Source: www.economicprinciples.org
The above video (hopefully its working) is easily the best description I’ve seen on how economies operate and an absolutely must see for anyone interested.
In the context of the Australian economy it certainly does sound a few bells…perhaps alarm bells…particularly when you consider that the Australian economy has not experienced particularly good productivity growth over the last 10 years, has been deleveraging somewhat (e.g. double digit household savings ratios) over the past few years, has had record level income growth (best in the developed world), and now faces an uncertain future as the resources investment boom is finished and unemployment is expected to climb as the unwinding begins
The requirement for Australia is a lower exchange rate, increased productivity growth, and a government with a long term vision and credible plan for a weaker Australia…oh well, looks like we’ll be in for tough time over the next few years economically. Either way, there is still a bit of fuel in the policy fuel tanks but I’m still backing volatile markets and not the complacent bull markets Australians have almost come to expect over the past few decades.