Everyone’s panicking about the falling oil price. Should we panic too?

The price of oil has fallen an amazing amount in a short time.

Source: Nasdaq

Which is sending global markets into a bit of a panic.

oil hurts shares
Source: AFR

But is this really the moment where the Australian economy comes crashing down?

Lower petrol prices are already a reality, which has the same effect for many households as a reduction in interest rates – more money in their pocket.

Source: Australian Institute of Petroleum
Source: Australian Institute of Petroleum

Since this graph was made a week ago, retail prices have fallen even further, to 2005-era levels of $1.20/L. The median household spends $40 a week on petrol, so a 25 per cent fall gives them $10 extra to spend on other things.

This is a real boost to the Australian economy at a time when it really needs it.

And our major trading partner, China, is in the same boat. It is an oil importer and it is apparently stockpiling fast during this period of low prices. Like Australia, China is trying to get growth to continue without causing a surge in inflation. The oil price drop just made this a lot easier.

If lower oil prices perk up the Australian consumer just as a lower dollar makes life easier for Australian business, and China is able to continue to grow strongly, that represents just about a best-case scenario for the Australian economy.

But it’s worth remembering: What goes down can go back up.

crude history
Source: Bloomberg

If consumers in China and Australia re-set their oil price expectations, and then the price of oil goes back up, it will feel like an interest rate hike – at the worst possible time. In that scenario, with Australian consumer confidence falling as China suffers a blow to growth, anything could happen.

What we export now – advertising, etc.

The great saviour of the Australian economy arrives in a Porsche 911 convertible. The saviour’s professionally dyed locks are artfully disarrayed in order to best conceal an advancing bald zone. He whips his Raybans from his tired eyes and advances up the pavement to meet you, hand out-stretched.

The great hope of the Australian economy is the advertising man.

Ad exports

New data on services exports have revealed a whopping great leap in the export of salesmanship. No surprises really. As markets to our north develop there is more need for first world advertising expertise.  And as the world’s developed markets become culturally more similar, Australian ads can play offshore.

Mumbrella has a list of a few Aussie ad exports, including this cat food sushi train ad, which we are apparently sending to Japan!

Regular readers of this blog will know that I am a giant fan of the services economy. I believe that in the future, politicians will idolise services as they now idolise “making things,” because the services sector will have provided the vast bulk of great jobs of their parents generation.

Almost any high-value service can now be provided across national borders.

I was talking to a consultant the other day who’d just signed a whole lot of what he hoped were visa forms for his staff – they were completely in Arabic. His medium-sized Melbourne business was sending people off to the middle east to work on a big project.

Great services export growth is happening not just in travel, but across the economy.

Screen Shot 2014-05-21 at 10.24.15 am

I Love a Services Country; a Land of Sweeping, and Flying Planes

There’s an idea out there, that Australia is built on primary industries and manufacturing. That we are first and foremost a country that “makes things.” And that we should be proud of it.

This view of history must not stand.

This is a country that depends on services. Always has, always will.

People who go on and on about how we are about to turn into a nation of burger-flippers and/or door openers reveal themselves to have bugger-all understanding of the true history of Australia.

Services, mate. Since day dot. Each one building on the last, to make this great nation you see before you:


1. Pre- European Australia.

Story-telling services, decorating services, etc. [no photos available, sorry]

2. Cpt J.Cook

Captain Cook
Exploration and mapping consultant.

 3. Arthur Phillip

Arthur Phillip
Colony commencement consultant.

4. Burke and Wills.

Burke and Wills
Checking out what’s up there and failing to come back consultants

5. Governor Macquarie:  

Governor Lachlan Macquarie
Governance consultant with a sideline in financial services innovation.

6. Banjo Patterson

Banjo Paterson
Poetry and myth-making consultant.

 7. The Man From Snowy River

The man from Snowy River
Horse retrieval consultant. 

8. Ned Kelly

Ned Kelly
Funds liberation consultant / flamboyant headwear designer. 

9. Simpson and his Donkey. 

Simpson and his Donkey
Casualty retrieval consultant.

10. Royal Flying Doctors Service. 

Royal Flying Doctor's Service
They don’t call it the Royal Flying Doctors Manufacturing Industry.

11. Don Bradman.

Sir Donald Bradman
English despair and dismay consultant.

 12.  John Bradfield. 

John Bradfield
Water crossing/tourism icon construction consultant. 

13. Sidney Myer

Sidney Myer
Retail services guru

14. Dennis Lillee. 

Dennis Lillee
Moustache consultant with a sideline in high-speed leather propulsion services

15. Road train drivers.

Logistics consultants

 16. Bob Hawke.

Bob Hawke
Worker organisation/national leadership specialist

17. Professor Peter Doherty

Peter Doherty
Cure guru

18. Cate Blanchett

Cate Blanchett
Pretending to be someone else professional

This nation is not just about things.

It’s about people and the things they do for one another. If the Colt from Old Regret had got away and the owner went and bought another one, while the Man from Snowy River worked in a factory, it wouldn’t be much of a story, would it?

Next time you hear a politician say they don’t want to live in a country that doesn’t make things, remember that living in a country that didn’t do things would be even worse.