Is australias economy heading off the cliff?

daveyeh

Hi all,

Perhaps I could get some advise from the good folks on here. I am considering moving to Australia but the article below has spooked me, especially the parts that I have enboldened.

I have been enformed by someone 'in the know' that the author of this article is someone to listen to and who knows what he's talking about.

So, what is the economic mood like down under at the moment?



https://www.smh.com.au/business/the-economy/australias-economic-luck-looks-to-be-running-out-20171004-gytstx.html

Mod Note: A link to the article is preferable to posting the entire article as it against site rules

aido79

daveyeh wrote: »

Hi all,

Perhaps I could get some advise from the good folks on here. I am considering moving to Australia but the article below has spooked me, especially the parts that I have enboldened.

I have been enformed by someone 'in the know' that the author of this article is someone to listen to and who knows what he's talking about.

So, what is the economic mood like down under at the moment?



https://www.smh.com.au/business/the-economy/australias-economic-luck-looks-to-be-running-out-20171004-gytstx.html

Mod Note: A link to the article is preferable to posting the entire article as it against site rules

Have you heard the expression "economists have predicted 9 of the last 5 recessions"?
It's a bit like that in Australia at the minute. A number of economists such as the author of the article you quoted have been predicting a massive collapse of the Australian economy for a couple of years now.
On the other side of things there are probably just as many economists who think that a collapse will not happen.
It's hard to know for sure what will happen. A lot of people talk about the end of the mining boom. This is an inaccurate term to use as it seems to imply that mining has finished in Australia. The reality is that mining has never been busier in Australia. What's happened is that it has just moved from the construction phase to the production phase and as a result less people are employed in the industry. The other side of this is that exports have increased but this isn't really being celebrated because the prices of the minerals being exported has dropped considerably. He also hasn't anything about the impending lithium boom which will be very beneficial for Australia as they will become the biggest exporter of lithium in the world and as the demand for lithium batteries increases this will benefit Australia.
Looking at the property market in Australia is a very poor indication of the state of the economy in my opinion as there is such a huge variance is house prices between state to state, city to city and even city to regional area in the same state. For example houses in Sydney are insanely overpriced in my opinion while houses in Western Australia are relatively affordable. A collapse in the housing market in Sydney would have little effect on Western Australia and house price increases in Western Australia would have little effect on Sydney or any other east coast location.
A lot of the other stuff the author talks about in regards to household government debt is common to most Western countries as people become for want of a better term capitalistic and obsessed with consumerism.
The Australian economy relies a lot on China and so any change in China's economy or their importing of Australian goods will have an effect on Australia. In my opinion one of the biggest factors in this is something that nobody in the world seems to have any control over and that is Donald Trump.

I don't really know whether to advise you to move to Australia or not to be honest but please don't base your decision on the thoughts and opinions of one economist.

Tigerandahalf

We had a thread on this a few years ago. Nothing has imploded yet but that doesn't mean their future is positive.

Lots of things are wrong in their economy that the article mentions but sometimes - just like what happened with Ireland - outside factors outside of their control will tip things over.

If interest rates rise in Europe and America money will leave Oz and then their banks will be left with poor balance sheets. Household debt is a big issue there with house price growth out of line with wages.

Then you have the issue of a potential trade war between China, US and Europe. How would Oz fare if tarrifs were imposed.

All these things are cyclical. If things start to go south who knows how badly exposed they could be. Are their banks acting as reckless as ours were? You won't know until things start going wrong.

daveyeh

Tigerandahalf wrote: »

Nothing has imploded yet but that doesn't mean their future is positive.

Lots of things are wrong in their economy that the article mentions but sometimes - just like what happened with Ireland - outside factors outside of their control will tip things over.

All things considered, I'm veering towards assuming that the future there might not be as good as some people say, mainly for the reasons above.

Thanks for the replys guys.

Peregrinus

The future anywhere might not be as good as some people say, since there are incurable optimists everywhere.

