Article: Melbourne Economy

Victoria, the stagnant state. Rapid population growth masks economic woes since global crisis

Melbourne's unprecedented population growth is masking nearly a decade of stagnation in the Victorian economy, which has seen living standards fall in four of the eight years since the global financial crisis.

"The population growth has disguised the fact that Victoria has become a poor state," said Saul Eslake, a former chief economist at ANZ. "Let me put it this way, economic growth that's only driven by population growth is not really worth having, as it is not improving people's living conditions."

An Age analysis of Bureau of Statistics data shows income per person in Victoria rose just 0.8 per cent from mid-2008 until the end of the 2016 financial year (the most up-to-date annual figures). Australia as a whole grew more than 7 per cent.

Prominent economist and planner Marcus Spiller said the Victorian economy was heavily reliant on a growing population.

"The way we are generating jobs is to build houses," he said. "If you asked someone in the state government what was driving the Victorian economy, they would mostly struggle to answer that question."​

Thoughts?

 

All hocus pocus to me. I know i made good money in this Melb boom and many others have too. Should see what economists were saying pre syd boom lmao.

Economists are in the business of talking. I'm in the business of making money. Let them keep talking and projecting.

Imo economics and wealth creation can be quite separate topics. The larger economy can have issues and yet certain markets can be booming. Also depends on strategy. I rarely pay attention to this kind of economic stuff.

 

It's not a comment on the larger economy though, it is specifically on Melbourne.
I don't see why you would not pay attention to economic stuff. Property investment is tightly related to it, and in a big part driven by it.
They were not projecting.
Also I don't see how whether you made money from it or not is relevant.


What I thought they were alluding to is that if the population increase slows down, there is not much propping up the economy there which sounds risky. If non-building related jobs are created out of the population boom that would be make it less of a risk, but if not then what happens when population growth slows and the jobs drop off? Do they all go to Sydney and lack of demand crashes the Melbourne market? I am not saying this will happen - just wondering what the implications of the article could mean to the property market in the longer term.

 

Call me stupid but personally i don't pay much attention to this stuff. Just me. I'm sure others do.

 

Melb market boomed in 2008 and then again in 2013 and still going. The stats are broad, but basically this is when the Melb market boom cycle occurred.

With recent boom cycle, If you jumped in and made some money, either access equity or alternatively it may be time to take some money off the table, its been 4 years now.

MTR

 

Every time I mention here that the economy is not as rosy as everyone gets fed in the various medias etc; I get slammed as some sort of mindless "sky is falling" idiot, and then the pursuant plethora of fun from personal attacks...mostly from folks not from Melb whatsoever, as it happens.

So; you are wasting your time with this topic here...unless you want to have about 15 pages of a bun-fight?

FWIW; from my observation over the last several years and talking to many, many people from various industries and occupations; I agree with you and the excerpt you posted.

As Leo said; folks will still make money no matter what the economy climate; and I am one of them - but if you are talking strictly the economy in general; yeah....a bit of a worry without the population - even with the population it's a bit of a worry; how do the Govt fund exponential heads, without the increasing job infrastructure to support them all?...welfare?...just borrow more?

The Pollies have this delusional idea that everyone will magically fall into a worthwhile, full-time, lifestyle supporting job....which are coming from....where?

Good luck with it.

The property market has done well it's true; but the Vic economy as a whole generally.....

 

This line nails it, though its only 50% of the story. the other half is that the previous government averaged $4.5bn a year infrastructure spending, whereas Andrews is averaging $10bn. On top of that, Andrews has also put record spending into the mental health and care services sector. The rapid increase in government spending has created stacks of new jobs which underpin population growth, and spur the housing market. Problem is, that growth has now slowed considerably (though is sustained at a high level), so population growth rates cannot increase at the same level.

The VIC government's largest source of revenue is sales tax on residential property. They have also had added spending power in the last few years from privatisation, mainly the port of melbourne and the land registry office.

Really that means the economy is two-fold dependent on the housing market; 1. it underpins a significant amount of current construction jobs, and 2. taxing it is the their primary revenue source.

IMO 2019/2020 is when they will run into problems. Population growth will continue on hype, but jobs growth will have clearly stalled. Construction spending will be falling, and government spending is already forecast to drop several billion at this point.

 

Don't bait me, I may be your only friend and vice versa

Property market has been going gangbusters in Melb since 2013, but its in the main due to immigration increasing, Melb number 1 in Australia. Also the service industry is very strong in Melb.

I am no expert but the gravy train will eventually stop, booms don't go forever, I wish.

I see Labour are now in front in the polls, I am thinking we should all batten the helms. The weird thing is Shorten does not even need to work hard at it, its on a platter at the moment.

MTR

 

Nah; got a huge following here.....

Nup; Daniel Andrews has stuffed it...as bad as Weatherill with their froot-loop ideas.

God knows what's gunna happen next election; Andrews will be out, and the Libs have no-one of any excitement factor or vision that I can see...probably another Andrews clone.

Matthew Guy doesn't seem to be much push-back against Labour...conspicuous by his lack of visibility.

 

Malcom hasn't been great but i shudder to think labor may get in.......i completely don't identify with that mob.

 

They want to use a sledge hammer on property investors, there will be changes, and it will impact on cash flow.

 

They sicken me tbh. Tear down the hard working folks who sacrifice and dare to dream and spoon feed the bludgers and losers. morons.

 

Seems that almost no-one does; all defected over to Pauline's Party and the Sex Party?

I reckon Corey is snagging loads of votes, right about now.

