The Lucky Country
So I’m sitting at the airport early in the morning, killing time by flicking through the Financial Review economics section. As you do. If your believe the general flavor of news you’d think the nation was on the pigs back.
Stories drive home the growing need for higher interest rates because economic growth is threatening to get out of hand. “Measures of investment intentions are positive, particularly for the resources sector” said the Reserve Bank this week. The resources sector. And there’s the little lie in the ointment.
If we focus for a moment on the Australian household, and not the half percent of the country making a killing out of shipping coal and iron ore to the Chinese, we find a different picture. Retail spending is up only 1.9%, whilst inflation is running at 3.1%. So that means in absolute terms the retail sector is going backwards by 1.2% per annum as of the end of June.
The amount of money households spend on servicing their mortgage is increasing as interest rates push ever upward, which of course removes ever more cash out of Australians pockets to boost banking profits.
So even a cursory look beyond the RBA headlines finds the people riding on the pigs back right now are banks and mining companies. The lucky few. Very few. Maybe you saw the economics professor Niall Ferguson was in Australia a week or so ago. He suggested that this commodities boom was a once in a lifetime event and Australia should be setting up a sovereign wealth fund for all Australians, like Norway did with their oil.
As it stands, the boom looks like a spectacular windfall for a small group of mining executives.
For them it really is becoming the lucky country.
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