By and large, you don't want to be paying too much attention to the everything-will-be-wonderful merchants or to the doomsayers. In the middle ground there are less sensational commentators who will discuss the problems facing whatever country it is, the things that can be done to address those problems, etc, etc. Those are the ones you want to listen to.

But nobody can predict the future. Whoever you listen to could be wrong, and you shouldn't act in reliance on their predictions unless you have considered the possiblity that there predictions could be wrong, and you're satisfied that that's a survivable outcome, and it represents a risk you are happy to run.

daveyeh

Peregrinus wrote: »

But nobody can predict the future. Whoever you listen to could be wrong, and you shouldn't act in reliance on their predictions unless you have considered the possiblity that there predictions could be wrong, and you're satisfied that that's a survivable outcome, and it represents a risk you are happy to run.

Thanks for your advice!

I think I'll give it a miss though. I'd only be going if I knew things where looking very good to great over there.

As things stand, my prospects are looking better where I am.

corks finest

Hope not, daughter just back there,from her,,, construction,and mines are flying

daveyeh

corks finest wrote: »

Hope not, daughter just back there,from her,,, construction,and mines are flying

At the moment it's good, it's the future I'm trying to guage. Seems to me that whats most likely is an economic decline. Possibly gradual, possibly sharp.

Hope I'm wrong for her sake!

aido79

daveyeh wrote: »

Thanks for your advice!

I think I'll give it a miss though. I'd only be going if I knew things where looking very good to great over there.

As things stand, my prospects are looking better where I am.

Is there anywhere in the world that is looking very good to great at the minute?

daveyeh

aido79 wrote: »

Is there anywhere in the world that is looking very good to great at the minute?

I'm not sure. Possibly India.

aido79

daveyeh wrote: »

I'm not sure. Possibly India.

That's kind of the point I'm trying to make. Nobody can really accurately predict the future of any economy. It's a guessing game.

daveyeh

aido79 wrote: »

Nobody can really accurately predict the future of any economy. It's a guessing game.

I know, I was trying to form an educated guess.

Wasn't getting a whole lot of info from here, probably the wrong forum to ask.

Anyway, happy enough with my conclusion now though.

aido79

daveyeh wrote: »

I know, I was trying to form an educated guess.

Wasn't getting a whole lot of info from here, probably the wrong forum to ask.

Anyway, happy enough with my conclusion now though.

You didn't really give enough info to get a whole lot of info to be honest. A lot of your success if moving to Australia would depend on the visa you come over on, your occupation and level of experience and where you choose to live. The economy would actually only play a very small part.
Best of luck with your decision though.

daveyeh

aido79 wrote: »

You didn't really give enough info to get a whole lot of info to be honest. A lot of your success if moving to Australia would depend on the visa you come over on, your occupation and level of experience and where you choose to live. The economy would actually only play a very small part.
Best of luck with your decision though.

True, I didn't give a lot of info!

My (potential) job would be affected directly by the economic performance of the country.

I'll be staying where I am for now, thanks for the input guys!

ChikiChiki

Sydney doesnt seem to be slowing down at all. Seems to be lots of spare cash in the local economy to the extent that they want to knock down and rebuild two modern stadiums, the ANZ and Allianz stadiums. I cannot get my head around it as they are both world class as-is.

Everywhere you turn there is infrastructural projects happening with new rail systems and motorways being developed. The skyline is littered with cranes. A new airport is being built out in the citys west which will drive the constuction of a new CBD close by and loads of new residential units.

At the same time it does kind of remind me of Ireland 2005 especially with how easy it is to get credit:eek:

Wanderer78

According to Australian economist Steve keen, it's close to going bang, and it possibly could be a big one, due to over leveraged banks, at least their government didn't encourage a housing boom like ours, maybe they'll experience the elusive 'soft landing'!

Tigerandahalf

I was reading an article online the other evening and it mentioned the following...

