With Sydney’s water storages plunging below 50%: And 95.1% of New South Wales suffering from drought: Level 1 water restrictions have been put into force, with those caught illegally watering facing hefty fines: Level 1 water restrictions were supposed to be triggered when dam levels hit 50 per cent capacity but were brought in early and
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.
MB has long argued that Australia’s skilled visa program is poorly targeted with the majority of visas granted to professions experiencing an oversupply of workers. The below chart illustrates the problem. According to the Department of Jobs and Small Business, skills shortages across managerial and professional occupations were running way below the historical average at
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Former Treasury head, and outgoing Secretary of the Department of Prime Minister and Cabinet, Dr Martin Parkinson, delivered his valedictory speech yesterday, which included one final immigration spruik: Valuing diversity as something inherently Australian should increasingly be seen as a strength of this country and a comparative advantage in the region in which we live…
From Roy Morgan Research: The latest data from Roy Morgan has shown that a greater proportion of Australians (aged 14+) are now using Uber (22.9%) compared with taxis (21.8%). This is the first data to reveal that taxis are no longer the preferred private transport service of Australians. Over the past three years, Uber has
Data from the Australian Housing & Urban Research Institute (AHURI) shows that the proportion of homeowners aged 55+ with a mortgage rose from 14% in 1987 to 28% in 2015. Professor Rachel Ong Viforj from Curtin University, who led the AHRI’s research, says governments need to be prepared for the likelihood that an increasing number
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From Josh Recessionberg at The Australian: Josh Frydenberg will issue a rallying call to company bosses to invest more in new technologies — rather than returning excess cash to shareholders — in a bid to kickstart flagging productivity and boost wages by $3000 a year. In a wide-ranging address to the Business Council of Australia,
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Last week’s damning report on Australia’s international trade from the Centre for Independent Studies (CIS) has finally awoken the mainstream media to the substantial hidden costs arising from our universities’ extreme over-exposure to international students. In its report, the CIS warned that Australia’s universities have badly lowered standards to gain the world’s biggest per capita
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The Academic Rankings of World Universities was released last week, which placed a record seven Australian universities within the world’s top 100: The ranking, produced by the China-based ShanghaiRanking Consultancy, is regarded by most top universities as the most prestigious of the international rankings because it measures only excellence in research — mainly in the
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