What is the problem in Australia? (from my email)

From Khalil Menaf Hegarty, note that an Australian dollar is worth about 65 cents.  I also won’t double indent:

“There are a series of economy-wide, labour-related problems in Australia that policymakers appear incapable of tackling in a coherent way.

First up, this is a very good summary of some key national indicators around Australia’s per capita recession.

The story here is a good entry point to what is happening on the ground, but I’ll try and summarise.

• • Left-leaning state governments have embarked on major infrastructure projects (and require significant public debt);
  • These projects require minimum pay requirements that are effectively endorsed by construction unions;
  • Costs and wages tend to blow out for these reasons (and I don’t want to get into the public debt conversation here);
  • As noted in the story, the wage demands are quite significant. (AUD240k = approx. USD160k)

At the same time:

• Significant labour shortages in teaching, healthcare/nursing, law enforcement and the defence forces;
• A housing crisis, with a massive shortage of homes, prompting house construction targets;
• An inability to meet house targets because of the labour shortage;
• Immigration as both the solution to a labour shortage, problems for the housing crisis, and a spiral for both.

Perhaps this is a similar situation to Canada (as per your April column), but perhaps the problem is more acute because we don’t have access to the US labour market in the same way.

So, my questions are: What’s wrong with Australia’s economy? Is this precedented? What would you do about it?”

TC again: Perhaps we need new and better models for this kind of situation…