"In 2016, 67% of Australia’s GDP growth came from the cities of Syd­ney and Mel­bourne where both State and Fed­eral gov­ern­ments have done every­thing they can to fuel a run­away hous­ing mar­ket. The small area from the Syd­ney CBD to Mac­quarie Park is in the mid­dle of an apart­ment build­ing frenzy, alone con­tribut­ing 24% of the country’s entire GDP growth for 2016, accord­ing to SGS Eco­nom­ics & Plan­ning."

"Accord­ing to the Rider Lev­ett Buck­nall Crane Index, in Q4 2017 between Syd­ney, Mel­bourne and Bris­bane, there are now 586 cranes in oper­a­tion, with a total of 685 across all cap­i­tal cities, 80% of which are focused on build­ing apart­ments. There are 350 cranes in Syd­ney alone."

"By com­par­i­son, there are cur­rently 28 cranes in New York, 24 in San Fran­cisco and 40 in Los Ange­les. There are more cranes in Syd­ney than Los Ange­les (40), Wash­ing­ton DC (29), New York (28), Chicago (26), San Fran­cisco (24), Port­land (22), Den­ver (21), Boston (14) and Hon­olulu (13) com­bined. Rider Lev­ett Buck­nall counts less than 175 cranes work­ing on res­i­den­tial build­ings across the 14 major North Amer­i­can mar­kets that it tracked in 3Q17, which is half of the num­ber of cranes in Syd­ney alone.

Accord­ing to UBS, around one third of these cranes in Aus­tralian cities are in post­codes with ‘restricted lend­ing’, because the inhab­i­tants have bad credit rat­ings."

"Already at the time of the GFC, Aus­tralian house­holds were at 190% debt to net dis­pos­able income, 50% more indebted than Amer­i­can house­holds, but then things really went crazy.

The gov­ern­ment decided to fur­ther fuel the fire by “stream­lin­ing” the admin­is­tra­tive require­ments for the For­eign Invest­ment Review Board so that tem­po­rary res­i­dents could pur­chase real estate in Aus­tralia with­out hav­ing to report or gain approval.

It may be a stretch, but one could pos­si­bly argue that this move was cun­ningly cal­cu­lated, as what could pos­si­bly be wrong in sell­ing over­priced Aus­tralian houses to the Chi­nese?

I am not sure who is get­ting the last laugh here, because as we sub­se­quently found out, many of those Chi­nese bor­rowed the money to buy these houses from Aus­tralian banks, using fake state­ments of for­eign income. Indeed,accord­ing to the AFR, this was not sophis­ti­cated documentation?—?Australian banks were being tricked with pho­to­shopped bank state­ments that can be bought online for as lit­tle as $20."

The same article goes into how coal and iron ore which are Australia's big exports are in decline with coal being phased out across the globe due to climate change and reducing carbon related temperature rise < 2%. Car manufacturers have also exited.


http://www.debtdeflation.com/blogs/2017/11/14/australias-economy-is-a-house-of-cards/

Wanderer78

Tigerandahalf wrote: »

I was reading an article online the other evening and it mentioned the following...

http://www.debtdeflation.com/blogs/2017/11/14/australias-economy-is-a-house-of-cards/

just be aware, keen has more or less abandoned his debtdeflation.com blog, he works mainly from his patreon page now

https://www.patreon.com/ProfSteveKeen

id also recommend his youtube channel and his podcast

http://debunking.podbean.com/

https://www.youtube.com/user/ProfSteveKeen/featured

ChikiChiki

ChikiChiki wrote: »

Sydney doesnt seem to be slowing down at all. Seems to be lots of spare cash in the local economy to the extent that they want to knock down and rebuild two modern stadiums, the ANZ and Allianz stadiums. I cannot get my head around it as they are both world class as-is.

That is absolutely ****ing mental.

