Australia: The Platypus Economy
Steve Keen School of Economics & Finance University of Western Sydney
What sort of animal is this?
• Platypus – A mammal… • With webbed feet… • That lays eggs… • And has a poisonous spur… • Australia – A booming developed economy… • That exports raw materials • With a soaring terms of trade • And a soaring trade deficit • And huge government surpluses
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The international environment
• Booming terms of trade…
Australia's Terms of Trade
130 120 110 Index 100 90 80 70 1960
• Yet a plunging balance of trade…
Australia's Balance of Trade
5
1965 1970 1975 1980 1985 Years 1990 1995 2000 2005 2010
0
US $ billion
−5 − 10 − 15 − 20 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Years
The domestic environment
• Contractionary government policy
Australia's Government Deficit
4 2 Per Cent of GDP 0 −2 −4 −6 −8 1990
Per Cent
• Yet a booming economy…
Australia's Growth Rate
8 6 4 2 0 −2 −4 1960
1970
1980 Years
1990
2000
2010
Australia's Unemployment Rate
11 10
1992
1994
1996
1998 2000 2002 2004
Per Cent
9 8 7 6 5 1980
Years
1985
1990 Years
1995
2000
2005
2
The poisonous spur…
• Sound government finances… • Out of control
Australia's Government Debt
45
private debt…
Debt/GDP Exponential Fit 1953-60 trend
Australia's Private Debt/GDP Ratio
1.6
40 35 30 25 20 15 1990
1.4 1.2 1 0.8 0.6 0.4 0.2 1950
US $ billion
1992
1994
1996
1998 2000 2002 2004
Years
Ratio
1960
1970
1980 Year
1990
2000
2010
The 90’s all over again?
• Households rather than Bond & Skase…
Classes of debt as proportion of GDP
Standard Mortgages 0.5 Low Doc Loans Business Personal Credit
0.4 Proportion
0.3
0.2
0.1
0 1975
1980
1985
1990 Year
1995
2000
2005
2010
3
The recession we can’t avoid?
• Unsustainable trend in debt – If trend doesn’t reverse, exploding interest burden…
Mortgage interest payments as proportion of GDP
All Mortgages Standard Loans Low Doc Loans 0.06 0.05 0.04 Ratio 0.03 0.02 0.01 0 1975 1980 1985 1990 Year 1995 2000 2005 2010
• If it does, a decade of low consumption growth…
The recession we can’t avoid?
• Correlation between debt corrections and recessions…
Private Debt to GDP Ratio
1.6 0.12 1.4
Debt/GDP Exponential Fit 1953-60 trend Nominal GDP Growth
0.1
0.08 1.2 0.06 1
Ratio
0.04 0.8 0.02
0.6 0
0.4
0.02
0.2 1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
0.04 2010
Year
• There could be a sting on its way… • Check www.debunking-economics.com/debt
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