Having moved from California to Australia a year ago, the main thing we're finding exceptional about Australia is the high cost of living. IMO the Australian economy is currently being squeezed in a vice between the insane property bubble and the resources boom and high Australian dollar making other sectors of the economy uncompetitive. Western Australia and Queensland (i.e., the two minerals states) are the only two states showing any significant growth.
Australian retail, especially e-commerce, is completely uncompetitive compared to the U.S. Try picking a product at random from www.toysrus.com.au and compare the price on Amazon and even after international shipping it will almost always be much cheaper to just buy from Amazon.
>It's almost as if Australian e-commerce sites depend on their customers not having heard of the internet..
That's exactly what it is. They pretend they don't exist, or that somehow what you get is inferior.
Historically, it's because the Australian dollar was weaker (after the last minerals boom bust) and therefore imported goods were more expensive. The retailers built their business models on higher margins, and now are struggling to compete with the disruptive influence of international e-commerce.
I'm not expert on retail but I suspect the problem is with too many middlemen - importers, wholesalers, and the like.
But instead of trying to work out why/how to compete, they are starting to run to the government looking for intervention.
One of the few retail chains doing well is Supercheap, which has BCF and Goldcross bicycles (and probably some others). They seem to be able to be cost-competitive with international prices on many things and are still profitable.
To me, there is no reason why an Australian e-commerce site couldn't be more successful. ebay is wildly successful in Australia, so it's not like people are averse to purchasing online. It's more to do with woeful range and prices.
If Amazon ever decides to open up an Australian subsidiary with warehouses located in Australia they will wipe out entire retail chains. As it is, they're already knocking them about badly even with inflated international shipping and long lead times.
Yes, that's correct as far as I understand. But there's nothing to stop them selling all the other stuff they sell and wait for the inevitable change on books. A pile of it comes from China, anyway. They will end up being asked to come - because as it is, the local book industry is collapsing and there won't be anywhere to actually purchase books.
The same thing happened with music - there was a push to stop parallel import of CDs which cost about $25 for an album. But iTunes rendered that argument completely meaningless anyway.
I have one local bookstore left in my area but it appears to be existing on lots of big tables full of discounted merchandise sitting outside. The range is woeful and the prices are criminal. I doubt they'll be there in another 12 months.
> E-books obviously make import regulations of books irrelevant so I don't think Amazon would bother setting up a retail operation in Australia.
I have a Kindle for this exact reason.
> But if Amazon Web Services set up shop down under, well now, that would be quite disruptive!
I don't see why they would. In terms of global traffic, Australia is a minnow. But in terms of cost-per-bit, we're one of the most expensive locations in the world.
It makes more sense for Amazon to sit offshore and send bits in, where they'll be paid for by the end user with an ISP account.
About as close as you'll get is Singapore, I think.
I meant AWS opening up in Australia would create severe problems for a lot of local high-cost hosting providers. But Amazon may not bother as US west coast latency is often good enough. (Keep in mind that Australian ISPs might route traffic to Singapore via the US, so although it may be closer as the crow flies, it's not necessarily closer on the internet.)
Even with a Kindle (or Kindle software) you still can't get the same books (in ebook format) as you can overseas. There are several fiction books that I just cannot get in Kindle e-book format because the local distributor hasn't authorised it or some such.
This frustrated me so much I took the time to setup proper drm cracking.
So the answer is:
1) set up US proxy so you appear as US browser (ie openproxy or similar)
2) open up US-sepcific account using US address (any will do, you're not getting anything shipped, I used a postal service).
3) purchase gift voucher for amount covering the books you wish to purchase with 'regular' amazon account
4) use US account via proxy to make purchase, and use gift voucher to pay for them.
5) use Kindle cloud reader to download purchased ebooks to your local machine (you have no Kindle registered to this account, so you can't download to your kindle).
6) install calibre open source e-book management (this is a good tool for managing your ebook collection anyway)
7) google for amazon DRM book plug in for calibre
8) load purchased ebooks up, run drm cracking plugin
9) connect kindle and upload cracked books
10) open beer and laugh openly at futile attempts to use DRM to control industry
It sounds complicated but it's not really that hard. Amazing how you have to act like a criminal to do something that would seem logical to everyone but a publishing lawyer.
You can also use this tool to share ebooks between kindles, ie, yours and your partner - as you would with a book purchased from a store.
I use a service called MyUS.com - they've been good on a couple of occasions, so I'll give a qualified support to them. You pay some cash ($10 I think) and they give you a permanent US address to get stuff sent to.
This is very easy to get around. Amazon allows you to register multiple addresses. Just register a US address against your Kindle. All your other Amazon services can be registered against your AU address(es). This will give you full access to the US ebook catalogues from AU.
As you would expect Amazon only puts up a minimal, token resistance to you buying their stuff.
Now they check the address on your credit card, and check you are coming from a US IP address. I've heard you can work around this using pre-paid credit cards (and possibly gift cards) and a US based proxy.
If this is true then they must be only location testing new Kindle subscribers.
I purchased my first-gen Kindle a few years ago and have been purchasing US books without a problem since registering a US address soon afterwards.
There is an option under "Manage your kindle" -> Country Settings where you can select your country. Mine is currently set to US and I dont have a US credit card or IP proxy etc.
If you want one number that tells why Australian retail is more expensive than U.S., it is retail rents.
Aust. retail rents are (among?) the highest in the world, higher than London and New York. This is mainly due to poor short-sighted planning authorities in local councils which over-manage commercial planning. The result is that, except perhaps Melbourne, all large retail is in malls instead of spread among the suburbs. Almost all the malls are owned by one or two parties, Westfield being the major. As monopoly owner, they have squeezed retail rents for decades.
