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Australia Businesses China Government The Almighty Buck

This is Why Australia Hasn't Had a Recession in Over 25 Years (bloomberg.com) 115

Posted by msmash from the state-of-things dept.
Australia is close to seizing the global crown for the longest streak of economic growth thanks to a mixture of policy guile and outrageous fortune. From a report: While growth is being underpinned by population gains and resource exports to China, failure to spur productivity has meant stagnant living standards and electoral discontent; a property bubble fueled by record-low interest rates has driven household debt to levels that threaten financial stability; and a timid government facing political gridlock could lose the nation's prized AAA rating as early as May because of spiraling budget deficits. Australia's last recession -- defined locally as two straight quarters of contraction -- occurred in 1991 and was a devastating conclusion to eight years of reform designed to create an open, flexible and competitive economy. But it also proved cathartic, paving the way for a low-inflation, productivity-driven expansion. As momentum started waning, China's re-emergence as a pre-eminent global economic power sent demand for Australian resources skyrocketing, helping shield the nation from the worst of the global financial crisis. But the post-crisis return of the boom proved ephemeral, failing to boost government coffers and pushing the local currency higher, eroding competitiveness and driving another nail into the coffin of a fading manufacturing sector.
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This is Why Australia Hasn't Had a Recession in Over 25 Years More

This is Why Australia Hasn't Had a Recession in Over 25 Years

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  • Disjunction between headline and text (Score:4, Informative)

    by Geoffrey.landis ( 926948 ) on Friday March 31, 2017 @04:32PM (#54154605) Homepage

    There's rather a disjunction between the rah-horray headline and the text, which seems to be about how Australian economy is heading for a major bust. "Failure to spur productivity has meant stagnant living standards and electoral discontent; a property bubble fueled by record-low interest rates has driven household debt to levels that threaten financial stability; and a timid government facing political gridlock could lose the nation’s prized AAA rating as early as May because of spiraling budget deficits."

    The answer to the question posed in the title seems to be "because Australia is close to China, so when the rest of the world economy hit a depression, the Australian economy was buoyed up by the Chinese money."

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      The answer to the question posed in the title seems to be "because Australia is close to China, so when the rest of the world economy hit a depression, the Australian economy was buoyed up by the Chinese money."

      Sadly that is the truth combined with Australia didn't have the bank problems of the rest of the world as we had regulations that prevented them from being leveraged to the hilt. Unfortunately even though we were not in any real danger in the GFC the then Labour government decided to use it as a vote buying/popularity exercise and sent the country from surplus into massive debt and overspend, and ever since neither Labour nor liberal governments have been able to rein in the overspending. The housing bubble

      • Re: (Score:2)

        by Luthair ( 847766 )
        Canada had similar regulations on our banking industry - however when oil prices dropped part of the economy slowed. If I recall correctly wasn't Australia buoyed through the down periods by exporting coal?

        • IMHO Canada is more dependent on energy resources than Australia. We can grow more of our own food and we don't have to import food to survive. Our climate allows food production all year round, and our tropical areas are very productive.

          • Re: (Score:2)

            by dryeo ( 100693 )

            Canada is easily self sufficient in food, we just have to not export quite as much, though without imports, not as much variety. Our greenhouses do allow food production all year round for fresh veggies in the winter.

            • With or without artificial energy input?

              • Re: (Score:2)

                by dryeo ( 100693 )

                Depends on what you call artificial. Some are heated by methane from cow manure and some are heated by wood waste. Most winters there aren't many nights when they need heat here on the wet coast. Without the green houses we can still fall back on the Brassica crops as well as things like apples that keep. Note also that where I am, California is considered local as it's closer then the further parts of the province.
                I'd imagine that much of your food production depends on artificial sources of water.

              • Re: (Score:1)

                by Anonymous Coward

                Canada uses mostly hydroelectric and a significant amount of nuclear locally (and has local uranium), along with a scattering of renewables. Fossil fuels were about 22% of Canada's energy sources. Despite Canada having very large oil reserves, hence Canada's export economy being driven by oil prices. Citation: https://www.nrcan.gc.ca/sites/... [nrcan.gc.ca]

                I'm less familiar with Australia's energy mix, but this site suggests it's surprisingly dependent on fossils: https://industry.gov.au/Office... [industry.gov.au]

                I'm also not famili

                • .Plenty of water and improved CO2 levels mean less CO2 starvation for plants and better growing results.

