Latest / Money Grows on Trees / #265 - Why Australia’s Economy’s Stuck in Decline

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#265 - Why Australia’s Economy’s Stuck in Decline · Money Grows on Trees

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  I'm the type of person that addresses my problems head-on. So
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  for example, if I'm seeing that our growth in our business is going to go through a
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  decline, any of our businesses, I start cutting some of the costs, I
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  try to be clever with how much or what we're doing to bring more income in,
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  being more productive in the business, so actually making difficult decisions. That's
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  really what it boils down to. It's like, well, we're going to go through a decline, I've got
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  to make some difficult decisions. Right? I mean, it happens to
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  anything. If you're going through a challenge in your relationship, you're going to make some difficult decisions.
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  You're going to have a difficult conversation. It's the same thing as a country. If
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  we're going through this process where we're going into a recession, we've
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  just got to make some decisions. And unfortunately, we don't get to make those
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  decisions for the country. The political party in has to make them. And unfortunately,
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  the one we've got doesn't make any decisions. They haven't... There's
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  no leadership here. Kind of makes you
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  want to get into federal politics, doesn't it? But then you get into the
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  fold and then you get infected by the fold. So it's not as easy as
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  that. Anyway. All right, so we're
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  in a per capita recession, seven consecutive quarters. In March
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  it fell 0.4%, June in 2024, 0.4% it fell, September
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  it fell by 0.3%. So we've got this happening,
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  right? Now there's two reasons why this is happening, two
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  reasons, okay? The first reason is low productivity, which
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  I'll explain why that's coming and how that's happening. And the second thing
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  is, More people. So if you have more people coming
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  in, you're dividing the denominator in the equation by
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  more, you're going to have a lower number. So
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  if we're bringing in more people through immigration, we're going
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  to have less GDP per capita because this is more people. So
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  if the denominator is higher in the equation, we're going to have Effectively,
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  it's why it's causing a per capita recession. More people need more jobs.
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  More people need more public services. More people need more housing. I'm
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  not a big proponent of mass immigration. It destroys the
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  citizens who are already there. But I am a believer in immigration. So
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  I'm all about growing a country through immigration, through net
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  migration, or obviously through natural births. And
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  a growing population is great, but not unchecked. immigration
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  to then throw them into low productivity jobs, which I'll explain. So I'm
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  all for immigration, but we don't have to go crazy with it, right? It's the same sort of
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  thing. Like if you're inviting your family out for Christmas, you want
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  Like imagine if like 55 of you family go, oh, we've got one house. We've
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  Like, yeah, I want people to come, but not everyone at once, right? And certain
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  people and for certain reasons and so forth. So there's two things, low productivity, the
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  first thing that causes it, and then the second thing, more people. So let's look at low productivity,
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  all right? So we look at jobs growth
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  here, and we look at where the jobs are growing to show what productivity
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  gains we're gonna have with jobs growth. Now, what's really interesting about this is
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  recently in the June unemployment rate rose to 4.3%, and
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  it just shocked every economist like, what? I thought unemployment
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  was gonna fall. They weren't expecting a rise in unemployment. It's
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  kind of surprising actually because you're bringing more people here and you're maxing out the
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  jobs already. We're a low productivity country, you're not gonna have a lot of
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  people fulfilling roles. So you're seeing already that immigration and
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  unemployment are connected, okay? So you bring in more people, not as many jobs, of
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  course unemployment goes up. Now, what's interesting about this is the part that
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  is most important about productivity is where are the jobs? Because
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  if you want to have a highly productive country, you put them into growing
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  sectors in the economy. Generally, it's through business activity, innovation,
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  and effectively, non-government jobs. That's where you get a lot of productivity. Because
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  we all know, having dealt, if you've ever dealt with a public, with a
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  government entity of any kind, you know
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  how incredibly ineffective and low productivity efficiency
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  they are, you know, like you go to any deal with the government, anything is efficiency
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  is terrible. So the same sort of thing happens in jobs, it's
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  just not a highly productive space, right?
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  So you look here on the in the data, the amount of employment. So
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  private sector, public sector jobs has come from the ABS. There
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  were a total of government funded roles
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  such as healthcare, education, public administration, In
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  2024, there were 373,100 jobs
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  added. In the private sector, so the market sector, so it's a business driven employment,
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  where it's the most productive because of capitalism, it's
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  approximately 113,900 jobs. So you're looking at, so 77%, 77% of all jobs created last
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  year were in the government. in
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  this really non-productive, it's not creating
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  anymore, it's just facilitating and servicing the people here and it's
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  being paid by the taxpayer. So what happens when
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  that happens is that everyone in the economy including
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  the public sector, but those private businesses building all this new growth, a
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  lot of their tax revenue is getting thrown into the government
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  funded jobs. So we're almost robbing Peter to pay
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  Paul a little bit. And when that happens, you get low productivity gains.
