What on Earth is a patchwork economy?

There’s been a lot of “patchwork” babble lately. Read on for the plain English translation…

Right now some parts of the economy are rockin’ while other bits are being rolled.

In the rockin’ corner we have the Aussie diggers and drillers who are filling up tankers bound for nation-building projects in Asia. The diggers and drillers are announcing record profits and it don’t look like stopping anytime soon, folks.

Meanwhile, Resources Boom Mark II is pumping the dollar big time. Last week some pointy head at St George went out on a limb and speculated the AUD could hit $US1.15 in the next few months.

Sounds great but the rising AUD renders the globally exposed, non-resources bits of our economy too expensive for overseas markets. We’re talking sectors like education, tourism, farm exports and manufacturing.

And remember the Queensland floods and cyclones have disrupted about 10% of businesses nationally, and 25% of businesses in Queensland. The flow-on effects have, in some way, impacted 60% of all Australian businesses.

So it’s rockin’ over there and rollin’ here and there. It’s a bit all over the shop. It’s a bit patchy.

Some pundits call this phenomenon a two-speed or multi-speed economy. Wayne and Julia call it “patchwork” because they reckon the differences aren’t just between states or towns or industries. They see variation at a micro level between businesses, households and individuals.

Here’s another way of perceiving this mish-mashy muddle: the benefits of the mining boom haven’t reached everyone.

Looking ahead, Mining Boom Mark II might not be as lucrative as Mark I. The rocketing AUD, already high terms of trade that are likely to taper off, and the higher levels of investment needed this time round will all eat into profits.

And interest rates? The patchwork is taking the heat out of the economy, giving the RBA board cause to pause. For now.

In other news… the UN now projects the world population, long expected to stabilize at 9 billion by 2050, will instead keep rising to hit 10.1 billion by 2100. One of the main causes will be Africa; its population is expected to triple. Oh and give yourself a pat on the back: we humans are expected to pass 7 billion in late October. Hmm, methinks that sixth wave of innovation can’t start soon enough.