                  I don't subscribe that the historical CO2 levels have been reported, correlated and projected accurately (e.g. Antarctic levels, cores are lower than arctic levels but not noted) nor do I buy the proposed CO2 accumulation levels, due to actual kinetic measurements of CO2 lifetime. This independent of the CO2 itself causes catastrophic warming discussion.
        • Labour spent the money on "economic stimulus" in the wake of the GFC, in much the same way as Obama did in the US. The mining boom has ended and none of "leaders" saw it coming. Unlike Norway that experienced a similar boom from North Sea oil and invested it in infrastructure, education. and health, John Howard pissed ours away on tax cuts for the people in the top tax bracket who didn't need them (people like me). We haven't learnt our lessons, it's now more profitable for natural gas companies to ship gas
          • What about the socialists and their green energy fubar in South Australia,

            Sounds like they f*cked you more, made you the goose.

      • bullshit. (Score:5, Insightful)

        by Falconhell ( 1289630 ) on Friday March 31, 2017 @05:08PM (#54154809) Journal

        Complete right wing rubbish, the reason we got thru the GFC without recession was the governments prompt stimulus actions at the time.
        The housing bubble is not due to supply, there are many vacant investor properties, it is the ridiculous negative gearing tax dodge that is fuelling the housing price problems.

        • Re: (Score:3)

          by dwywit ( 1109409 )

          You seem to have forgotten why Rudd & Co were able to take the actions they did - there was a BIG pile of cash reserves, put there by the previous govt as they enjoyed the profits and royalties of selling our coal & iron ore overseas. Unfortunately Rudd & Swan couldn't manage a chook raffle without going into debt.

          Anyway, you're right about negative gearing - the sooner it's given the chop, the better. All those "wealth creation" schemes based on buying investment properties using interest-only

          • Re: (Score:2)

            by rtb61 ( 674572 )

            The stagnation is a temporary thing, mainly due to the government taking no significant action to avert it, preferring to just do their get rich quick buddies favours for favours at election time. Right now Japan is also stagnating, so a smart move would be for both countries to work together to stimulate each others economies ie big step, open borders (well, not that big, neither Japanese nor Australians are big on emigration), which would open up access to both countries to each others consumers, a really

          • You seem to have forgotten why Rudd & Co were able to take the actions they did - there was a BIG pile of cash reserves, put there by the previous govt as they enjoyed the profits and royalties of selling our public infrastructure.

            FTFY. That big pile of cash reserves is the reason why your gas and electricity bills have skyrocketed.

          • Have you seen the debt now, under the hopeless LNP, far higher than under Rudd/Swann? Of does reality hot suit your narrative?
            It was by starving pensioners and unemployed that Howard/Costello built their surplus, on the back of reforms introduced under Labor, and the resources boom.
            Had the Howard govt not given away buckets of money tomthe well off in middle class welfare, instead of creating a national wealth fund as Norway did, no debt would have been needed.

            • Re: (Score:2)

              by dwywit ( 1109409 )

              Yes, the debt is excessive, no doubt about that, and will likely get worse before it gets better. The income from selling resources is nowhere near what it was in the "boom". BTW, how much debt did the LNP inherit from Labor? You can't fix multi-billion-dollar national debts in one election cycle.

              The narrative is a familiar one. Labor gets into power, and proceeds to spend, spend, spend (hint: you may or may not remember what happened in the 1970s under Whitlam). If the money isn't in the bank, Labor will b

        • The housing bubble is not due to supply, there are many vacant investor properties, it is the ridiculous negative gearing tax dodge that is fuelling the housing price problems.

          Good to see you're gobbling up the political speak hook line and sinker.

          Firstly there are no vacant investor properties. There are undesirable ones mostly fuelled by mum and dad investors who heard about this housing investment thing and then bought / renovated a house without any thought as to who would live there or how much they would pay and now can't get the money they want for it.
          If you're in a city and you have a vacant property you're doing it wrong and you should pick a different career.

          Secondly le

          • Well, arent you totally uniformed, there are vast amounts of unoccupied negative geared properties. Meanwhile, young people cant afford to buy their own residence, so they end up renting forever from negatively geared investors, manynof whom own multiple properties, who get capital gains.
            I know its difficult for someone well off enough to afford an investment property to understand, but you are simply ignoring reality.
            I absolutely stand by the words I used, and your beakdown is lttlie more than dishonest at

      • If there's an urban land shortage, what's stopping Australia from building a new freeway a kilometer or two inland along the entire east coast from Carins to Sydney, opening up tens of thousands of square kilometers of land for new development in the process?

