John Carroll, Professor Emeritus of Sociology at La Trobe University, penned a ridiculous article in Fairfax over the weekend hailing Melbourne as the bastion of Australia’s economic success:
Not once in the article did Carroll mention any downsides from Melbourne’s hyper-growth or ponzi economic model. A balanced assessment by Carroll would have acknowledged that the cost (and quality) of housing has unambiguously eroded, as evident by the huge escalation in Melbourne’s dwelling price-to-income ratio from 5.2 in 2002 to 7.5 in 2017, according to CoreLogic: A balanced assessment would also have acknowledged that the home ownership rate for those aged under-40 has fallen precipitously across Melbourne, from 36% in 2002 to just 21% in 2014 (and likely lower now): With the proportion of households thrown onto the rental market growing massively: And the proportion of new rental lettings that are ‘affordable’ to lower income households vanishing: With the proportion of lower income households now in ‘rental stress’ escalating: What sort of ‘miracle’ city throws its youth onto the housing scrap heap? Carroll’s claim that Victoria “has had the nation’s healthiest government balance sheet” is also dubious as it ignores the massive increase in stamp duties and land tax receipts, which will evaporate if/when the property bubble bursts: As well as the woeful under-investment in infrastructure by the State Government, which has left a critical infrastructure deficit across Melbourne. Carroll’s understanding of economics also leaves a lot to be desired. If he had bothered to study the data pertaining to Melbourne, he would have discovered that since the onset of the Global Financial Crisis (GFC) in 2008, per capita gross state product (GSP) in Victoria had risen by a pathetic 0.8%: Whereas per capita State final demand has also barely risen since the GFC, despite robust (population-driven) aggregate growth: Carroll also would have discovered that Victoria (read Melbourne) has experienced the lowest increase in per capita GSP in the nation since the GFC: And that Victoria has the lowest per capita gross disposable income on the mainland, only beating out lowly Tasmania: What Carroll doesn’t seem to understand is that Victoria’s (Melbourne’s) economic pie has grown due to rampant population growth. But everyone’s slice of that pie has stayed the same (and shrunk once wider impacts are taken into account)! Victoria is running a ponzi economy based on endless population growth (mostly immigration), which in turn has juiced its services industries (think cafes, universities and financial services) and the housing construction industry (see below chart). Such a growth model is like a dog chasing its tail. There is activity but the per capita Victorian (Melbourneian) is no better off. Meanwhile, it accumulates debt as seen in Victoria’s trade performance. Exports recorded minimal growth in the 14 years to June 2016, whereas imports more than doubled. Accordingly, the state’s trade deficit had blown out to a whopping $47.5 billion in the year to June 2016 (see below charts). Other indicators of living standards that are not captured in the aggregate economic statistics have unambiguously gotten worse in Melbourne, as the city’s population has swelled by nearly one million people, or 26%, over the past decade (let alone to the projected 8 million people mid-century). Melbourne’s economic and social infrastructure is becoming increasingly crush-loaded every year as rampant population growth continually outstrips capacity, leading to overcrowding on roads, public transport, and in schools. Meanwhile, as noted above, housing affordability and rental availability has also deteriorated markedly on the back of the population deluge. And yet these huge costs have been ignored entirely by Carroll. Melbourne is running full tilt on a rat wheel economy that Australian politicians and their mates in a few chosen sectors are enriching themselves on. It is the perfect exemplar for what has gone wrong across the nation. And here we have academics like Carroll cheering this situation on as if it is some kind of economic miracle! YOU MAY ALSO BE INTERESTED INfrom https://highpowerclean.com.au/manic-melbourne-is-no-economic-miracle-macrobusiness-blog/
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