Yes Australia has a higher cost of living than the United States, and recent high commodity prices have pushed up our exchange rate. However, if you are comparing prices across currency, then a lot of what you are seeing is due to a higher exchange rate. If you had moved to Australia in the early 2000s, you would've felt rich. Inflation is not currently a problem in Australia.
Re: the property bubble. House prices in Australia are high compared to historical levels. However, as this article from Crikey describes, Australian wages have risen too. While median house prices are still at a higher level compared to median wages (see: http://economics.hia.com.au/media/House%20price%20to%20incom...), they have been soft and in some cases reducing this year. They haven't 'burst' in the way the US housing bubble did.
The differences between Australia and the US where you had a massive house bubble are numerous.
* Australian banks are more heavily regulated and haven't lent 'sub-prime' mortgages.
* Australian housing market has good fundamentals - our population growth has been quite high (due to overseas migration, like yourself!), and in most areas there is an undersupply of housing (with exceptions like the gold coast).
I think you are overplaying the negatives in Australia, in general everything is working quite well as this convincing piece from Crikey shows.
* Australian banks are more heavily regulated and haven't lent 'sub-prime' mortgages.
This is completely untrue. The extent of sub-prime mortgages isn't the same, but it exists nonetheless. As does the existence of RBMS, which the government continues to purchase from the banks.
All of that looks over the fact that the big 4 banks in Australia are massively overexposed to residential mortgages and small business loans underpinned by residential property. In some ways it's worse than the USA because the mortgages are still on the books rather than being sold off into the secondary market.
The differences between the Irish housing bubble and the Australian housing bubble are actually much less. So you're right to say that there the parallells between the USA and Australia are less, but the parallells between Ireland and Australia are few. Ireland has full-recourse mortgages like Australia. Ireland had a massive overinvestment in property, like Australia. Ireland had high immigration, like Australia.
As I've said elsewhere in this thread, I don't think there is ever a time when you take your eyes off the negative.
I agree that Australia shouldn't become complacent, and I agree that housing is historically highly priced in Australia, I just don't agree that we are looking at a catastrophic bubble.
Ireland and Australias' levels of net migration aren't comparable either. See:
> banks in Australia are massively overexposed to residential mortgages and small business loans underpinned by residential property
As opposed to what, though? Historically housing and small business loans were the raison d'etre for being a bank. It is only the last few decades where they have been allowed to invest in other areas.
I think you are overplaying the exposure to housing. Our tier capital requirements were and are much more onerous than in the U.S. We (our central bank and treasury) have been telling the U.S. for two decades that their banking system was broken, and we were proven right. You can't compare a U.S. bank to an Australian one, they are very different beasts.
The reason our housing is so expensive is largely due to supply issues. Australia has some of the most complex land release and use laws in the world. The incentives to liberalise these rules are weak because State governments, who hold the legal power to do so, get higher revenues from stamp duty if land prices are higher.
The high cost of property runs the risk of slowly strangling the middle class. Not a good idea.
We don't always agree jacques, but I'm totally with you on this.
Stamp duty is the most regressive, unfair tax around.
Paying $15,000 or more in tax to move houses? Madness. How on earth is that considered fair, or a good thing for economic development? Particularly when the states agreed to drop stamp duty in return for the GST incomes.
If you take it that demand for housing is pretty much unlimited (everyone wants their own dwelling, and everyone wants as much space as possible) then you must look at supply.
Sure, cities like Sydney are geographically constrained, but this doesn't explain the high cost of housing places where there are no geographic constraints, only planning constraints.
Historically, in Australia, the cost of the land was well below the cost of building a house on it. Now it easily exceeds 50% of the cost in some cases.
The block of dirt under my feet cost 1500 pounds in the mid 1960's. Converted to a modern value, that is about $30,000. That value is out by a factor of probably 15-20 times. Which means, in rough terms, the land is 20 times more valuable now than it was back then. While some of this is attributable to improvement in services, population increase, etc etc, there isn't anywhere where you can buy a house block for $30,000 which is the inflation-adjusted price of the land as it was originally when the subdivision was opened.
The high value of land can only have one factor - restriction in supply. Restriction of supply is caused by a combination of large land-holders drip-feeding blocks on to the market and in collusion with the state government putting major restrictions on the ability to release land for sale.
When comparing income by country, you need to take into account cost of living, yes. This index I've linked does that; Australia is at parity with the richer countries in Europe, but behind the US, Switzerland and Norway.
One thing to keep in mind when comparing cost of living: minimum wage.
In the US, minimum waqe is about US$7.50. In Australia, it's about US$15. Your McValue meal is $1-2 cheaper in the US, but the minimum/low wage worker (the bulk of the workforce) has to work for less time to get that meal in Aus.
Until the e-commerce boom of the last 5-10 years, this disparity wasn't much of a problem, as economies were much more localised.
I'm not saying it's the complete answer (thankfully, I'm not an economist), but it's one of the most overlooked factors in all these analyses: the buying power of the poor.
If you think about those who work in the food industry in the US, they depend on tips to get back the rest of that money. Unlike the US, you aren't obliged to tip in Australia.
$7.50 is just the straight minimum wage, regardless of industry (varies from state to state). Hospitality workers in the US earn less than that (think I heard one say it was about $2.50).
I don't think it is really a fair comparison to compare a traditional retailer dabbling in online to what else is available online. The traditional retailers play on Australians traditionally expecting to pay more for the same products. As the internet has opened up commerce these kind of companies wouldn't survive for long.
What you miss is that because Amazon is not in Australia, you have to pay a significant price for shipping and currency transfer to USD, then wait weeks (in my experience up to over a month!) for the thing to arrive....
This is what holds back Australians from not ordering more online, especially at Amazon...
I didn't miss anything: my most recent purchase from Amazon cost $11 in shipping and arrived in less than a week. I have a USD credit card, but even if you pay w/ a AUD card the currency conversion is instantaneous and costs maybe a couple of percentage points.