      • Re: (Score:2, Interesting)

        by Anonymous Coward

        This is a very partisan point of view and totally ignores the effect the government stimulus had at the time. It could be argued that the stimulus could have been targeted better, but the focus at the time was on the dissemination of the stimulus as quickly and broadly through the community as possible. The actions of the government of the day during the GFC were widely regarded globally as an example of an economy that had successfully navigated the GFC.

        Comments on property are also naive and ignore the di

        • Re: (Score:2)

          by dwywit ( 1109409 )

          We survived the GFC better than most, true, and most schools got major infastructure upgrades (there's good and bad sides to that, but it's another story), but at the end of the surplus, the labor govt didn't stop spending, so we ended up with massive foreign debt again.

          There's a surplus of apartments because developers can't get their hands on land for traditional quarter-acre blocks for housing, and that's because local and state governments won't co-operate to release the land. Councils *are* allowing ol

          • Re: (Score:2)

            by Luthair ( 847766 )
            As an outsider, it doesn't seem reasonable to blame the party in power. They can't control the global economy or force your trading partners to buy more. More importantly, cutting spending during an economic downturn has been shown to acerbate the problem.

        • Re: (Score:2)

          by Luthair ( 847766 )

          The actions of the government of the day during the GFC were widely regarded globally as an example of an economy that had successfully navigated the GFC.

          Point of order, I'm not sure who you think was doing the wide regarding... but as a normal Canadian who reads a lot, Australia is never mentioned in the context of the financial crisis. The only articles I've ever seen talked about coal exports to China and a couple about that batshit crazy rich lady. Oh, and occasionally someone being eaten by a shark or alligator.

      • It also depends on what you compare it to. Bhutan, for example, hasn't had a recession ever as far as I know.

  • I purchased a house just before the 1991 recession (Score:5, Insightful)

    by Catharz ( 223736 ) on Friday March 31, 2017 @05:08PM (#54154817)

    It was our first house, and my partner was a lot more risk adverse than me. She insisted we be prepared for one of us being out of work and interest rates doubling. Both happened. I changed careers to IT and it took me nearly 2 years to get work, while interest rates went from 9% to 18% in a matter of months.

    We managed to pay the mortgage and keep the house, but it was not a fun time.

  • Chinese buying the property, selling all resources (Score:5, Interesting)

    by AbRASiON ( 589899 ) * on Friday March 31, 2017 @05:40PM (#54154981) Journal

    I've posted this maybe dozens of times across the internet, I'm tired of shouting it and I'm tired of making lengthy posts with links and evidence.

    The country is selling all it's gas, minerals at rock bottom prices to anyone and everyone for a start. In a huge massive way. The mining boom is finally slowing down significantly, at least so I hear.

    We are also pretty lax with stopping people buying property. There's arguments why shouldn't we stop them, but seriously, I'm sick of debating it. If you can't see how someone vastly wealthier than the common local, bidding for houses isn't going to mess up the cost for the locals,..... well I don't know what to say. There's a reason Thailand, Indonesia, other smaller second class countries don't let foreigners buy.

    We're getting 'Vancouvered'. It ain't about race, it's about economics and the locals (who don't own yet, you know, a LOT of people) are getting destroyed, totally by this.

    That's the facts, it's as simple as that. Furthermore, as long as the Chinese can still buy property (and they do it legally and illegally) then I suspect the 'crash' which I've hoped for, for a decade, simply won't come. They'll just see a cheaper place to store their money they want to hide from China.

    We're boned. Best benefit to all this would be a property developer in the last 20 years. Rest of us? Well I've held off using expletives but to say I'm white hot raging angry would be an understatement. @$#%^ our governments.

    • The country is selling all it's gas

      You're not wrong. What a wonderful example of a free-market economy. A small localised gas supply at relatively cheap prices made using gas for everything affordable. Even cars were converted to run on LPG to save costs.

      Fastforward to now. Shale gas has boomed. Australia sold it's own grandmother to gas companies for a penny and we became a huge exporter of gas able to rival Russia and the middle east. Everything happy right? Except Australiasian gas prices fell to below the break even cost of the shale gas

    • I've posted this maybe dozens of times across the internet, I'm tired of shouting it and I'm tired of making lengthy posts with links and evidence.

      The country is selling all it's gas, minerals at rock bottom prices to anyone and everyone for a start. In a huge massive way. The mining boom is finally slowing down significantly, at least so I hear.