 

lol

Well the Pirates party suddenly doesn't seem so bad....

 

On average maybe..but if argue it's what you are going to continue to see going forward in most capital cities..the 'haves ' and going to have it good and standard of living will likely get better.. Whereas the 'havr nots' will struggle and pull the overall averages of standard of living down.
Most larger cities worldwide have this issue of inequality.

 

Well for manufacturing - it really is going down the drain (cars, clothing, spare parts) everybody is just going to get some from china. Even glass windows (so yes) nothing is being manufactured here and let's face it it is pretty damn expensive.

i think it is mostly generalisation - of course when ppl build houses, really who are the ones getting the jobs (builders, carpenters, tilers etc) But not everyone who moves here is in that line of work. So are everyone just coming here to be on the dole?

Victoria is moving more into service industry. When you have lots of people moving in and migrating. Do you not have to feed people? do people not fall sick? do children need to go to schools? Do people need a place to live? So are everyone just refugees that are coming here increasing the toll on the gov spending.

Also the "sharing economy" in Victoria is really booming - just go in the CBD everyday there are ppl riding bikes motorcyles deliverying uber eats, deliveroo. Also the variety of other applications like Airtasker, pethomestay, airbnb, uber. In Asia it is so big in some cities the share economy stuff like "grab" - people rely on these for income as a job. For e.g. just on taking care of pets is like a 40-50K a year part time. how do i know? coz i do it as a hobby not as a job.

Of course also some non-traditional jobs are going like for e.g. sensis (friend's whole graphic design department got outsourced to india). There are also a lot of IT companies (even offshore ones that move here although taking jobs but they are also making jobs) - Wipro, Infosys as certain government contracts require on premise staff and local people being employed.

Tourism is also big in Victoria and there is currently a hotel boom happening in Victoria (of the list b below - do they not need cleaners, fire engineers, maintenance staff, waiters, chefs, conceirges, service staff?) seriously (the list below is billions in dev alone in construction) - and it ain't no government spending or a stimulus.

Coming: 2017-201
Crown Queensbridge: 388 hotel rooms (+708 apartments)
Novotel, South Wharf: 347 rooms
Holiday Inn Express Southbank: 339
Holiday Inn Express, Lt Collins St: 299 rooms
Next Hotel, 80 Collins St, 300 rooms
ibis, Little Lonsdale: 270 rooms
Novotel Little Lonsdale: 213 rooms
Ritz Carlton, Spencer St: 240 rooms
Quest NewQuay Docklands: 113 rooms
Adina Apartment Hotel Southbank: 220 rooms
Mantra, Epping: 214 rooms
Hotel Indigo, Docklands: 170 rooms
element, Richmond: 168 rooms
Mandarin Oriental at 600 Collins St: 196 rooms (+148 apartments)
Marriott at Docklands: 200 rooms and 110 apartments
Shangri La on Latrobe St: 500 rooms
W Hotel, Collins St: 294 rooms
Savoy Tavern, Spencer St, 187 rooms
Four Points by Sheraton, Docklands: 273 rooms — opened March
Hyatt Place Melbourne, Essendon Fields: 166 rooms — opened June

Education sector - years and years (are these not people coming to Melbourne to spend in the universities and schools?

The gov spending will continue (just looking at the Melbourne 2030 plan) and in the north even the railroad crossing projects, the new westgate tunnels to egate, regional rail and all these underground train stations will take it all the way to 2030.

When you have overseas companies which are billion dollar companies in USD no Rupees (having thinktanks and research departments in the 1000s (all dying to gear up projects in Melbourne) what does that tell you ?

 

That's excellent.

But it wont save Melb, perhaps a soft landing, no State in Australia gets a free card, because booms cant and don't last forever, and that is fact.

The biggest/longest boom cycle in Australia was in Perth 2001-2007 and this was riding the mining boom, this impacted on commercial property which also boomed.

There is am much bigger picture than overseas investors/developers buying up.

Affordability? interest rate rises? Finance tightening..... no loans, no buying.... oversupply.

I am not suggesting Melb will correct, but I do think some markets are starting to soften and there will be a point where people can not afford to buy. This in part is why the outer burbs are currently booming and prices rising. I think 2018 will be an interesting year, I am watching

MTR

 

It will flatten out for sure - just look at the upper end stuff they're not moving and harder to sell. and why suburbs and guys like @sash making a killing in the outer - no doubt. if anything I think Geelong is the biggest suburb that will boom (that is inevitable). Affordability - and ripple effects in the suburbs that is why some suburbs moved. Like suburbs like Thomastown and Lalor even are edging towards a million now. The question is which are the next suburbs to move and take than jump? And the gov is creating new suburbs like Mt Atkinson.

No one is going to make a killing in suburbs like hawthorn or glen Waverley or Balwyn or brighton . Like said markets within markets for sure.

No city is immune just take London or new York or LA there were ups and downs. Melbourne will have its drops, flatten and also rises. My parents got places in paris as my father studied university there in the 70s - so far till today up and down it has only projected upwards over the years despite all the good and bad economic news over 40+ years

It really depends on strategy of each individual - the old ways of Nathan birch methods of buying as many as possible is not going to work in today's climate and even he is moving into devs and next stage. So have to adjust and move with the times. I hope to reduce holdings in Melbourne over the next few years and do other stuff to diversify

 

Thanks for the valuable insight. I want to buy in Hawthorn? still too early I think??

 

that would be more lifestyle - I would say. I don't think it is dropping or booming just slowly going along. Unless it is dev project - my friends are building apartments in hawthorn and already sold out and currently building.