Economically speaking - “what goes up, must…………...”

September 29, 2015

The recent corporate adopters of cheap Chinese manufacturing began outsourcing over ten years ago, leaving many of their locals out of a job.  There were hysterical cries of how doomed the blue collar workforce in Australia (and the USA) would be.  The ‘lucky country’ lifestyle was under some threat unless millions of workers learnt new skills.

But nothing lasts forever in economics.  Guess what?  The Chinese workers are asking for much bigger wages.  In fact, according to a new Boston Consulting Group report (called ‘Made in America, again’), wages have gone up 16% in each of the last 10yrs! While at the same time, Americans are merely pleased to have any job. The huge gap between the cost of doing business in the East and West has narrowed a lot. Also, many big companies are struggling with the loss of management control of things like quality and delivery times. For many it’s just not worth the discount of going offshore. ‘Bring the jobs home’ is the new Obama battle cry.

The other huge factor is the weak currency benefit that is received when you mess up your economy. The USA stuffed up royally, so their dollar gets a whacking and all of a sudden everything American is so much cheaper for us to buy, or go and visit. These actions breathe even more life into their factories.

Now we are definitely not obsessed by all things American here. However, witnessing a reduction in the large US unemployment rate will go a long way towards scaling this economic ‘Wall of Worry’ our investment markets are trying to climb. Perhaps we are getting pretty close to scaling the wall……

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