Okay - I cant argue with that. My last experience with amazon Aus was 5 years ago, but that was terrible (V. expensive shipping, and item arriving long after 'estimated' arrival time). Perhaps they have picked up their game now, but I know there are others like me with a negative experience that has discouraged future use of Amazon in Aus...
Shipping costs may have been reduced too, but Im sure they are still much greater than other countries...
What you miss is that because Amazon is not in Australia, you have to pay a significant price for shipping and currency transfer to USD, then wait weeks (in my experience up to over a month!) for the thing to arrive
They were bought by Amazon a few months ago. I'm not sure if their business model will have an effect on Amazon or Amazon's business model will have an effect on TBD.
Some sleight of hand there- they try and play down the government debt because it's low, but omitted the fact that 4 years ago it used to be zero and now is growing faster than Ireland did before it went bust. This is happening because of a spending/taxes deficit that is at 2.5% and growing - all while in the middle of a cyclical boom underpinned by a chinese credit bubble that has skyrocketed demand for iron ore and metallurgical coal.
Not many people know this, but Australia is basically the Saudi Arabia of high-grade coal and high grade Iron Ore.
They also omitted the fact that personal debt - ie debt owed by people rather than the government is also one of the highest in the world.
Australian also homes usually take out the top spots in the 'most unaffordable' list.
They also omitted the fact that the workforce has gone from being one of the most free back to a much higher regulated workforce, and as a result productivity has dropped precariously and strike action has exploded.
There is no mention in the article of what is termed 'the two speed economy' where manufacturing firms are struggling and retail businesses are closing their doors, mostly because of the high debt load servicing the unaffordable property market and because of diffculty competing against international imports (ie Amazon et al) caused by a strong currency and a very regulated labor market which drives up the cost of keeping stores open.
Yes, the economy has been strong as a result of being underpinned by selling resources to fast-growing nations like China and India.
So I agree with the central thesis that there is much to be proud of, but this type of preening article is a warning that people might start to get complacent and over-prescribe success to perfect management rather than being at the right point in the cyclical trend. The truth is the country is starting to behave like a 3rd generation family who inherets the hard work of the 1st and 2nd generation but isn't prepared to make the sacrifices that made it so.
Crikey is a partisan website - not sure of the US equivalent but it's pretty hard left. It's where you go to confirm your beliefs rather than to get a balanced view.
When it comes to personal debt Credit Suisse would beg to differ with you, their latest wealth figures have Australians handily richer per capita than every other country in the world bar Switzerland.
As far as shop fronts are concerned; I live in the UK at the moment, the average town centre here has 25% of shop fonts boarded up, in some towns that figure exceeds 55%. In Australia you might get isolated areas where you get lots of boarded up shops due to local economic factors but you don't get a complete country wide phenomenon like the UK.
Property prices in Australia are due to people wanting to live in big properties. Again in some places in Europe I have seen the equivalent of two up two down terrace houses of less than 100m2 in size converted into 4 separate flats.
I think you could easily argue that Australians are spending their wealth on a better lifestyle. A fairly wise decision when you remember that you can't take it with you.
Property prices in Australia are a result of Aussies selling each other properties to generate wealth, financed by loans they can't afford. Private debt in Oz has been insane since the mid 2000s and has only gotten worse.
The economy is fine at the moment, but as soon as China steps back in any real way things are going to get ugly.
Having moved from California to Australia a year ago, I'm amazed that Australians deny that there is a property bubble. Anecdotally, in the neighborhood I'm living in, it costs at least twice as much to buy a house as to rent.
I live in a lower middle-class suburb in Melbourne, and a couple of weeks ago a two-bedroom, one-bathroom house up the block sold for $600,000. Keep in mind too that mortgage interest rates in Australia are higher than they are in the U.S. (7% vs. 5%) and they don't have long-term fixed interest mortgages. The amount of debt home buyers are taking on is insane.
Needless to say I'm renting and waiting for the bubble to pop.
A good % of me and my friends are all sitting on our hands and waiting as well. We're all about the same age as our parents were when they got their first house (late 20s early 30s).
The prices are nuts, at least the market has flattened out of late, but with the population growth rates we are seeing around the country the pressure for housing isn't likely to lift any time soon.
Yeah I don't see an end to it, if you want to be around and work in the inner city there only a reasonable distance away you can buy before it becomes prohibitive. The majority of that land is either already in use or running up $300,000+ just for a regular block of land.
I'm not convinced that waiting is the best strategy. In my case I'm a 26 year old developer in Perth. I bought my first 2x1 apartment 13 months ago in a nice area 7km from the city and have now paid it off to the point where if I were to rent it out, it would pay for itself.
Now all my savings still go into the loan (offset account), but they are essentially a deposit for my next property which I will be able to buy around 28-29 (2-3 years).
There are plenty of Australians who shout about the property bubble. The problem is that there is so much middle-class wealth tied up in it, that any political party that steps forward and eliminates negative gearing is basically signing their own death warrant - they won't be a player for 10-15 years.
Ever considered moving back to the states now that you're established? I'm the opposite, having moved from .au to California and now using australian bank accounts and investments as my savings vehicles, 6.3% on aud savings + 3% currency is a lovely offset vs a US mortgage.
> Ever considered moving back to the states now that you're established?
Not without a Green Card. I'm Canadian, not American, and the constraints that you have to live under on an H-1B visa whilst in the multi-year wait for a GC are IMO intolerable.
I may complain about the high cost of living in Australia compared to the US, but I am thankful for much greater personal freedom I have--although that's mostly thanks to my Aussie wife. :)
From the linked paper:
"During the 1980s, the ratio of debt to disposable income for Australian households was fairly
stable at around 45% (Graph 1). But since 1990, this ratio has risen rapidly, reaching 157% in December 2007. Housing debt accounts for the bulk of the increase, with the ratio of housing debt to disposable income rising from 31% to 134% over the period. By comparison, the ratio of personal debt to disposable income increased from 13% to 22% over the same
period. The ratio of debt to assets has also risen sharply over the past two decades, from 8% in December 1989 to 17% in December 2007.
