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.


NSW turns into water police state

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


Australia’s skilled visa program piles up idle migrants

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


International student hordes target Australian public schools

In 2016, the former Turnbull Government introduced a new visa class that enabled international students and their guardians access to Australian schools, along with the ability to buy property ahead of applying for permanent residency (see here, here and here). At the time of introduction, I labelled this visa “one of the worst policies that


Parko departs with final ‘Big Australia’ spruik

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…


Uber overtakes taxis as preferred private transport service

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


Rising mortgage debt to crush Australian pension

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


Coalition goes FTA mad

The Morrison Government is looking to complete ‘free trade agreements’ (FTAs) with Indonesia, Hong Kong and the United Kingdom. Trade Minister Simon Birmingham says the FTAs will help protect the Australian economy at a time when the trade war between the US and China seems to be getting worse. Here’s The AFR: Free trade deals


Pretend infrastructure boom booms!

Australia’s pretend infrastructure boom to the moon!  At the AFR: “It looks like the boom is going to be a bit more protracted than we previously thought,” said Nigel Hatcher, director at Macromonitor, which specialises in economic forecasts for the construction industry. Transport construction activity around Australia is expected to hit a record $42 billion


Planning parasite: More immigration needed to bust congestion

When it comes to ‘Big Australia’ shills, you would be hard pressed to find a bigger rent-seeker than Dr Shane Geha, managing director of EG – “a leading real estate investment fund manager” – whose business profits directly from mass immigration. According to their website: As founding Managing Director of EG’s Urban Planning business, Shane bears


Chinese international student exodus sounds death knell for universities

There is no more important market for Australia’s universities than China, whose international student numbers have ballooned by 66,000 over the past six years and accounts for 38% of total international students: As shown above, there were 136,000 Chinese international students enrolled at Australia’s universities as at March 2019, roughly double the next biggest nation, India


People smugglers take control of Australia’s visa system

Labor’s immigration spokesperson, Kristina Keneally, has launched another onslaught against the blowout of bridging visas under the Coalition’s watch, which has been fuelled by people smugglers: Labor senator Kristina Keneally has credited the coalition government with “stopping the boats” but warned people smugglers are now bringing in asylum seekers by plane. Senator Keneally is going


Mass immigration floods Australia with spies, insurgents

Via the ABC: Foreign espionage is taking place in Australia at a greater rate than any other time in history. It comes after revelations Rwanda has an alleged network of spies suppressing political dissent in refugee communities in Queensland The stark warning from the nation’s domestic intelligence agency follows accusations the east African nation of


How to attract top talent into teaching

Australia’s top teachers should be able to earn $80,000 a year more, and top school-leavers should receive $10,000-a-year scholarships if they take up teaching, according to a $1.6 billion Grattan Institute blueprint to boost teacher quality and student performance: Australia needs more high achievers in teaching. People who are good learners themselves are far better


NSW drought hits crisis point

The “worst drought on record” is ravaging New South Wales, which has led to more water restrictions being imposed across the state. On Friday, NSW Water Minister, Melinda Pavey, released the following statement: “This drought is more severe than NSW has ever experienced. While autumn and winter are typically the highest rainfall seasons for the Lower


Financially stretched Aussie consumers abandon new cars

The Federal Chamber of Automotive Industries (FCAI) latest new car sales report revealed a 2.8% year-on-year decline in overall car sales, with annual sales hitting the lowest level since November 2012 after 16 consecutive falls in sales relative to the same month in the preceding year: Late last week, John McConnell – chief executive of Australia’s


Recessionberg: I am an idiot

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,


Coalition to deliver more fake migrant visa cuts

Earlier this year, the Morrison Government cut Australia’s non-humanitarian permanent migrant intake by 30,000 to 160,000, in order to “relieve congestion in the cities”. Now, ‘experts’ believe the Government is readying to cut Australia’s permanent migrant intake by another 10,000 people this year. From ABC News: The regional and global talent visas represent almost 30,000 permanent


International student fallout becomes too big to ignore

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


International students should ignore bogus university rankings

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


International students trigger 2000% rise in university cheating

As we all know, Australia’s universities have experienced an incredible boom in international student numbers over the past six years, with enrolments ballooning by 327,000 (89%) over this period: One of the deleterious side effects of this boom has been the degradation of teaching standards alongside increasing reports of plagiarism and cheating across Australia’s universities.


Please China, turn the trade war guns on Australia!

Via Goldman: “…things could change pretty quickly, particularly against the backdrop of China’s frustrations about Australia’s decisions to ban Huawei, target China with recent foreign interference laws, and allude to China as responsible for recent cyberattacks on the Australian government.” A “very significant” and “targeted pullback” could see Chinese tourism volume fall 60 per cent


No Scummo miracle: CBA services PMI contracts

Via CBA: The August Flash PMITM data signalled a first reduction in output since March, with the decline centred on the service sector. New orders also decreased, but employment returned to growth and business sentiment picked up. Currency weakness led to a faster rise in manufacturing input prices, but services costs increased at a weaker


MSM slams pimping of Chinese international students

Yesterday the MSM finally tore the scab off the international students wound MB has been picking at for years. The driver was a CIS report that made plain what MB readers have long known, that Aussie uni’s have whored themselves horribly to Chinese international students, via The Australian: Universities are “taking massive fin­ancial risks” through over­exposure to


Institute of Public Evil: Scrap minimum wage

Via News: Low-paid work “provides dignity” and is an “important first rung of the career ladder”, according to a document distributed to MPs calling for the minimum wage to be scrapped. The parliamentary research brief distributed by conservative think tank the Institute of Public Affairs (IPA) argues Australia’s minimum wage of $19.49 an hour is


“Generational bargain is at breaking point”

More from Kate Griffiths and Danielle Wood at the Grattan Institute. Via the ABC: Each generation of Australians has enjoyed a better standard of living than the one that came before it. But today’s young Australians are in danger of falling behind. A new Grattan Institute report, Generation gap: ensuring a fair go for younger Australians, reveals


Health insurance doom loop accelerates

Via the ABC: The percentage of Australians with basic hospital cover has dropped to its lowest level in more than a decade, as almost 30,000 people dumped their policies in just three months. The latest Australian Prudential Regulation Authority (APRA) data shows health premiums are still rising faster than wages, and out-of-pocket costs are continuing