Economic cycle

News about the coming closure of the Holden brand in Australia was sad to many Australians, especially their own employees.  But it is said that this is something that has been on the cards for a while.  What led to this situation, though?  Can we really analyse this?

Holden became part of General Motors (GM) some time ago.  GM preserved the Holden brand because of its popularity in Australia.  GM actually carries 15 brands.  Australia has been carrying the Holden brand as well as Chevrolet, HSV and Opel.  Dropping the Holden brand does not mean that GM is pulling out of Australia, but it is a smack to the Australian perception because of how Australians regard Holden to be their home-grown product.

News media have been reasoning out the economic side of the equation.  With the high value of the Australian dollar, it has made sense to Australia to send its manufacturing industry off-shore.  It is cheaper that way.  However, this can come as a vicious cycle.  Without manufacturing, the cost of importing parts can become expensive.  Then, if Australia spends more money importing manufactured goods from overseas compared to its GDP, the value of the dollar and the value of the GDP will drop.  But this is forward-looking.  Does it make sense to continue manufacturing locally today when the cost is high?  To restart and rebuild manufacturing plants after closing them down is also a great cost.  Especially to those who lose their jobs.

I see that this issue does not lie with manufacturing alone.  It is the same with the building industry.

Presently, the cost of real-estate has soared quickly.  There was a slow period last year, but a drop in the interest rates and scare tactics through advertising and news broadcasts has pushed the cost to be high.  Many people are buying now, as they are afraid that they will not be able to afford the cost when it becomes higher.

Building of roads and rail services also pushed people to move houses and buy and sell their properties.

A lot of this has been due to anticipation of population growth in Sydney, especially in the area of Western Sydney.  And while the dollar is high and Australia is viewed as a rich country, this is attracting immigrants to this country.

But what if the dollar fell in value?  What if the job market became worse (as it seems to be becoming) as inflation rises (because of the rising housing cost)?  All that capital invested into housing could leave the city having many unoccupied homes.  Shopping malls not having enough customers for retailers to rent stalls.  Then all that investment in anticipation of a rising population would be Australia's downfall.

Now, I am not saying that Australia should not build.  If the population rises as it seems to be, not building can be a downfall, as the congestion and the strain increases.  The nation needs to plan in advance.

But plan in which direction?  How can the national leaders know?  They can look at the graphs that map the trend, but the trend is not dictated by the graphs - the trend can go the other way.  How can anybody know which way to go?

What do you think?  How would you plan?  Does God have anything to do with our future?