Many advanced economies have witnessed a large rise in household indebtedness over the past two decades. However, the increase in Australia has been particularly pronounced. The ratio of household debt to income in Australia went from being one of the lowest in the advanced economies in the late 1980s to one of the highest in December 2007 (Graph 2). "
It's an older article (frustratingly newer is harder to find) but since 2007 many of the countries in comparison have suffered badly in property value write-downs.
Basically, my point is this : household debt/income ratios are one of the highest in the world. This is mainly because of the most unaffordable property market in the world.
As has been seen in the USA, Spain, Ireland and elsewhere, a breakdown in the property market has very wide implications for the wider economy as much of the current spending has been due to debt spending. As things are the excess income is being channeled towards debt reduction, which in effect is a negative savings rate, which has major implications for things like consumer spending.
Australia cannot remain at the top of the 'most unaffordable housing' and 'highest debt/income' ratios forever. What goes up must come down.
Even a 10-15% drop in housing prices will not only severely undercut consumer and business confidence, it will also undermine the banking sector stability because most of the major banks are heavily weighted towards residential property lending, meaning their capital bases are underpinned by the values of property.
A fall in housing values would wipe out many of the statistics in the parent linked article. Yet people continue to say what happend in Europe and the USA cannot happen in Australia - but I'm yet to hear a convincing economic argument as to why not.
Right now low unemployment and a strong dollar are underpinning teh property market (to some extent) but also so are (quiet) changes to government policy which include allowing banks to package up more residential backed mortgage securities (yes, those very things that brought the USA undone) and sell them to both pension funds and treasury as AAA investments. They have also changed the rules to allow superannuation funds to now borrow and fund purchase of property, something that was strictly prohibited before. Some mortgage brokers have estimated that super-backed borrowing makes up 20% of their business now.
Even a slight fall in house prices and/or income levels will have major ripple effects. Yet this is not being discussed at all, as it is continually hand-waved away with 'oh that's not a problem, this time it is different'.
Australia cannot remain at the top of the 'most unaffordable housing' and 'highest debt/income' ratios forever.
Is there a reason for this, or it is just a "something bad must happen" feeling? The Swiss have topped the highest debt/income for years, and it hasn't been a problem[1].
Even a slight fall in house prices and/or income levels will have major ripple effects.
Australian house prices have dropped around 4% over the last 12 months, and have been largely static since 2008/9.
Yet this is not being discussed at all, as it is continually hand-waved away with 'oh that's not a problem, this time it is different'.
That's not true. Most commentators forecast little-to-no increase in property prices over the next few years, and there are plenty of people who think the property market will fall.
Again in some places in Europe I have seen the equivalent
of two up two down terrace houses of less than 100m2 in
size converted into 4 separate flats.
Australia is not the Saudia Arabia of high grade (Anthracite) coal. The United States has triple the amount of proven high grade coal reserves and is also a larger coal producer than Australia. Don't get me wrong, Australia has a lot of coal, but the USA, Russia and China all have much larger reserves of all but the lowest grade brown (lignite) coal.
They also don't mention we (I'm Australian) lost the Ashes. That's not the point - they are saying we talk about the bad things all the time, and fail to take a step back and look at how good we have it.
To address your points:
they try and play down the government debt because it's low, but omitted the fact that 4 years ago it used to be zero and now is growing faster than Ireland did before it went bust.
Well, no.. they specifically talk about government debt. They point out it is lower than almost any other developed country. I don't understand your point about "it growing faster than Ireland" - yes, there is currently a deficit budget (which means borrowing is occurring). I've never heard "it is growing faster than Ireland did when it went bust" argument before, but it doesn't make much sense to me. The Australian economy is much, much bigger than the Irish economy, and the Irish debt crisis was caused when the Irish government suddenly took over billions in private banks debt, not by government borrowing.
They also omitted the fact that personal debt - ie debt owed by people rather than the government is also one of the highest in the world.
This is true, but is misses the point that Australian savings are also at record levels [1]. People are choosing to keep debt while saving money.
Australian also homes usually take out the top spots in the 'most unaffordable' list.
This is true, but at the same time is one of the things that has driven household assets to the highest in the world. [2][3]
They also omitted the fact that the workforce has gone from being one of the most free back to a much higher regulated workforce, and as a result productivity has dropped precariously and strike action has exploded.
That's a very political statement that I disagree with, but I don't think the argument would be useful here.
There is no mention in the article of what is termed 'the two speed economy' where manufacturing firms are struggling and retail businesses are closing their doors
The "two-speed economy" and Dutch Disease is the biggest challenge facing the Australian economy over the next few years. But that wasn't the point of this article.
I don't particularly want to get into a point scoring match because clearly we are looking at things from different sides of the political aisle, as it were.
However, to clarify the point : the government debt is low by world standards, but growing fast, and that is while the economy is at a cyclical high. What I am trying to say here is that : current government debt spending is unsustainable and unwise. The comparison with Ireland is to show this : there is never a good time to start growing your government debt, particularly when your economy is being underpinned by excessively high property prices and diversion of resources into the property industry. What, precisely, would the Australian government do if the banks were all caught short because they are overexposed to the overleveraged and overvalued property market? Why, of course they would be considered 'too big to fail' and public funds would be used to bail them out. And Australians would suffer from the same transfer of private debt to public sector debt to shore up the balance sheets of the big four banks who have massive holdings of residential mortgages. If anyone thinks it can't happen here, I'd be very interested in why not.
