No light for the poor productivity record of Australia
The Whyalla Steelworks was founded in 1941 and employed 1,100 people. Mount Isa Copper Smelter was founded in 1953 and employs 550 people, and the refinery of Townsville was founded in 1959 and employed 500 people. Without enormous government subsidy, all three companies look like they will follow the Exxon Mobile Refinery, Oceana Glass and Plastics Makers, Qenos and Trident in oblivion.
There will be unintended negative consequences. For example, the Dyno Nobelfosphateuvelmijn, 140 km from Berg Isa, who employs 500 people, relies on a copper smelter by -product for the production of fertilizers.
All these companies have had an increase in energy of about 50 per year since 2019, an average annual increase of six years in six years. And this puts enormous pressure on Australian production. Of the 37 Organization for Economic Cooperation and Development (OECD) countries, Australian production has the lowest share of the gross domestic product (GDP) by 5 percent, a decrease of 10 percent 25 years ago.
Graph 1: Australia has the lowest part of the production of an OECD country
Source: MacroBusiness.com.au
One of my bugbears is the obsession that have both sides of politics with a “large Australia”. Since 2000, the Australian population has grown by almost 9 million people or 45 percent. If we had grown with the OECD average of 17 percent, that would have seen an increase of 3.5 million people.
Graph 2: Population change this century (until 2024)
Source: MacroBusiness.com.au
The theoretical extra 5 million people since the year 2000 have exerted excessive pressure on housing and infrastructure and labor productivity per head of the population. The real GDP per person fell in nine of the last 12 quarters. The government increases its debts, with almost record spending with about 28 percent of GDP, 4-5 percent above the 65-year average of sub 24 percent of GDP and much of this increase is wasting.
Consider the lack of accountability associated with the NDIS (Naturinal Disability Insurance Scheme), infrastructure eruptions, rescue operations and subsidies and the extraordinary amount of duplication and inefficiency.
The problem is that too often government spending is granted poorly, for political reasons, with a canalization to jobs with low productivity. So when we read that the expenditure of federal and national government spending has reached the highest level since the end of the Second World War and that more than 50 percent of adult Australians now relate to the government for their most important income, this complicates the ambition to increase the productivity of labor.
Graph 3: Labor -Productivity
Source: MacroBusiness.com.au
With high net immigration, high government spending with regard to GDP, a considerable dependence on the government for the income of Australians and higher energy prices of poor structure regulation plus decarbonization, it seems likely that the Australian economy will remain in a low productivity trap.
Chief Executive Officer of Montgomery Investment Management, David Buckland has more than 30 years of experience in the industry.
David is a very well -informed and very experienced executive for financial services. Before he came to Montgomery in 2012, David was CEO and executive director of Hunter Hall for 11 years, as well as director at JP Morgan in Sydney and London for eight years.
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