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  Okay, this is the way it works. And so for example, if everyone worked
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  for the government, you'd have a socialist communist style economy. And
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  this is no productivity because everyone's on the gravy train. It's
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  a little bit like having, you know, like let's say is a family business and
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  only anyone who worked there was in the family. And
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  of course you're going to have family members that are lazy, that trying to
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  take advantage. And you think about those who are working in government, they're
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  not there to, to be productive. A lot of people, I'm
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  not saying just government, but people in a employment style that
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  are unchecked. in terms of their review and so forth. They're trying to
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  do as little work as possible and make as much as possible. That's just human nature,
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  right? That's the incentive structure. Government-style roles, I'm not saying all of them.
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  So if you're in government, don't freak out like Lloyd hates. The incentive systems in government and
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  the checks and balances just make it inefficient. You
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  know, they hold people they shouldn't do for too long and because They're
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  funded by the government. There's no natural attrition
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  in the sector. So for example, if certain quotas aren't hit, no
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  one loses their job because they need certain roles to be filled and so
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  forth. So you do get a very inefficient economy when
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  you're piling people into the government sector.
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  And you don't really want a full socialist government or communist government. There's a reason why
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  when the Berlin Wall, if you're wondering why, if you're someone who's like, well, we
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  want more socialism and power to the people instead of
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  the rich people and more government jobs and communism yeah
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  I don't know where this came from but it seems to be more prevalent today than
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  ever in the 50s you get arrested for that type of talk but there's
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  a reason why when the Berlin wall fell that
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  people from the east fled to the west When
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  the Berlin Wall fell, there was no one running from the West to
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  the East. Does that make sense? There's no one running from South Korea
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  to North Korea. Like, oh, I hope I can go to North Korea. That
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  looks like fun. No, it's not how everyone's trying
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  to flee. They're trying to get away, right? We want as many private
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  sector jobs as possible. We want as much business
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  market type jobs as possible. We certainly don't want 77% of
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  them going into the government sector. No way, not for a productive, healthy
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  economy. And the reason why that's happening too, I think,
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  is well without doubt if you when you're immigrating a lot more people
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  you're going to put pressure on the health care system the infrastructure and public
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  works you're going to so for sure you need people to fill roles
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  to then service those people coming in but i also think the
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  immigration minister and obviously the prime minister and the
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  government they all talk and they say well look we don't really want a recession in our books here
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  so can we just bring some more people in and can we just give some more jobs to
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  the government sector so that we can prop up the employment numbers so
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  we can keep the momentum going in employment because no
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  political party wants to say well unemployment spiked during my prime ministership right
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  so they're kind of in cahoots Let's give more jobs. And
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  of course, if you have things like the NDIS program happening, you're
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  creating, you're funding this particular sector,
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  you're gonna find a lot of people coming into that to fill roles because it's
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  a created thing by the government, right? So anyway, the reason
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  why that causes a per capita recession is because there's more people coming, right? So the
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  next part is the immigration component. And
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  you can see they're very, very closely related, okay? If we look at
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  now that that unemployment's gone up recently. Now
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  they're threatening a cut at the reserve bank because
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  unemployment's going up. We can't have that happen at all. I mean, no one
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  wants to lose their job, but when you're immigrating people, it's just
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  gonna happen. It's a by-product. So here we have the next part of the equation. So low
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  productivity is the first thing, and it's the type of jobs being created that create low
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  productivity. So we've established that too many government jobs are
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  creating a low productive economy. The next part is migration. And
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  so in the year ending June, 2024, So
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  the last financial year, the net overseas migration into
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  Australia, the net, so that's like immigrant arrivals was like 667,000. The departures
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  were 221,000. There's people that leave here too, 221,000 left. The
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  people that are left over is net migration, and
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  it's 446,000 people. Now what's interesting about that is it was down
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  by a lot, probably about 20% it looks to be.
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  It was down by 20% from June financial year. So from June 2023, it was 536,000. June
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  2024, it was 446,000. So you see it did drop, which is, what
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  you really want. If you're a citizen in a country and you have
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  all the wonderful natural resources that we have, you should be happy not
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  to have a lot of migration, truly. There
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  are countries in the world that don't have a lot of net migration and they have wonderful lives. It's
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  not the be all and end all. I think that the lobbyists and
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  certain people in certain sectors like the property sector, they lobby
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  hard for more people because they know it's gonna pump up prices and
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  that's what they want, right? It's just the greed factor that causes it. That was that year. Now,
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  what's interesting about that is since then, it's gone, it's gone back.
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  Well, it's certainly not gone back, but it's risen a little bit. So it's
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  like 447,000, 448,000 are coming in in the last year or
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  this year specifically. So we're seeing a lot of migration
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  come in. And everybody knows, I've done episodes on this before. If you haven't seen some of the episodes, go
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  back and have a watch of them as to why this is a problem. in
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  our country. But of course, if you bring more people in, then especially
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  if you're giving away 70% of jobs to the government, you're
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  gonna have a lot of people coming in and joining the government. It's like, just join
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  the gravy train. And they're not providing any... efficiency
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  to the economy. Not in sectors that are going to grow our GDP, right?
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  It just sucks. It just takes more tax revenue from every single
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  person to facilitate their employment. And it's
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  what's causing this per capita recession. Now,
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  what will happen over time if we don't fix this is we're going to go through actual
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  recession. Thanks for listening to Money Grows on Trees. If you enjoyed the
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