Why is Australia in such a bad way? The country is exporting at record levels. China is paying up front for these exports. Interest rates are not too high. Remember the Keating days of 14 per cent? We do have a "dual" economy with manufacturing doing it tough due to the high dollar, but Australia never has been a strong exporter of manufactured goods.
Retailers are saying people aren't spending. You would think that people can only spend what they earn and no more. However, due to the multiplier effect, according to economic theory, when a person spends a dollar that one dollars turns over about five times. In other words the money supply, the real paper dollars out there, is actually only about a fifth of the money on the books in an economy. So what happens when a consumer saves? Think about it. The money in circulation "shrinks" by four more dollars. This is what is happening in Australia. We all envied Japan in its good years when they had very high rates of saving per head of population. Now Australians are adopting this way of living.
Retailers are saying people aren't spending. You would think that people can only spend what they earn and no more. However, due to the multiplier effect, according to economic theory, when a person spends a dollar that one dollars turns over about five times. In other words the money supply, the real paper dollars out there, is actually only about a fifth of the money on the books in an economy. So what happens when a consumer saves? Think about it. The money in circulation "shrinks" by four more dollars. This is what is happening in Australia. We all envied Japan in its good years when they had very high rates of saving per head of population. Now Australians are adopting this way of living.
Australians are doing the right thing and being told by retailers that they are doing the wrong thing. You can't have your cake and eat it too. You either spend now or you don't. The real problem of course is that there are far too many retailers in Australia. Particularly today where many shops sell broad lines of goods. Years ago shops really specialised. Each town had one grocer, one greengrocer, a chemist shop, fish shop selling fresh and fried fish, butcher, Garage and so on. When you are in a shopping centre today you pass several shops selling the same thing while walking.
Australians were in personal debt for decades. Many warned about the lingering debt levels. It is a good thing that people are changing their ways. Unfortunately, the whole retail structure must change as well. This will only occur reluctantly and with great hardship. Many buy businesses and think their future is made. The reality is different. Owning a business is now very tough. Not only do you have local rivals, many Australians buy from oversees on the Internet. Gerry Harvey of Harvey Norman may be calling for GST to be placed on Internet purchases. What he really wants is a ban on buying in this way. Things will change. More businesses will go bankrupt.
Australia's future lies in commodity exports. It always has; it always will. Manufacturing motor vehicles in this country was a mistake. Sell iron ore and coal then buy cheaper imports. This has always been the way to go. The main question for us all now is whether we should abandon food production and import most of it? Australia is a major exporter of wheat. This is a commodity. Perhaps Australia should continue. Growing food generally, however, is an important issue for the future. We cannot keep out cheap, high quality food imports from New Zealand for ever with questionable import barriers. Just why Australians still bother producing poor quality sheep is a mystery. The wool is good. The meat is inedible.
Australians were in personal debt for decades. Many warned about the lingering debt levels. It is a good thing that people are changing their ways. Unfortunately, the whole retail structure must change as well. This will only occur reluctantly and with great hardship. Many buy businesses and think their future is made. The reality is different. Owning a business is now very tough. Not only do you have local rivals, many Australians buy from oversees on the Internet. Gerry Harvey of Harvey Norman may be calling for GST to be placed on Internet purchases. What he really wants is a ban on buying in this way. Things will change. More businesses will go bankrupt.
Australia's future lies in commodity exports. It always has; it always will. Manufacturing motor vehicles in this country was a mistake. Sell iron ore and coal then buy cheaper imports. This has always been the way to go. The main question for us all now is whether we should abandon food production and import most of it? Australia is a major exporter of wheat. This is a commodity. Perhaps Australia should continue. Growing food generally, however, is an important issue for the future. We cannot keep out cheap, high quality food imports from New Zealand for ever with questionable import barriers. Just why Australians still bother producing poor quality sheep is a mystery. The wool is good. The meat is inedible.
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Economics