My overall thesis is that, yes, Australia is doing well, but that is precisely the time to tighten up and do better, rather than give a collective pat on the back and say, 'well the hard work has been done, let's all borrow a heap of money and give ourselves a reward'.
In other words, yes, on a Friday afternoon, crack a coldie and enjoy a quick survey of things. Back on Monday morning continue the hard work of difficult economic reforms and tightening the fiscal belt and getting productivity higher. Those difficult economic reforms are more deregulation of the labor market, removal of red tape surrounding industry, find out how more international investment can be attracted. Work out how productivity and foreign investment can be increased. The hard work never stops and it's never time to get complacent.
However, to clarify the point : the government debt is low by world standards, but growing fast, and that is while the economy is at a cyclical high
Oh, right. I think that's where we mostly disagree.
I think current government spending is what is propping-up the "slow" part of the two-speed economy. The government needs to find ways to support the bad parts of the economy while stopping the high-growth areas (ie, mining) from becoming "too hot".
If anyone thinks it can't happen here, I'd be very interested in why not.
What I find surprising though is that the government is putting pressure on the big bangs to decrease interest rates in line with the reserve bank. I would think the last thing you would want it for the banks to start operating unsustainably lending wise. Sure the banks make crazy profits but I think it's preferable than for them to be a disaster waiting to happen if there is any downturn.
Yes - and the majority of the bank lending is done in the international market which has nothing to do with the RB interest rate. Banks should be allowed to charge whatever interest rate they like. It's bad enough that there is a centrally fixed interest rate, but that's workable as long as there aren't rules that say everyone has to borrow at that rate.
There are plenty of problems in Australia, including insane housing prices, negligible government support for the manufacturing industry and comparatively lower research & development spending (I don't have data to prove this, but I think this is obvious in comparison to other countries esp. the US).
BUT, on the other hand, we have what other citizens in other countries lack:
* an excellent superannuation system
* a social security system that provides some real security (centrelink)
* a medicare system that provides for all Australians
* a public university system (although since the Howard govt. universities have suffered)
* an excellent public schooling system
* relatively low gun crime and,
* a tolerant, multicultural workforce.
We're not losing it 'to' anywhere. If you don't use skills, they atrophy, and when you need them again it takes time to knock the rust off, and even then you can lose some of your original finer points.
One easy example is manufacturing management, particularly of electronics. People think it's easy, but it's really quite intricate. I've worked for two manufacturers of electronic goods, and if a production manager leaves, it's very hard to find a replacement that has a clue. And if you're not a company that can afford both the scope and salary to pull talent internationally, it scuppers your ability to make things efficiently. It takes years to train someone up to be an efficient self-directed production manager.
There's also similar things like this in the trades - tradesmen are so heavily paid right now because of exactly this issue, skills forgotten by society. We went through a period where trades were looked down on and the skill pool atrophied. With only so many tradesmen and too much work, it's really expensive to use that skillset.
Australians love to self-denigrate, it's the national pastime. But we won't stand for anyone else doing it!
I'm lost some potential new friends when I've took exception to their usual slogan "Australia has no culture", which either means that we don't have the thousand years of fine art history of Europe or that we don't have a coming-of-age ceremony like some tribe that live in grass huts do.
We waste so much hot air and our media talking about how crap we are and how poorly performing the country is, when we consistently score in the top 5 in any international measure involving quality of life (oh no, so Sweden or Denmark beat us out again... why is that so shameful that we're not always #1 of 200 countries?)
Not to say we don't have some serious problems, but we do tend to look at ourselves in a bubble and compare ourselves against some mythical 'home country', seen through rose-coloured glasses.
One of the wisest moves I have seen by a bunch of politicians in the world was the introduction of the superannuation system in Australia. I have lived in a number of countries around the world and I don't understand why more countries don't adopt a similar system.
Negative gearing seems to be a whipping boy for all sort of ills.
The fact is in the USA most people can claim their mortgage payments interest as a tax deduction - which is more bizarre.
I agree it's a stupid strategy, but it's plain foolish to think that negative underpins property investment. If you removed it, in the short term there would be a dip in property investment, but this would only work towards creating a further supply shortage.
Negative gearing isn't a tax ruling - it's an investment strategy. Businesses use the tax deductibility of interest payments as a legitimate expense, so it's difficult to argue why this should be different for individuals.
Only 1 out of 10 negatively geared properties is for the construction of a new property. The rest is for the purchase of existing stock.
The problem with negative gearing in the context of a tax deduction on housing investments is that it encourages speculation by reducing the losses on bad investments. This is why we have such a disconnect between housing prices and rental prices.
It is bizarre, but as far as I know the tax deduction is limited to your personal residence, while negative gearing is more open to speculative investing.
We did it here in New Zealand as well in the 1970's, one of our previous Prime Minister's portrayed it as "reds under the bed" etc etc, destroyed it, and now we're paying for it dearly. Stupidest move in NZ's economic history as far as I'm concerned. According to current studies, we would've had one of the largest soverign wealth funds in the world if we'd kept up with it since its inception.
Policy blunders like this are par for the course here though, Normally committed by the right-wing/conservative (as in economically, not religious, we don't really give them much space in our national discourse) National Party.
Superannuation (at least in Australia, generally speaking) is privately run. You don't end up with a soverign wealth fund. (Although you do end up with a large amount of capital looking for places to be invested)
There are many good policy ideas implemented in Australia. The superannuation system is pretty good - it has problems but overall is good for the country.
The healthcare system also manages to tread a fine line between having a public safety net (ie, everyone gets free treatment) but also encouraging private health insurance and private healthcare for those who can afford it.
There are many sensible insurance regulations around, such as compulsory third-party-personal insurance that comes attached to vehicle registration, so that if you're a licensed driver driving a licensed vehicle, even if you run over 50 pedestrians you're covered for their losses and they are all covered for medical insurance, compensation payouts and rehabilitation.
