Friday, June 15, 2007

Jerking the figures

Having give my previous post, Howard faces rate rise reality, a little more thought I think I am starting to understand the dynamic. There are a couple of stand out issues; trade and domestic growth. So starting with the latter:

Like other western economies Australia has gone with the ‘growth is good’ dynamic. Of course growth is fine in its place, but you can’t keep paying off last months debt by creating another notional income stream.

When we've got no spare capacity, the economy can't grow faster than its longer-term trend rate of growth, known to economists as its "potential" growth rate.” Gittins

Developers are driving the economy. Both commercial and residential development is the fundamentalist economic mantra. This is at a time of the country’s peak in personal bankruptcies and insolvencies. It is a time when retailers are battling to cover rising rental costs as consumer spending is falling.

On Trade:

“…growth of 4.5 per cent in the volume of exports, but then must subtract the exceptionally strong growth of 11.3 per cent in the volume of imports. Combine the two and "net external demand" (exports minus imports) subtracted 1.6 percentage points to give growth in aggregate demand (domestic plus external) of 3.8 per cent (near enough).” Gittins

The net foreign debt stood at $532 billion (or 52 per cent of GDP) at the end of March, up from $492 billion (51.7 per cent) a year earlier. This is about free trade vs fair trade. Australia has gone the free trade route and in the process sacrificed self-sustainability and self reliance.

We are sending raw product, mineral resources, out of the country as fast as we can load ships. But we are bringing in a wide range of manufactured and food products to make up for the industry sectors we have given away under various free trade agreements.

I was amazed some months back to see kiwifruit in supermarkets which came from eastern Europe. We send our wool to Italy and China, then buy back manufactured goods. I could go on, but the fact is, our masters have fallen for the pea and thimble trick. I hope so at least, the other alternative is that they will walk away with fat pockets while the country goes down the tube.


Praguetwin said...

Well, your foreign debt is not as bad as ours.

Kiwifruit from Easter Europe? Damn, I wish they had them here! They do, but only in specialty stores. I'm lucky to get a ripe avocado in summer.

Seriously though, the other shoe is going to drop and that is going to be inflation. When the rates go up more and more in reaction, then the real fallout begins.

Don't forget that everyone is more leveraged than ever before. When the cheap money dries up, it will be ugly.

Cartledge said...

PT, I forget the per capita figure, but I think it was similar to the US.
But the real fear is the personal debt and the effects from a rate rise.
Yet both major parties insist the economy is still sound. It is a bloody worry.