      We are also pretty lax with stopping people buying property. There's arguments why shouldn't we stop them, but seriously, I'm sick of debating it. If you can't see how someone vastly wealthier than the common local, bidding for houses isn't going to mess up the cost for the locals,..... well I don't know what to say. There's a reason Thailand, Indonesia, other smaller second class countries don't let foreigners buy.

      We're getting 'Vancouvered'. It ain't about race, it's about economics and the locals (who don't own yet, you know, a LOT of people) are getting destroyed, totally by this.

      That's the facts, it's as simple as that. Furthermore, as long as the Chinese can still buy property (and they do it legally and illegally) then I suspect the 'crash' which I've hoped for, for a decade, simply won't come. They'll just see a cheaper place to store their money they want to hide from China.

      We're boned. Best benefit to all this would be a property developer in the last 20 years. Rest of us? Well I've held off using expletives but to say I'm white hot raging angry would be an understatement. @$#%^ our governments.

      Oh please, spare us your xenophobia. I have heard such sentiments in the late 80's and 90's when the Japanese were on a spending spree. Everyone were concerned by the Japanese buying up American assets while conveniently ignoring that citizens and business entities of the UK owned more assets in America than the Japanese. I wonder why people were concerned about the Japanese and not the English. On second thought, I know why. Those other counties, you mentioned, preventing Chinese from buying property are

      • Re:Chinese buying the property, selling all resour (Score:4, Interesting)

        by thegarbz ( 1787294 ) on Saturday April 01, 2017 @05:43AM (#54157007)

        Oh please, spare us your xenophobia.

        If I said the population of Africa is mostly black is that xenophobia? No? Then why is pointing out the simple fact that there is an incredibly large institutional investment from Chinese non-residents of Australia in the country?

        I mean every major skyrise construction is bought out mostly by Chinese non-residents. Whole suburbs in major cities have been bought and build by Chinese non-residents. The two largest cattle companies in Australia have been bought out by Chinese consortium. The largest property in Australia (the size of Israel) was bought by a Chinese consortium. And let's not forget the all their investment in our dairy industry, coal industry, telecoms, ... they'd own it all if it weren't for the fact that the government keeps coming up with new laws limiting foreign ownership (and good-on-em as well).

        I wonder why people were concerned about the Japanese and not the English.

        You may wonder, but you don't know despite what you claim. There's a big difference between having foreign ownership from a country who is a close ally, has strong political ties, similar financial systems, and works on the same principles as yourself, vs a country who you will quite likely be at war with again within the century, who you have strained political relations with, and who you accuse of and constantly take to the various trade organisations of deceptively rigging their financial and trading systems. China is economically hostile, just as Japan was in the 80s.

        The fact that you put this down to xenophobia is just an amazing display of ignorance.

      • Japan didn't have laws excluding any foreign company from owning more than 50 of a business, so I didn't care at the time. Neither did England.
        China, however....

    • then I suspect the 'crash' which I've hoped for

      I wouldn't hope for any crash, much less a property crash. Just remember what happens when prices come down. It sound great for a new home buyer, but well didn't we just witness what happened in 2008? A sizeable chunk of the population not being able to afford their houses as interest rates spike and the investment value crumbles has a horrible effect on the economy.

      • I no longer care, I couldn't care less.
        Fuck them all, a generation (or 3!) have been fucked by the Australian government policies and I want to see it all crumble horrifically.
        There's far too many "interest only loan" investors with 2,3,4 properties, reducing their taxable income (google: "negative gearing" a true scam for the rich).

        Nope the middle class, the young and a small handful of the cautious middle aged (me) have been ruined. Let it fall to utter pieces.

        • and I want to see it all crumble horrifically.

          Yeah before you do, let me move my pension and all my other investments overseas. You want to shoot yourself in the foot then go right ahead but please don't get blood on everyone else.

          google: "negative gearing" a true scam for the rich

          Taking a loss on an investment and offsetting it against the tax you pay is a scam? I find it funny you think it's a scam for the rich since they don't pay enough taxes to offset for negative gearing in the first place. Also those with 2 3 4 investment properties driving up the prices? Well a large portion of that you can th

    • Re: (Score:1)

      by Catharz ( 223736 )

      Foreign investment is a factor, but nowhere near the biggest one is.

      The shift from having pensions to superannuation, and the implementation of negative gearing are the biggest issues. Owning multiple homes has become the retirement plan of most of the population. Our politicians (including our prime minister) are some of the largest property investors in the country. We have a level of plutocracy on par with Columbia, and property developers are making a killing. Several IT people I know have already given

  • ... More shrimp on the Bar-B. G'day.