The dividend tax system is also quite good, in that, if you're an Australian taxpayer, you can claim a tax rebate on the dividends you receive from revenue arising from an Australian company. So an Australian company pays tax on it's earnings, then pays some of those earnings out to taxpayers via dividends. The dividend recipient can then claim what is called a 'franking credit' on that dividend which is offset against their own earnings. It sounds complicated but what it essentially means is that Australian corporate income is only taxed once - you don't get double taxed for paying out dividends. As a result, Australian companies pay healthy dividends, which underpins investment in Australian companies by individuals requiring income from shareholdings.
Of course, there are some dumb policies as well, but in general things work pretty well, and, as the article says, quality of life and income spread at ranked very highly in world terms.
There are many sensible insurance regulations around, such as compulsory third-party-personal insurance that comes attached to vehicle registration, so that if you're a licensed driver driving a licensed vehicle, even if you run over 50 pedestrians you're covered for their losses and they are all covered for medical insurance, compensation payouts and rehabilitation.
That's the case in Victoria with the TAC, but I'm not sure about the other states.
It's the case in all Australian states. I don't know if this is because of a copycat pattern, or if it originated from a Federal initiative, or why. I just know it is a good thing because it increases the pool of premiums and produces fairly even results for the victims of traffic accidents and prevents people being bankrupted for making a mistake while driving - unless they were driving an unregistered vehicle or DUI.
At least with the TAC, it's medical coverage only. The TAC picks up the tab for all medical care in road-transport-related accidents. It won't help with property damage - run into a maserati and may still be bankrupted. Property insurance is still privately run (hence 'third-party' vs 'comprehensive' car insurance)
That's the case in all states. You can still be bankrupted by not taking out third party property insurance, but physically maiming someone for life is an order of magnitude worse than writing off someones Ferrari by running into it.
All Australian states have compulsory third party personal insurance attached to the vehicle registration.
Ah, thanks, good to know. I do know that ~15 years ago someone was complaining about the high cost of victorian car rego, which was basically due to the TAC payment he didn't have in his home state.
As a new resident of Australia, I love, love, love the idea of superannuation. My employer contributes 9% (IIRC) to my retirement. I never see it, so I never miss it or spend it. I can also choose to make extra contributions if I like, which I most likely will once moving expenses are paid. It's a 401k, but better.
If you don't plan on living in Australia permanently, be aware that your effective tax rate on contributions to your superannuation is 50%. You pay a flat rate of 15% on your contributions like everyone else. When you leave Australia permanently, they take out 35% before giving you back your money.
Well, it's good, but don't for a minute think that your employer is contributing to your retirement. You're contributing to your retirement by deducting 9% of your wages into a retirement fund.
In most salaried positions, they drop the charade of 'employer contributed super' and talk about your 'total package' which includes your super payments.
I'm not arguing against the merits of forced investment, but you shouldn't believe your employer is paying it for you. You are paying it.
It is different to salary, because it is taxed differently, and when the superannuation rate increased (which happens occasionally) you never see a reduction in your take-home pay.
But it does reduce the amount they can afford to give you as your take-home pay.
Actually, the really interesting discussion is about superannuation-as-forced-savings vs a sovereign-wealth-fund. They aren't really equivalent, but they have some similar outcomes (eg a large amount of capital available for investment). I've gone back on forth on if we should have a sovereign wealth fund - there are good arguments both ways.
The smartest thing they did was make it payable from employers separate to your wage - that way you don't get the "gummint taking my wage, bastards!" crap. It's an extra cost to employers, but they don't tend to storm the newspapers with knee-jerk reactions and fiery torches...
What's danced around in this piece is what specific circumstances arose to create the political class that managed to steer the economy so well. In fact, one of the enduring paradoxes of the Australian miracle is how such a dismal political process has managed to consistently produce competent leaders over a 30 year time span.
> how such a dismal political process has managed to consistently produce competent leaders
I find this a strange comment. I find the Australian electoral system (if thats what you mean by political process) better than most of the other large western countries (USA, UK, etc.). As for the 'competant leaders' part - I'm not sure the leaders have much to do with Australia's success at all. Sure, the politicians do some good things, but also some pretty terrible things, just like most other western countries.... I think the economist article misses the point too of the natural wealth (not just minerals), and perhaps also a quite worldly attitude, being at the centre of Australia's economic success, rather than specific politicians...
Resource exports drive the currency up so much that the rest of the economy suffers. But international comparisons using that exchange rate look pretty good.
I think this is one of the better reactions in the Australian blogosphere:
"As much as I am wary of discussions of national character, there’s another aspect of cricket that I think relates to Australian character. This is the fretting that comes from unfavourable comparison with the unattainable."
The article begins by taking pot shots at Americans. Classy.
Following that, the article only presents statistics in the particular way that shows Australia as leading, while leaving the other ways unsaid.
First it talks about GDP growth percentage without adjusting for population growth differences.
Then it compares the average income growth per year while ignoring the hard numbers of both where it started and where it ended, removing the ability to compare income with other nations.
This is followed by more of the same, an odd obsession with comparing the economic growth of Australia's poor to the rest of the world's rich, citing a high minimum wage as if it were an accomplishment instead of a fiat law, a claim that anyone who disagrees is in denial, and topped off with a shot at the American government.
It seems Americans aren't the only ones who enjoy chart-fueled autofellatio.
It seems you're also not familiar with the usual self-depiction of Australia in the media - that we're a shit country spiralling into disaster, and nothing here is worthwhile (except those lovely miners and our sports teams)
Taking pot-shots at America is a favourite pastime of the Australian left. The leaders of the left side of politics usually take turns at doing their best to insult the American president and/or the American people.
Of course all this sniping is done behind their back. If Air Force one actually touches down, they line up like preening peacocks at the bottom of the steps.
