is the prime dumping ground for these migrants: With Western Sydney also projected to receive the lion’s share future immigration-driven population growth – i.e. an additional 1.2 million people over the next 20 years, according to the Greater Sydney Commission:


Welcome to your mass immigration kleptocracy

For years, MB has pointed out to an obtuse media that wage theft, crushloading, dodgy construction, falling living standards and corruption are integral parts of the mass immigration economic model. It is pointless whining about it, regulating it, fixing it piecemeal and expecting our institutions will cope. All such efforts will fail. Why? Because these are


Universities sell souls for Chinese international students

Late last month, the University of Queensland descended into violence when pro-Chinese international students attacked Hong Kong students protesting against a controversial extradition law. These China nationalists were filmed tearing down banners, as well as punching and shoving the protesters. Following the scenes, Hong Kong students were reported to have experienced further attacks off campus,


Chinese international students lured into prostitution

The exploitation of international students across the Australian economy has been well documented. For example, the 2016 Senate Committee report, entitled A National Disgrace: The Exploitation of Temporary Work Visa Holders, found international students “were consistently reported to suffer widespread exploitation in the Australian workforce”. The report also noted that “students are ‘generally young, low


Mass immigration gobbles up Melbourne’s greenery

The hidden costs of the ‘Big Australia’ mass immigration policy have surfaced again, with a new report from RMIT’s Centre for Urban Research showing an alarming loss of greenery across Metropolitan Melbourne caused by encroaching urban development: Comparison of the 2014 and 2018 combined tree and shrub cover across the study area reveals an overall


Do “quiet Australians” hate the unemployed?

So says ScoMo: Scott Morrison has emphatically ruled out lifting the $40-a-day rate of Newstart, warning campaigners including Barnaby Joyce they are out of touch with what voters want. The Prime Minister, who credits “the quiet Australians” with his election victory, said voters want the welfare system to work for taxpayers too. “I’m not going


Retail sales plunge to recessionary levels

The Australian Bureau of Statistics (ABS) has released retail sales figures for the month of June, which recorded a 0.4% rise in retail sales over the month in seasonally-adjusted terms, with annual sales growth rising to 2.5%: However, in trend terms, annual retail sales growth fell to 2.7%. In real chain volumes terms, annual retail sales


Why employ locals when you can import migrant visa slaves?

Earlier this week I posted a detailed expose on the systemic exploitation of migrant farm workers, which has been exposed repeatedly by a raft of major studies. Shortly afterwards, it was revealed that the Morrison Government plans to grant farmers even more slave migrant workers: Backpackers from 13 countries are being targeted by Immigration Minister


David Jones: Retail in “recession”

Via Domain: The South African parent company of luxury department store David Jones has slashed the value of the beleaguered retailer on its books due to “unprecedented” economic pressures. In a trading statement released on Thursday afternoon, Woolworths Holding Limited (WHL) recorded an impairment charge of $437.4 million for David Jones for the 2019 financial