Australia's insane self-sabotaging economy

Letters from O'Brien #73

Dear Mr Smith,

Thank you for hosting me once again. Today I’d like to talk about some aspects of the Australian economy.

Of all first world countries, few match up to Australia in terms of pure economic instability. With a particularly small population, a huge amount of natural resources, and a high per capita GDP, one would expect Australians to be prosperous on both an individual and societal level. They are not, and, since I live in Australia, this has interested me for some time, to say the very least.

Australia may have the most self-destructive political class in the west and one of the most inefficient economies I've ever studied. Today I want to write a shorter letter on this, not necessarily a deep dive (which I hope to do in the future), but merely a brief introduction to what is going on in the strange economic catastrophe of my home country.

HOW AUSTRALIANS SHOULD PERFORM

Before jumping into the core issues, I must highlight just how peculiar Australia’s situation is. As you are aware, Australia is a huge landmass, yet despite this, the country only has a population of roughly 27 million. Even with mass migration, this number will remain tiny for years to come.

The landscape is rough, with extreme heat and vast expanses of mud or sand, which make farming difficult. Yet despite this, the country is filled with natural resources. Below the surface of the land and in the oceans surrounding the landmass, one can find iron ore, natural gas, oil, coal, and countless other valuable materials.

Miners, tradesmen, engineers, technicians, and other specialists make up the majority of the working class in Australia.

By all metrics, Australia has everything at its disposal to thrive as a country, yet in practice the nation is actually regressing in terms of economic progress and financial stability.

HOW AUSTRALIANS ACTUALLY PERFORM (REALITY CHECK)

Considering this, it is important to examine how the Australian nation and its people compare on the international stage.

In terms of domestic economic complexity, Australia ranks roughly 100^th on the global stage. To put things in perspective, a variety of third-world nations with significantly fewer resources surpass Australia in terms of domestic economic complexity. Australia’s domestic economy rests almost entirely on both mining and housing/infrastructure development. While the mining sector, which employs a significant portion of the working class, is a legitimate part of many nations' economies, the housing/infrastructure development sector, which employs even more of the working class, is an artificial sector. This is due to the sector's sole reliance on loans and its reliance on a continuous, circular flow of homebuyers—a topic we will explore in more detail later.

It is a similar story in terms of product export diversity and customer/destination diversity. Australia’s primary trading partner is China and Australia’s largest exports are iron ore and coal. The third category includes natural gas, oil, and oil-based products. This lack of trade diversity can, and has been, precarious.

Despite all of this, Australia uses its natural resources only minimally at home. For example, around a decade ago I remember reading about a controversial move to export crude oil to China at a deficit. Chinese refineries would process this oil and then we’d purchase it back at mark-up prices. Makes you wonder, right?

LIMA AGREEMENT AND OFFSHORING MANUFACTURING

From what I can gather, Australia seems to have gone down this road in the mid-1970s. Before this, Australia’s economy was rather profitable and had a bright future. As noted, the small population, natural resources, and huge landmass presented many opportunities.

It seems to me that this began to change in the 1970s with the Whitlam government. Whitlam was, for context, a third-worldist and communist sympathizer. Even on the right, many today seem to obfuscate this and call him an unsung nationalist. He wasn’t.

Whitlam signed Australia into the UN Lima Declaration and Australia’s involvement in this was very strange. In essence, Australia began to offshore industries, not for economic gain but in a bid to improve third-world economies. Based on available information, Australia appears to have incurred financial losses by using taxpayer dollars to support the establishment of these foreign industries. The ‘deal’ included the official transfer of jobs and industry to smaller countries in a humanitarian bid to help them. They also cut tariffs significantly, again both leading to Australian manufacturers being undercut and decreasing national earnings, leading to increased domestic tax. This played a big part in the slow decline of national manufacturing.

What is interesting and disturbing, was Australia’s insistence on the ideals of this agenda. While most other countries seem to have moved on from the Lima Declaration (a UN agenda), each successive Australian government since the 1970s (yes, both left- and right-wing governments) has repackaged roughly the same policies, albeit with different names. ‘The Comprehensive and Progressive Agreement for Trans Pacific Partnership Implementation Bill 2018’ is the name it currently goes by. This is one of the primary reasons I believe Australian politicians, from both sides, have long attempted to sabotage the nation's economy.

As previously mentioned, Australia had the capability to produce its own goods using its own natural resources. Most major cities featured manufacturing districts that actually built things. They also had many refineries scattered across the country. This opened up meaningful job opportunities, and we actually used what was available. Only two oil refineries remain operational today, with the conversion of one or two others into 'holding stations' for outgoing and incoming shipments. Again, this sounds familiar given the situation in the US.

However, unlike in the US, things get even more absurd. In America, there is a heavy emphasis on tech startups and the contemporary industries that allow the country to uphold its services-based economy. I believe this approach is still ineffective, as the US should shift its focus back to manufacturing and use tariffs to level the playing field between Chinese and domestic goods. Despite the industry's lack of production, at least some efforts are underway to sustain the economy.

In Australia, this is not the case. Despite Australia's lack of a manufacturing base, the state apparatus appears to actively stifle startups, even though there is no clear advantage or justification for doing so. They do this through industry regulations.

The field of rocket technology provides an interesting example. Despite having a small space industry in Australia and a team of passionate designers and engineers with decades of experience, the country has yet to produce anything that is truly effective. For instance, despite Australia's great potential in this industry, every attempt to produce something valuable faces obstacles.

To put this into contrast (and really highlight how absurd it is), New Zealand—a microstate that is far less advanced than Australia in many areas—has a working space industry. Founded in 2006 (far more recent than many Australian companies), Rocket Lab received funding and eventually acquisition from US corporations and now launches full-sized rockets into orbit, delivering satellites and equipment. It took them 10 years to launch their first rocket. Where is Australia in this race?