The article is really about (a) trying to convince people Australia is on the right track politically and (b) trying to say 'hey, we don't have a 99/1 wealth spread like Americans do'.
There are a lot of interesting facts about the Australian economy in the article but the most interesting thing about the article is the beginning and the end. Australians are fed a huge amount of misinformation by the media and politicians.
Australians are very ignorant of the situation in other countries. Understandable considering they don't have direct neighbours but still a bit unfortunate.
As a Brit living in Perth this may all be true, but beware the cultural void. Nothing can prepare you for the dullness and isolation of living here.
"Australia is like a library with a dozen or so books I've read, and re-read and read again. In London and Europe, it feels like I'm in a library that I'll never get to the bottom of" Justin Knock
Yes they've got money, but the blandness of life here wears you down.
But dude, you are in PERTH - the most isolated city in the world. Sydney and Melbourne are far less like that, especially now the dollar is high and we are starting to get better cultural acts visiting.
And I think many Australians have seen as much of Europe as most Europeans - if not more.
I hate that when I was in NYC, every night had a band or play or comedian that I wanted to see, but I wonder if Sydney is worse than, say, Buttfuck Iowa.
I'm pretty sure Honolulu takes the spot for most isolated large city. Perth is a mere few days drive from some large cities (Adelaide). In Honolulu you are stuck on an island 2300 miles from the mainland.
Out of curiosity, why are you comparing Perth to Melbourne rather than the closer Adelaide? Flights are 3 hours going east and 3:20 going west between those cities.
It all depends what you're into. I've been in Perth for 5 years and love it. The weather is excellent almost all year around which is great for cycling, and there are some beautiful rides along the coast-line / rivers.
Even though we are so isolated, we get some of the best house / drum & bass music acts in the world coming here, and combined with the great weather = awesome music festivals.
Additionally, I love the fact that I can drive to work in 10 minutes and the CBD in 15. I've thought of moving elsewhere, but in my opinion Perth (and Australia in general) has excellent quality-of-life.
Being able to make very good money as a developer is just the icing on the cake.
Do you live in Perth, or do you live in Clarkson or Rockingham with the rest of the Brits?
Whilst your interests might not be complemented by living in Perth there are many others that would love to take your place. People interested in windsurfing, diving, the beach, and even astronomy (as Perth normally has little cloud) all love the offerings available here.
That said, if you're looking for British TV then Perth isn't the place for you.
Ah yes, the ever whinging migrant, there is a plane or boat with your name on it... because apparently gloomy, wet, miserable UK is so much better.
What is it with Europeans, their elevated self worth in the world and how life back home is so much better.
I get to listen to this shit every christmas from the in-laws.
If anyone from hacker news is looking to spend some time in Australia & work for a great startup, we're hiring: http://89n.com/content/careers We're all setup to sponsor people and get you through the visa/immigration process :)
Just shoot an email to jobs@89n.com and mention you're from HN!
I'm looking to move from the US to Sydney, but now's not the best time for me to pull the trigger. How frequently would you guess an offer like yours comes around?
Indeed - I think many Australians fail to recognize their good fortune because by and large they had nothing to do with it. It just happened in a far off part of the country without them noticing.
And it's nothing new. In 1964 Donald Horne penned a book "The Lucky Country", which caused many Australians to start referring to Australia as "The Lucky Country". The bit they miss is that the full quote was.
"Australia is a lucky country, run by second-rate people who share its luck."
Ouch! It's a bit harsh, in that Australia does punch above its weight in some areas (eg. excellent radio astronomy program and some very good medicos). It's spot on for other areas though, such as the majority of business and political leadership. One gets the feeling that the things that succeed in Australia do so in spite of the leadership, not because of it.
Exactly! One of the less-discussed effects of 'Dutch Disease' is that it creates a political class who are determined to capture the inflow of new money and distribute it for their own needs.
The thing I get frustrated about is that people continuously say 'look we're better than Japan or the USA or the UK'. But what I want to say is 'well, why aren't we the richest country on the planet with the highest standard of living for all?'. Comparing yourself to mediocre performance just leads to reversion to the mean because people -as you say - become second rate and share in the luck, convincing themselves it was their wise stewardship that made the luck happen.
when you say 'political leadership', are you including things like the world-first legislated 8-hour work day? The world-second women's vote? Or more recent world firsts, like the mining profits tax? Australia has it's downsides (like the WAP that only ceased half a century ago) but it's a pretty progressive nation, if you bother to compare it to other nations rather than utopia. Where are the other powerful, inspiring leaders? There's nothing unusually bad about ours.
Our exceptionalism began before the mining boom. Australia has been growing more or less continuously for decades, in spite of other crises and setbacks. It's a story of sensible reforms being progressively applied with an eye to the long term.
Aside from mining companies (which were still a huge part of Australia's economy before the 'mining boom'), Australia is also flush with other natural resources (farmland, fisheries, petroleum, etc. etc.) in a way that is hugely significant compared to its population. 100 years ago, very few of these could be easily exported. Now, most of them can..
I'm sorry, but I just really dont buy this line that somehow Australia has been much better 'managed' than other countries over a long period. I see very little to support this at all other than extremely vague inferences....
> I see very little to support this at all other than extremely vague inferences....
It's not about vague inferences, it's about clear policy decisions.
1. We floated our currency before that became the norm.
2. We have an open and totally independent central bank which telegraphs its intentions to avoid mysticism.
3. We have very low or no tariffs on almost all trade, including agriculture.
4. Compulsory superannuation means we will not face a pensions crisis in future, unlike almost every other developed economy.
5. A long series of microeconomic reform and deregulation.
6. Low sovereign debt. It got down to zero for a few years. The electorate has no appetite for debt and out debt levels are rounding errors by international standards.
