
Australia's Economy Is a House of Cards - umerf
https://www.linkedin.com/pulse/australias-economy-house-cards-matt-barrie
======
cup
The writing has been on the wall for a long time in Australia but vested
interests and the status quo means no meaningful change is actually going to
happen.

Take Australia National Broadband Network (NBN) strategy as an example.
Connecting every house and business to a fibre optic line would have "future-
proofed" the nation for generations. Instead it was destroyed by the
conservative government, along with investments in renewable energy, a
resources super tax and a range of other progressive ideas.

This country is run by dinosaurs. While there are intellectuals, theres also a
proud culture of ignorance and weird working class arrogance. Instead of
having pride in working class jobs and pride in working class people who put
food on their families tables and support their community it seems theres been
a concerted effort to warp it into and "us vs them" attitude of "true blue"
working class Australians against white collar "know it alls". This is plain
to see when the current Prime Minister and former investment banker goes into
rural towns wearing his untarnished Akubra and adopts his fake working class
accent to stoke tension between rural and city people.

Australia often has bushfires every 7 years or so that have historically
cleared out a lot of dead wood and given the bushland an opportunity to breath
and grow again. New policies to prevent bushfires meant woodlands accumulated
fuel which led to cataclysmic-ally large bushfires like black saturday, ash
wednesday etc.

Its hard not to think that Australias approach towards governance is similiar
and that the only way for us to re-set the agenda is through a huge
depression.

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hydrox24
> In Australia, the average person in the street might think that the way that
> you get into the Prime Minister’s office is by being elected by the people.
> Since 1966, this has only been true about 40% of the time.

Well not only are they wrong. Matt Barrie (the author) is wrong too. No Prime
Minister has ever been elected by the people. All of them have been elected by
their party room. Australia elects Representatives and Parties. Mr. Barrie
seems to be wading into topics that he doesn't have the chops for...

~~~
sdwisely
screwed my face up at this, I'm willing to give him the benefit of the doubt
and and assume he chose his words poorly and meant that 6 were not the party
leader at the time of the election.

It's a shame because there is some interesting opinions in this that wind off
into almost stream of consciousness.

If he had stuck to making his point with data and scrapped the anecdotes it
would have made it an easier read.

It really need an editor and fact checking.

------
bruce_one
> Indeed Digital Finance Analytics estimated in a October 2017 report that
> 910,000 households are now estimated to be in mortgage stress where net
> income does not covering ongoing costs. This has skyrocketed up 50% in less
> than a year and now represents 29.2% of all households in Australia.

As of 2011 there were 7.7 million households in Australia (according to the
ABS) so how does 910,000 (or 888,207 in the table) become "29.2% of all
households in Australia"?

(I may well be missing something...)

~~~
bruce_one
The more I read this article, the less I'm convinced... Another "odd" bit
(imo).

> This brings me onto Australia’s third largest export which is $22 billion in
> “education-related travel services”. Ask the average person in the street,
> and they would have no idea what that is and, at least in some part, it is
> an $18.8 billion dollar immigration industry dressed up as “education”.

> While some of these students are studying technical degrees that are vitally
> needed to power the future of the economy, a cynic would say that the
> majority of this program is designed as a crutch to prop up housing prices
> and government revenue from taxation in a flagging economy. After all, it
> doesn’t look that hard to borrow 90% of a property’s value from Australian
> lenders on a 457 visa.

A 457 visa doesn't have anything to do with a student visa... This comment
feels like intentional misdirection, because those two things are not at all
related. (A 457 visa is a skilled worker visa - although as with all skilled
work visas, it has got it's own controversy and, as the article points out (in
an underhanded way I would say, again...), until recently had some very odd
"skills" (and probably still does...))

> How much the banks will be left to carry when the market turns and these
> students flee the burden of negative equity is anyone’s guess.

AFAIK, if you're a temporary resident in Australia getting a 90% loan (and
even if you're not a temporary resident in some (many?) cases) there's a
requirement to get Lenders Mortgage Insurance. So... The insurer will be left
to carry said burden, not the bank? Unless my understanding of LMIs is off.
And again, they're not a student if they're on a 457 visa, so this is all a
bit inaccurate anyway...

Back to the "education-related travel services" side of that quoting, friends
of mine work in the Higher Education industry and it actually is huge business
for them getting international students. And their respective organisations
make a lot of money from it. (And it's not just higher education, even schools
in Australia make a lot of money from international students.)

And, in my opinion more importantly, this is an export industry, so it doesn't
matter that only "some of these students are studying technical degrees that
are vitally needed to power the future of the economy". It's not about those
degrees being vitally important to Australia's economy, because it's an
export... (And the underhanded nature of that line is a bit much for me...)

> You now know what all these tinpot “english”, “IT” and “business colleges”
> that have popped up downtown are about. They’re not about providing quality
> education, they are about gaming the immigration system.

Sure, I mean, I don't know how technically accurate this statement is so
taking it at face value, just because there are some dodgy education
providers, the whole 18 billion dollar industry is now denigrated to an
"immigration industry"? Apparently there are 6 Australian Universities in the
top 100 worldwide [0], but no, the whole show is actually _mostly_ just an
"immigration industry"?

("Ask the average person in the street, and they would have no idea what that
is" \- a huge number of my friends know that the Australian economy makes a
heap of money from foreign students studying here, maybe they don't know it's
the third biggest export, but still... Again with the underhanded language...)

This article is quite grating...