How Australia manages to come up with these ridiculous rules of constraint in what is technically a new industry remains unclear. From what I could gather, it seems that the government has specialists whose job it is to monitor the space industry (and startups), predict what they will do next, and then quickly write up regulations. Cynical, I know, but that’s what it looks like. As noted, these regulations essentially stall any actual progress.

Almost every sector of the tech industry shares a similar story: regulations, oversight, and seemingly deliberate sabotage of good ideas aimed at stagnating industries and driving away talent.

CURRENT LIVING STANDARDS

This all brings me to my final point. In essence, Australians, despite maintaining a relatively high standard of living according to global standards, are rapidly becoming one of the most financially disadvantaged populations.

For example, one of the cornerstones of Australia’s domestic economy is its housing market. Despite this, housing in Australia has now—by some metrics—become the most unaffordable in the world by a significant margin. I believe the median housing price in Sydney is now $1.5 million (about $930,000 USD), which contrasts with the (actual) median income, which seems to sit between $67,000 and $70,000 ($41,500-$43,400 USD). Reports indicate that 90% of the Australian population now considers housing to be realistically unaffordable due to skyrocketing prices. Based on the information I found online, this situation is unprecedented, except for South American communist states in the 1960s.

Likewise, Australia has also begun to crack down on the working class in other ways. For example, in the southern states there is currently an obsession with removing combustion engine vehicles from the road. Recently, I discovered through a YouTube video that a region in the state of Victoria is serving as a testbed for a new law, which prohibits citizens from performing maintenance on their own cars, including oil changes and servicing, and limits them to three cars per property. They can apply for a 'permit' by paying $150, and if denied, they can reapply (if you’ve got the cash). If approved, the citizen is required to pay $250 for the permit itself, which expires shortly thereafter, necessitating a repeat of the entire process. (I’m sure God says somewhere that’s it’s an inalienable right to be able to service your own vehicle.)

In addition, the Australian government has been attempting for some time to prevent individuals from cultivating their own food, a practice that many people can afford due to their larger land holdings. The various state governments have somehow managed to introduce regulations prohibiting basically everything imaginable, from owning cows to chickens to bees, to herbs and vegetables, fruits, and so forth. As is typically the case with Australian government oversight, all of the justifications I could find are so comically absurd and unbelievable that I hold out hope that they may awaken people to the issue.

When taking a step back, Australians are some of the most proportionately ‘broke’ people in the west, increasingly unable to afford even basic necessities, let alone housing, new cars, or so forth—which, by the way, were affordable even as late as the 1990s. The continual influx of immigrants will only exacerbate these problems.

Migration and Housing

The migrant problem is too much to cover today, although it is essentially the same situation as seen in the US. The Australian government has a set of deals signed between 2022 and 2024 with the Indian government, which allows Indian nationals to travel to and live in Australia without a visa for up to 8 years, after which time they can reapply. I have seen many people online who are shocked to learn that England takes in roughly 700,000 migrants per year, or that Canada takes in 500,000 per year. Well, wait until they find out about Australia…

Despite being a country of only 24 million (in 2018-19), since the lockdowns of 2020, Australia has taken in a huge number of migrants. The official numbers from the government, the ABS, place the number of migrants in Australia during the 2023-24 year at 496,000. This is a staggering figure, but it's important to note that it only includes those who self-identify as "long-term arrivals." The actual number of people that entered the country in just the 2023-24 financial year was an incredible 1.1 million, unparalleled in Australian history. The past four years have seen similar (albeit slightly lower) numbers. The highest ‘official’ ABS number is from the 2022-23 financial year, during which time they admit that 739,000 migrants entered the country. Also of note: Australians are having very few children, and as of 2025, 83% of population growth in the country is a result of immigration.

The entire justification that politicians seem to rely on lacks any economic benefit. In fact, it poses a significant threat to the national economy. For example, in the US, government subsidies offset the low wages and equal living expenses of migrants, resulting in a lifetime fiscal cost to the taxpayer of approximately $200,000 USD. One can only imagine what is happening to the Australian economy.

Lastly, to illustrate the extent to which this situation is exacerbating the already absurd housing crisis, let's examine the numbers. In 2023-24, the total number of housing approvals numbered 163,000 units. According to the ABS's own data from 2023-24, the number of migrants exceeded the number of dwellings by 305,000. Again, this is based solely on official data from a single year. The total number is likely to be approximately three times higher, but one can determine the actual figure by calculating the approved long-term arrivals against the number of housing approvals for each financial year from 2019 onward and then adding them together.

Regardless of the ABS's 2024 figures, there will still be an 'official' housing shortage of 24,000. Even though the 'official' housing shortage of 24,000 seems excessive, I have discovered that the actual number is likely significantly higher. Australia's Housing Industry Association released figures in February 2024, estimating that the housing shortfall would reach 252,000 by 2028. Surprisingly, this association called out the government and, without explicitly stating it, highlighted an example of the self-sabotage I am referring to; they noted that the government has not only accelerated migration but also attempted, with some success, to stifle the construction industry, without providing a clear explanation for their actions. As I initially stated, construction constitutes a significant portion of the domestic economy. This situation is so illogical that I believe the only possible explanation is deliberate self-sabotage.

Anyways, I am planning to write a few more letters addressing some other issues within Australia that currently interest me; however, I will have to find the time for that. In hindsight, the Australian government stands out as highly abnormal, particularly when compared to the corrupted state apparatus in countries such as Canada or England. Australian politicians are arguably the most self-sabotaging and self-hating elite class I have come across in western politics, perhaps on par with particular politicians in the UK.

Sincerely yours,

O’Brien