Just to expand, I was gonna ask for a link but a quick google showed it. Again, that's bat**** insane.

daveyeh

Tigerandahalf wrote: »

"In 2016, 67% of Australia’s GDP growth came from the cities of Syd­ney and Mel­bourne where both State and Fed­eral gov­ern­ments have done every­thing they can to fuel a run­away hous­ing mar­ket. The small area from the Syd­ney CBD to Mac­quarie Park is in the mid­dle of an apart­ment build­ing frenzy, alone con­tribut­ing 24% of the country’s entire GDP growth for 2016, accord­ing to SGS Eco­nom­ics & Plan­ning."

"Accord­ing to the Rider Lev­ett Buck­nall Crane Index, in Q4 2017 between Syd­ney, Mel­bourne and Bris­bane, there are now 586 cranes in oper­a­tion, with a total of 685 across all cap­i­tal cities, 80% of which are focused on build­ing apart­ments. There are 350 cranes in Syd­ney alone."

"By com­par­i­son, there are cur­rently 28 cranes in New York, 24 in San Fran­cisco and 40 in Los Ange­les. There are more cranes in Syd­ney than Los Ange­les (40), Wash­ing­ton DC (29), New York (28), Chicago (26), San Fran­cisco (24), Port­land (22), Den­ver (21), Boston (14) and Hon­olulu (13) com­bined. Rider Lev­ett Buck­nall counts less than 175 cranes work­ing on res­i­den­tial build­ings across the 14 major North Amer­i­can mar­kets that it tracked in 3Q17, which is half of the num­ber of cranes in Syd­ney alone.

Accord­ing to UBS, around one third of these cranes in Aus­tralian cities are in post­codes with ‘restricted lend­ing’, because the inhab­i­tants have bad credit rat­ings."

"Already at the time of the GFC, Aus­tralian house­holds were at 190% debt to net dis­pos­able income, 50% more indebted than Amer­i­can house­holds, but then things really went crazy.

The gov­ern­ment decided to fur­ther fuel the fire by “stream­lin­ing” the admin­is­tra­tive require­ments for the For­eign Invest­ment Review Board so that tem­po­rary res­i­dents could pur­chase real estate in Aus­tralia with­out hav­ing to report or gain approval.

It may be a stretch, but one could pos­si­bly argue that this move was cun­ningly cal­cu­lated, as what could pos­si­bly be wrong in sell­ing over­priced Aus­tralian houses to the Chi­nese?

I am not sure who is get­ting the last laugh here, because as we sub­se­quently found out, many of those Chi­nese bor­rowed the money to buy these houses from Aus­tralian banks, using fake state­ments of for­eign income. Indeed,accord­ing to the AFR, this was not sophis­ti­cated documentation?—?Australian banks were being tricked with pho­to­shopped bank state­ments that can be bought online for as lit­tle as $20."

The same article goes into how coal and iron ore which are Australia's big exports are in decline with coal being phased out across the globe due to climate change and reducing carbon related temperature rise < 2%. Car manufacturers have also exited.

:eek::eek::eek:

"many of those Chi­nese bor­rowed the money to buy these houses from Aus­tralian banks, using fake state­ments of for­eign income. Indeed,accord­ing to the AFR, this was not sophis­ti­cated documentation?—?Australian banks were being tricked with pho­to­shopped bank state­ments that can be bought online for as lit­tle as $20."


Absolute and total insanity. This can't end well.

I'm definitely staying here!!

Fr Tod Umptious

OP

That first article you posted reads like something straight out of Ireland 2006 to 2008.

Low interest rates and easy credit.
Speculative building boom.
Reduction in competitivness
Banks guarantees

If that's what is really driving the economy then it looks like it could all come tumbling down alright

ceekay74

Looks like the bad news stories are starting to flood in now...

https://www.news.com.au/finance/economy/australian-economy

AngryHippie

'tis but a dip

A mere adjustment

AngryHippie

In all seriousness:


Sydney and Melbourne property prices have been on the slide for a good 18 months now.
There is typically a hangover of around that time before that spreads to the rural centers of NSW, VIC and QLD.

