‘Quiet collapse’: Video rips Australia’s ‘house of cards’ economy built on gambling, mining and real estate

An American finance expert has roasted Australia’s economy as a “house of cards”, saying it “should scare” the rest of the world.

A viral YouTube video warning Americans that “Australia should scare you” has ripped apart the country’s “house of cards” economy built on gambling, mining and real estate.

How Money Works, a popular YouTube channel with more than 1.3 million subscribers, set its sights on the Lucky Country in a video on Friday titled “Australia’s Quiet Collapse”.

Darin Soat, a former investment banker who created and hosts the channel, states that despite the US grappling with huge asset bubbles, extreme wealth inequality, spiralling consumer debt and diminishing savings, stagnating wages, unaffordable real estate and generational wealth divides, “somehow there is a country that is pushing these issues even further”.

Australia is a “warning for how bad things could get”, he says.

Soat argues that with Australians being ranked as having the second highest median net worth in the world behind only Luxembourg, according to a 2024 UBS report, one would think “anybody would be lucky to be Australian”.

Australia is a ‘warning for how bad things could get’ in the US. Picture: Getty Images

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“Well yes and no — and lucky really is the important word here,” he says.

“Australia has become so wealthy by getting lucky in just a few key industries and then by going all in on keeping those industries alive by any means necessary, including its own long-term viability.”

He highlights Australia’s inability to wean itself off the gambling, mining and real estate industries as emblematic of the deep structural problems in the economy — which has mainly grown rich through mineral exports — which now can’t be unwound without toppling the entire “house of cards”.

The decline of local manufacturing and science research has seen Australia plummet in “economic complexity” — the diversity of its exports — to be ranked the worst of any developed nation. We ranked 102nd place out of 146 countries, below the likes of Senegal, Bangladesh and Uganda.

“Australia now depends almost exclusively on selling natural resources and livestock to growing economies in Asia because it just doesn’t make financial sense to focus anywhere else,” he says.

The country has squandered its vast mineral wealth. Supplied

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Rather than funnelling mineral wealth into developing other areas of the economy, much of it is simply reinvested into building more mines to dig up more dirt to ship overseas in a feedback loop fuelled by government support.

The Australian dollar was long a proxy for the iron ore price, but this has decoupled since Covid. “That itself is probably not a good sign,” he says.

“It could actually be the biggest indication that Australia has dug itself into a hole, both literally and figuratively, that it’s going to be almost impossible to get out of without giving up a lot of what it’s become accustomed to.”

He highlights the irony of the fact that due to the poor investment conditions, much of Australia’s $4 trillion superannuation pool is invested in the US stock market.

“Australia is technically taking their cash, which is propped up by a mining industry, and then giving it to us so that we can build businesses here in America,” he says.

Soat then turns to the “elephant in the room”, the country’s absurdly overpriced real estate market, with which Australians are all too familiar.

Australia’s real estate market is valued at $11.4 trillion. Picture: Supplied

The Australian real estate market is “already so expensive that the rest of the world should be afraid of it”, he says.

The total value of Australian residential real estate was an estimated $11.4 trillion at the end of November, according to CoreLogic, with $2.3 trillion in outstanding mortgages.

This has made Australia’s banks some of the most valuable in the world — but their books are mostly tied up in lending to an overvalued real estate market.

Soat points the finger at the “usual combination of investor speculation, generous financing, NIMBYism and high levels of migration”, combined with Australia’s high taxes and negative gearing.

“This has encouraged high-income earners to favour investing in real estate that they can use to make paper losses to offset their income and then turn highly taxed earned income into much more modestly taxed capital gains,” he says.

“Negative gearing is almost universally agreed to be broken. It would be a lot easier to tax everybody at a lower rate and get rid of these write-offs, but they can’t afford this house of cards to unravel. There is now so much debt and wealth tied up in Australian housing that the Australian economy could be wiped out by even the indication that the government could rein in these incentives.”

Governments have fuelled record immigration. Picture: Nikki Short/NCA NewsWire

The same incentives apply to other policies like Australia’s record immigration levels, which keep the economy growing despite widespread public concerns about the effects on housing and infrastructure.

“The country has become highly dependent on low-income immigrants to do a lot of the jobs they aren’t willing to, and high-income immigrants to also buy into their asset markets,” Soat says.

He cites a study from law firm Henley Partners that found more than 40 per cent of the millionaires in Australia today were born overseas.

“In all of the biggest issues in the world today Australia is a look at what 10 years from now could mean for us,” he says.

“The biggest problem is that so far they have managed to keep everything on track. But there is a difference between success and delayed consequences. Workers are getting taxed heavily while dealing with declining real incomes, businesses are finding it too expensive to operate there. All of the wealth in the world, paper or otherwise, doesn’t mean anything if it can only buy you a one-bedroom apartment two hours from anywhere.”

How Money Works host Darin Soat. Picture: Supplied

But he jokes that “if you are an Australian and this was all a bit depressing for you, it could be worse — you could be from the UK”.

The video has racked up more than one million views and attracted thousands of comments, many from disenchanted Aussies.

“Us Aussies are over taxed, over levied, over dutied, over rated, over fined, and yet we are citizens of one of the most beautiful and tourism rich countries, and one of the most resource rich countries,” one person wrote.

“More and more people might face a tough time in retirement. Low-paying jobs, inflation, and high rents make it hard to save. Now, middle-class Australians find it tough to own a home too, leaving them without a place to retire.”

Another said, “My friend calls it ‘the boring apocalypse’. No zombies, no nukes, no asteroids, no solar flare superstorms, no tsunamis … only high real estate prices.”

One overseas viewer commented, “Australia mishandling some of the richest mineral deposits in the world, including uranium, is like watching someone dying of thirst while there are bottles of water all around them.”

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Originally published as ‘Quiet collapse’: Video rips Australia’s ‘house of cards’ economy built on gambling, mining and real estate