  • I just had a gorgeous Akubra hat sent over. It was 20 days in L.A. customs but I finally got it.

    • Re: (Score:2)

      by dwywit ( 1109409 )

      Don't tell PETA they're made from rabbit fur. They *are* nice hats, though. Check back in a couple of years when you've worn it in ;-)

  • The Australian Government's (both Labor and Coalition) over the last 15 years have conspicuously failed to support the automotive industry in the face of the high exchange rate caused by our enormous mineral exports. This is in opposition to the way they supported the banks via all sorts of funny schemes.

    As a result Australia is the only country I have ever heard of which has decided that the auto industry is not a good idea.

    So first the assembly workers went. Then the factories went. That meant there was n

    • Re: (Score:3)

      by dwywit ( 1109409 )

      You can't keep throwing public money at private companies to preserve local jobs when it's become obvious that we simply can't compete with manufacturing in developing countries. The big automakers have closed because it's just cheaper to make cars in other countries, regardless of how many govt "incentives" they get.

      You may as well have the govt nationalise the auto industry if they're going to keep funding it.

  • You're holding it upside-down mate.

  • Not sure about Australia, but here in the States the trouble is we keep giving our upper class massive tax cuts. Then we don't cut services (because if we did people would demand we repeal those tax cuts) and instead borrow the money. The idea is the system will eventually collapse and the rich will swoop in during the chaos and take control of the country. I'd like to think we'll be smart and stop that, but so far no such luck.

    If you guys are going through this then my apologies. Your ruling class learn

  • Housing in Australia (Score:3)

    by DMJC ( 682799 ) on Saturday April 01, 2017 @06:32PM (#54158849)
    Housing in Australia has several components to it which I will try to cover in this post. I live in Melbourne Australia and I want to provide insight to people interested in learning more. 1. The 1980s Hawke/Keating Market reforms set the country up for the past 30 years of economic growth. Anyone denying that is crazy. They floated the currency, freed up the market for global trade and set the nation on a path to long term wealth. They did however over stamp on the breaks in 1991 causing a short recession. https://en.wikipedia.org/wiki/... [wikipedia.org] 2. Negative Gearing and the Capital Gains Tax concessions are two massive tax breaks for existing home owners. Their effects are huge and not to be underestimated. Negative gearing allows any loss on a property such as repair work or investment loss to be written off against the owner's taxable income. Originally it was introduced to boost investment in the housing market. The Capital gains discount allows a property owner to not pay tax on 50% of their profit on a property when they sell it. In the current market this has created a situation where it is better to leave a property empty, appreciating in value and then sell it without the hassle of dealing with tenants and property management firms. http://www.abc.net.au/news/201... [abc.net.au] 3. Foreign investment. Market research data from Vancouver shows that implementing a 15% tax on foreign property investment caused a property price drop of around 20%. Where that money is coming from doesn't really matter, the point is that foreign investment accounts for approximately 8-11% of properties purchased in the market. https://www.bloomberg.com/news... [bloomberg.com] 4. Recent studies of water usage in Melbourne and Sydney show that upto 80,000 properties in Melbourne alone lie vacant. http://www.heraldsun.com.au/ne... [heraldsun.com.au] and http://www.afr.com/real-estate... [afr.com] 5. Immigration, 182,000 people migrated to Australia in 2015-16 the 2016-17 stats are not available http://www.abs.gov.au/ausstats... [abs.gov.au] This is a large number by Australian standards, but most immigrants are not rich enough to buy property outright. Mostly they increase competition in the rental market. Most of these people are settling in Sydney and Melbourne with an estimate of 70-80% of people moving to these two cities. http://www.abc.net.au/news/201... [abc.net.au] 6. The mining/resources boom. In the late 1990s/early 2000s the mining/resources boom brought a ton of wealth into Australia, this prevented a natural correction from occurring in the property market. More money flooded into the market which has helped to inflate prices and keep the cycle going. Now, with all of these factors combining there are many things occurring in the domestic market. Yes the car industry is closing, but overall that's not a big deal so far, because we haven't been exporting many cars for years and it's been a government funded jobs program. Wages are stagnant and growth is quite low at the moment, at the same time we have seen layoffs increasing especially in the mineral states such as Queensland, South Australia and Western Australia. The biggest threat to the economy in my opinion is high house prices growth at a time of high unemployment growth. We are seeing areas which most people would not consider desirable to purchase housing in (traditionally poverty stricken high crime areas)

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