Brisbane and the GC have been a bit stagnant for a while largely due to oversupply of 1 bedroom units ( how many b's can an airbnb??)

commencements are slowing, but hasn't been a sharp shock as yet.

Most vulnerable industries have been scaling accordingly and will hold their breath for a govt. change, infrastructure spend and re-structure for first-home buyers who have been sidelined in large numbers for a long time due to high prices and finance constraints.

The main problem is that the clowns in charge have been running amok with the deficit which is now in a bit of a crisis. If their hands are tied on infrastructure investment over the next 5 years, the issue could compound badly and turn into a bit of a sh1tshow.

yes the economy is lurching around like an Aussie Billionaire full of small batch JD and false confidence.....Will it fall over and end up in a coma or just have a big chunder and wander back to the bar ?....who knows?

Wanderer78

AngryHippie wrote:

The main problem is that the clowns in charge have been running amok with the deficit which is now in a bit of a crisis. If their hands are tied on infrastructure investment over the next 5 years, the issue could compound badly and turn into a bit of a sh1tshow.

I'd say it's more to do with our modern global approach of deregulate the financial sector, in particular banks, allow, even encourage them to flood the place with cheap credit, which in turn, drives up asset prices, in particular housing, sit back and watch it all blow up. Welcome to the world of 'soft landing', won't be long and the aussies will be hearing things such as the deficit, the deficit, our hairs on fire, living beyond our means, we must tighten our belts, and blah blah blah!

Tigerandahalf

Wanderer78 wrote: »

I'd say it's more to do with our modern global approach of deregulate the financial sector, in particular banks, allow, even encourage them to flood the place with cheap credit, which in turn, drives up asset prices, in particular housing, sit back and watch it all blow up. Welcome to the world of 'soft landing', won't be long and the aussies will be hearing things such as the deficit, the deficit, our hairs on fire, living beyond our means, we must tighten our belts, and blah blah blah!

We could see a change in our politics if Australia causes issues elsewhere. The banking sector has been allowed to run most countries. There could be a serious kick back against this.

I was watching a Simon Reeve programme on Oz and he was interviewing a major property developer in Sydney who has built numerous blocks. He was asked the question 'Who is buying all these apts?' He replied 'Chinese'.
There could be an awful hole there in the banks.

Moodys already predicting another 10% fall ontop of existing 10%.

Wanderer78

Tigerandahalf wrote:

I was watching a Simon Reeve programme on Oz and he was interviewing a major property developer in Sydney who has built numerous blocks. He was asked the question 'Who is buying all these apts?' He replied 'Chinese'. There could be an awful hole there in the banks.

Hole! I'd say it's rotten to the core, along with its parliament.

With very little changing globally with the banking system after 2008, you d have to wonder, what will change it. It will be interesting to see how aussies react to clasping house prices, bailing out banks, no one being held accountable, belt tightening......

lawred2

daveyeh wrote: »

At the moment it's good, it's the future I'm trying to guage. Seems to me that whats most likely is an economic decline. Possibly gradual, possibly sharp.

Hope I'm wrong for her sake!

soft landing I'd say :pac:

BarryD2

Know someone involved in shipping in Aus. Several years ago he was saying that they are exposed on mining exports to China. That the Chinese have been constructing basically cities of apartment blocks that the middle class Chinese invest in but which have flooded the market with many being unoccupied. Also says Aus is far more an Asian country than our perception here and that if the Asian and specifically Chinese take a wobbler, that Aus is in trouble. But I'm sure there's a lot more to Aus economy than just mining? Hopefully?

aido79

It's actually quite difficult to look at Australia's economy as a whole because the economies of each state are very different. For example a huge drop in house prices in Sydney or Melbourne would have very little effect on the Western Australian economy or a drop in mining activity in Western Australia would have very little effect on the eastern states.

There is a lot of uncertainty around at the minute due to the impending election because it's looking more likely that there will be a change of government so any predictions on the economy really are just guesses.