The argument that it's all down to geography is demonstrably false. 100 years ago Australia had the same relative wealth as Argentina. Similar economic profiles, comparable population and so on. Today our countries are very different.
Yes - As an Australian I can see that we are turning more and more into a high income country that seems unaffordable for members of other high income countries (Switzerland 10 years ago perhaps?).
However, we must realise that as Australians we have very little to do with it, its natural resources in general (agriculture, minerals, the ocean, etc. - there's very little that we are missing) and a relatively low population that make us rich.
With wealth comes complacency, bad government, and probably self-righteousness, however on a positive side hopefully it will at least mean the end of the perpetual 'brain drain' of the last 100 years to the UK and other countries.
Hardly; agriculture and mining _combined_ make up 10% of GDP. 68% of Australian GDP comes from the services sector. These figures courtesy of the Australian Bureau of Statistics in the year 2006. Agriculture and mining do make up 57% of exports however, thus keeping the trade balance on keel.
2006 and 2011 might be massively different in terms of GDP makeup. You also forget to mention that much of those services are underpinned by the money generated from the export industries.
Resources and demographics drive the economic fate of nations. There's a large land area (i.e. easily accessed minerals) divided by a small population (less than 25 million). Because the minerals are in the deserts, there's little public resistance to digging them up. Similar situation as Canada. With a similar cost: ceding effective political and economic control to the US, and accepting high numbers of immigrants from developing countries.
The Europeans came 220 years ago, took the land off the indigenous people over the following century, then created a centrally-controlled federal border 110 years ago to keep out others. Australia became known as "White Australia". But they couldn't hold back nearby Asia's population for long. 70 years ago, Australia gave up control of their foreign policy and defence to the US to keep out Asia, and has been giving up economic control ever since. Many call Australia "the 52nd state".
In the 1960's the immigration began: first from southern Europe, then from Asia. International students and immigrants lease the apartments and houses, keeping the rent high, eventually buying the houses, keeping the prices high. Like Canada and Northern California, most come from Asia. Australia/NZ and Canada are an economic, political, military, and cultural extension of the western USA, with the same immigration patterns.
Immigration is the price of remaining politically part of the English-speaking empire instead of a Japanese, Chinese, or Indonesian-speaking one.
1) How does the USA have political and economic control of Australia?
2) If Australia had not ceded political and economic control to the USA, what would have happened re: Asia? Are you talking invasion?
3) Why is immigration the price of remaining politically part of the English-speaking empire?
Furthermore:
4) Do you think that immigration is altering the status quo of Australia/NZ/Canada as English-speaking imperial extensions/nations, resulting in new "mongrelised" nations, or is it shifting these countries to become more Asian, or is it tacitly maintaining the status quo?
Australian economic performance is a testament to the power of protectionism. Nobody likes to admit it but Australia's relative isolation in the world as a developed nation it the best trade tariff the world has ever seen and helped them develop local industries that are more labour intensive and thus provide better income distribution than most other nations. The relatively recent revolution in container shipping is eroding the effects of the high cost of importing goods into their market, but that has dovetailed perfectly with China's hunger for their natural resources.
It is exactly the kind of perfect storm that every politician loves to crow about their policies being responsible for when the reality is that geography and external forces have more to do with it than anything else.
Nothing could be further from the truth. Australia has been at the forefront of trade liberalisation [1,2], unilaterally cutting tariffs for about 20 years. If anything, our current growth is a product of this liberalisation.
Income inequity is increasing, but the relative equality of income results from a unionised history (less so now), with the concept of "a fair go for all".
I suppose I should better state my premise: Trade liberalization is very much in Australia's interests because its geographic isolation has provided a degree of natural protection for domestic industries (not so now since shipping has improved) while liberalization also provides the market access that Australia needs anyway since it is a large exporter of raw materials.
The growth is absolutely a product of liberalization, accidents of geography and timing have made it so.
Completely untrue. Australia economic growth only got going after trade liberalisation was properly implemented and removal of tariffs.
Further, the improvements in living standards are directly attributable to lower cost imported goods.
There are still pockets of protectionism around, but in world terms these are quite small. There is nothing like the agricultural protectionism of the US and EU, for example.
I do agree with you that luck has a lot more to do with it than good management.
I was not clear in my original posting, what I really meant to say was the trade liberalization was very good to Australia because it needs market access and geography provides a natural barrier to local market access. Removing Australian tariffs on goods was beneficial to other countries but the reciprocation was worth a lot more to the Australian economy because it produces so much that it absolutely must export (or leave in the ground/waste).
For example if you are Japan trading access to the car market in Australia for unencumbered steel imports Australia wins, Japan needs a lot more steel for their manufacturing base than Australian consumers will ever need Japanese cars. (Yes, that example is a bit contrived, but I think it demonstrates my point.)
Well, the most comparable economy in the world to Australia's in structure is Canada in terms of the mix of activities. Australia, for as long as OECD has been collecting data, has always had a lower unemployment rate than Canada (and Canada has liberalized trade at roughly the same pace, starting in the 80's).
I would define a high unemployment rate as one higher than a comparable peer nation, so I do not think Australia can be considered to have had high unemployment by that measure.
We're freer by a point or so over the UK and the US (home of 'free speech'), as rated by Reporters Without Borders. Of Anglo culture nations in particular, NZ is way in the lead, Aus is #2.
Australian retail, especially e-commerce, is completely uncompetitive compared to the U.S. Try picking a product at random from www.toysrus.com.au and compare the price on Amazon and even after international shipping it will almost always be much cheaper to just buy from Amazon.
E.g., Megatron Transformers toy: $70 in Australia (http://www.toysrus.com.au/popular-boys-toys/kre-o-transforme...) vs. $25 at Amazon (http://www.amazon.com/KRE-O-30688-Transformers-MEGATRON-SET/...). It's almost as if Australian e-commerce sites depend on their customers not having heard of the internet...