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How Are Things In Australia?

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I saw a few threads on here about the Australian economy being in dire straits but have not read much recently.

What is happening over there, any real-life anecdotes?

Apparently the mining is really kicking off and keeping their currency strong.

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According to Opinion in the West Australian:

Do you think the constant battle with bills couldn't get any worse? The childcare fees have come in, council rates are up again, you can't jump over the power bill, little Johnny is working a double newspaper round just to afford a banana in his lunch box and the dog might have to be sold because pet food has become so expensive.Then you hear talk about a carbon tax, the Reserve Bank is rabbiting on about interest rate rises and some boffins reckon a "congestion charge" would solve the daily traffic jam.

The problem is it could all get worse and there is nothing you, me or a government (State or Federal) can do about it.

Reserve Bank governor Glenn Stevens used a speech last week to effectively lay it on the line to everyone who argues about the cost of living.

"For a long time, the world price of foodstuffs and raw materials tended to decline relative to the prices of manufactures, services and assets," he said.

"But for some years now the prices of things that are grown, dug up or otherwise extracted have been rising relative to those other prices."

There is a good reason for those rising prices (which, by the way, are making West Australians particularly wealthy).

"We do not have to look far for the cause: hundreds of millions of people in the emerging world have seen growth in their incomes and associated changes in their living standards, and they want to live much more like we have been living for decades," he said.

"This means they are moving towards a more energy-and steel-intensive way of life and a more protein-rich diet.

"That fact is fundamentally changing the shape of the world economy. Even if China's growth rate moderates this year, as it seems to be doing, these structural forces almost certainly will continue."

This is the structural shift in the global economy that economists, analysts and policymakers have been banging on about for most of this century.

In WA, we are riding the crest of that economic tsunami. But that tsunami is swamping plenty along the way.

The problems across the US and Europe are unlikely to go away soon as China, on track to be the world's biggest economy by the middle of this decade, grows quickly. Once China has its time in the sun, it will be eclipsed by India.

Within Australia, there is going to be pain felt outside the mining sector.

If you have a job in manufacturing or tourism, then life won't be easy.

New figures from the Australian Bureau of Statistics show that since early 2009 the number of people in WA with a mining job has jumped 52 per cent.

In contrast, over the same period, the number of manufacturing jobs in WA has fallen by 11.4 per cent.

In the accommodation and food services sector, which takes in a good share of the tourism sector, employment has barely changed, despite strong population growth which should actually lift employment.

So when the Reserve talks about the mining sector (and the strong Australian dollar) making structural change in the economy, this movement in employment is exactly what they're talking about.

The governor admitted as much, with his solution not all that palatable.

"Of course, it is easy to talk about structural change in the abstract. It is another thing to cope with it in practice," Mr Stevens said. "There are no magic-pill solutions, nor are there any real alternatives to adjustment.

"What solutions there are, though, are likely to involve a refocusing on productivity performance after a period in which, at least at a national level, our productivity growth has been disappointing."

So structural change is people moving out of one job into another, or becoming uberproductive.

Most of the commentary out of Mr Stevens' speech focused on his clear warning that an interest rate rise in August was on the cards.

But he also played down claims the Federal Budget bottom line was making life tougher for the Reserve.

He noted fiscal policy was playing a "significant role" in fighting inflation, with the shift in the Budget deficit effectively taking 2 per cent of GDP out of economic activity over the coming 12 months. The following year, when (with Wayne Swan's fingers crossed) the Budget moves into surplus from deficit there will be another tightening of the screws.

That, however, is in the face of the huge changes being wrought on the economy by demand out of China and India.

Maybe that suggests the debate over government spending, especially at the margins, is of decreasing importance to the Reserve.

A swing of 2 per cent in GDP, of the magnitude $26 billion, obviously gets the attention of the Reserve. Talking about lifting or cutting the surplus/deficit by one or two billion dollars, then, is of a much lower order. And that is what we get down to when it comes to much of the white hot anger over the trajectory of Canberra's finances.

Obviously, Mr Stevens' focus at this stage is not on the actions in Canberra.

He and the Reserve board are looking at events in China, India, and across the rest of South-East Asia, to which Australia is now linked.

That demand out of Asia will keep prices for food, minerals and energy higher. That's good for Australians, particularly West Australians and Queenslanders, but it comes at a price.

Little Johnny might have to pick up a third paper round.

I am offering my services to go on a fact-finding mission.cool.gif

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oh man, they must be heading for the mother of all property bubble implosions

Hopefully :ph34r:, then I'll buy a house in Perth's northern suburbs.;)

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