[0]: [https://www.timeshighereducation.com/world-university-
rankin...](https://www.timeshighereducation.com/world-university-
rankings/2017/world-ranking)

~~~
hydrox24
You're right that there are a couple of odd, basic inaccuracies.

> As if the Australian economy needed further headwinds, the developer-
> enamoured evangelical right have crucified NSW’s night time economy.
> Reactionary puritans and opportunists alike seized on some unfortunate
> incidents involving violence to simply close the economy at night.

In the last couple of years, the only lockout laws I have heard about apply to
the CBD of Sydney, and nowhere else. But here, the author conflates the
Entertainment district of the CBD with the entire NSW night-time economy.

Perhaps, by the numbers, it's fair enough to conflate those things. But a
strongly suspect he's just very wrong.

~~~
photojosh
They trialled (and kept) lockout laws in Newcastle, 2nd biggest city. Killed
our nightlife too.

------
Top19
Another bubble is agricultural land prices in the United States. This was such
a foreign thing to me when I first heard it, but it’s so overvalued. If you
look at a 20 year graph you’ll see it barely even dipped during the 2008
recession.

That, combined with any downturn is going to see a bunch of Baby Boomers sell
their houses to make up for their lost 401k money only to find that no
millennials (and certainly no millennials without jobs) can or want to buy
their houses.

Keep in mind, unlike the stock market which has dozens of safeguards and
controls, the housing market has exactly zero safeguards. Think about that for
a second. The housing market is operating off the same system Wall Street
basically had in 1873.

Bubbles certainly do come and go, but the larger issue here, the one that will
compound the bubble greatly, is the lack of political resolve to tackle it. A
bailout is a political no-go. It looks like the full force of this bubble will
have to be ridden out.

If anything 2008 was WWI, and the bubble coming up will be WWII.

tip: Start a local facebook group. The amount you can save in borrowing power
tools is amazing...

------
TaylorGood
Their real estate development boom is largely supported by Chinese investors.
That is, buying into a Development Co. in AUS and having an Aussie run it.

In Sydney I counted 50+ cranes earlier this year. Will the demand for X amount
of new towers continue? Will buyers support it or become Miami 2.0? How many
empty condos are there in Miami right now?

They are also very prideful about the state of their economy.

~~~
cylinder
Because Sydney barely had apartments until recently. Cross the bridge and it
looks like a country village 3km from the city. Not many development sites and
houses are very tightly held so it's tough to acquire houses for demolition
and agglomeration into a development site. If Sydney is going to be a real
city it needs the development that's happening now.

I've also noticed cranes here are used for midrise apartment block
construction which I'd never see for comparable building in the US. There's a
lot of safety rules and a strict building code so maybe that's why.

------
gumby
A much simpler way to look at the same argument is simply to describe
Australia as a Chinese mining province. There's no shame in that -- my native
Australia has only a bit more than half of the population of my current home,
California.

The widely reported "104 quarters of growth" is indeed impressive but it's
ironic that the achievement was breaking the record of the Netherlands -- who
set _their_ record through extractive industries (oil in their case). And in
fact Australia suffers some of the "Dutch disease": a loss of other primary
industries, like manufacturing, wage and property inflation, and a sectoral
imbalance.

None of this means the sky is falling (or doesn't) -- the economy is flexible,
and China's economy, being huge, has a lot of inertia. But people should be
honest in how they characterize it.

~~~
mikhailfranco
Yes, population of Australia at ~24m is about the same as Shanghai.

------
sasas
A long and perhaps terrifying article. With all the statistics, a strong case
is made that Australia is in deep, deep trouble. What I'm having trouble with
is understanding why this is not talked about more in more main stream
avenues?

~~~
cylinder
Barrie's company Freelancer.com was just outed as a bunch of scam artists on
HN front page yesterday, now he's an economic mastermind?

This whole article is basically "the entire world economy is a house of cards
wtf!" Yeah, no shit. We've known that for a decade now. Australia rises and
falls with the world economy and if/when China crashes things will be ugly
everywhere.

~~~
pitay
Could you please give a link.

I have searched for the article using 'Freelancer.com' and the earliest one is
from 10 days ago titled 'Freelancer.com has ruined my life'. I also see
similar articles to this from longer ago. Definitely seems like a site to
avoid.

Searching for 'Matt Barrie' only gave this story.

I would love to see the article about them being scam artists.

------
hydrox24
[https://medium.com/@matt_11659/matt-barrie-australias-
econom...](https://medium.com/@matt_11659/matt-barrie-australias-economy-is-a-
house-of-cards-6877adb3fb2f)

This is a link to this story, but with the original references and links.

------
shamas
People have been crying "bubble" my entire life, and I'm yet to see one
actually "burst".

The only things close to bubble bursts were scam driven things like the sub-
prime mortgage collapse in the USA.

~~~
ido

        People have been crying "bubble" my entire life, and 
        I'm yet to see one actually "burst".
    

I gather you didn't work in tech in 2000?

~~~
shamas
This is a fine example of what I was saying, this is people cramming money
into something with the hope of getting rich in a short period of time. People
getting in knew it was a high risk gamble. Not to mention that the tech
industry is now one of the biggest on the planet. Is it still a bubble?

Edit: attempt to add clarity.

The core of what I'm trying to say is almost any increasing asset is labelled
as a bubble now days. I'm not denying that there aren't shady investments that
appear and collapse all the time, some are enormous, like the tech bubble.

But it requires further classification. There are gambling bubbles built by
thousands of agents where some have seen astronomical profit, but then there
seems to be more stable "bubbles" like all of the bubbles mentioned in the
article.

A bubble isn't a bubble, not without further clarification.

