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Down Under's a land of economic wonder

Date

David Potts

Australia's financial strengths may not be quite as the government claims, but they do exist.

Illustration: Rocco Fazzari.

Illustration: Rocco Fazzari.

When Julia Gillard said the budget surplus was one of the seven economic wonders of the modern world - hmm, she can say that again - it got me thinking about the other six.

Australia skating around the GFC, for which the government takes credit at every opportunity, would have been a nomination but for one nagging doubt. When Treasury is telling you to spend like there's no tomorrow, which kind of comes naturally, how hard is that?

To this day Treasury is convinced it saved the economy, even though the budget is paying for it now.

Never mind that its claim is based on its own economic model. When you're judging your own race, it's pretty hard to lose. No, the real economic wonder was China holding up commodity prices.

Happily, we do boast a few home-grown economic wonders. One would have to be the Productivity Commission, which is funded by the government only to tell it what it doesn't want to know. Having an independent economic body with no vested interests is priceless.

And look at super: a marvel the way it has been made farcically bureaucratic and complicated, though I was thinking more along the lines of its sheer size.

There's $1.5 trillion sitting there at last count, making little ol' us - actually by GDP per head we're the seventh-wealthiest country - one of the most superannuated nations.

That amount is so enormous, it's out of this world.

Which reminds me: if the Bureau of Resources and Energy Economics can get excited about the investment pipeline for oil and gas projects being so big it would, updated in current dollars have paid for landing man on the moon, then surely there's enough super there to send somebody to Mars and back? Pity, then, your share probably won't be enough to retire on.

Another sight to behold is the dollar, also a hero of the GFC, which as the sixth most traded currency has become an international plaything way out of proportion to our trade. Mind you, having a AAA rating these days is a marvel in itself.

Let's see, that leaves two economic wonders of the modern world left.

I'd nominate Japan as a sort of economic anti-wonder, since it's been shrinking on and off for about three decades. Even the population is falling. Japan has become the unwitting-but-fascinating model for economists of ageing demographics in action. Amazingly, it's still our second-biggest trading partner.

Yet the greatest global wonder of all must be how some of the smartest financial operators so readily stash money into US or Swiss short-term government bonds at a negative interest rate.

That's right, they're paying the government for the privilege of taking their money for a while when a good mattress would have done.

Could never happen here.

Follow David on Twitter: @moneypotts

3 comments so far

  • I'de nominate as an anti-wonder is Australian consumer sentiment, consistently dire despite high wages and no GFC consequences as felt by the rest of the western world.

    Maybe it might have been better to have the GFC consequences? By now we could have crawled out of it and become more optimistic on the other side.

    Commenter
    DD
    Location
    Melbourne
    Date and time
    December 04, 2012, 12:57PM
    • Our government did not save Australia, not did the treasury.

      What kind of saved the government, was

      a) the royalties/income from the global commodities boom
      b) the lack of debt from the previous government
      c) the high AU dollar reduced the interest payments on their OS borrowings.
      d) Australians love of debt. Household and personal debt have increased 10 fold since 1990.

      So while the current government is trying to produce a surplus, when they shouldn't, the australian public is taking up the debt slack.

      We are borrowing our way, out of the current global recession.

      What this government has done to kill much of our economy, including any exporting and tourism, is pull leavers that have kept the dollar way too high.

      We need our AUD$ to be at around $80c to the 1 $USD.

      The subsequent rise in local and relative international inflation will offset and force a reduction in the level of household debt.

      Don't confuse me with some rightwing economist. The previous government also got lucky with the commodities boom. To be fair, they tried to put some cash away for a rainy day, albeit, only the equivalent of about 6.5% of the yearly government tax income.
      MrSwan needs to drop this surplus insanity, and save the export and tourist sectors by implementing policy that will drive down the value of our currency. Just as nearly every other country on earth has. The USA, china, the UK and the Euro union....

      We have sat by, and let them in turn artificially inflate our currency, to the detriment of half our Australian industries. Those industries employ real people.
      Real people currently have the highest personal household debt to asset ratios, in Australian history.

      This is not rocket surgery...

      p.s. I like to mix my metaphors

      Commenter
      Kam i Am
      Location
      Work
      Date and time
      December 04, 2012, 3:06PM
      • If there are any redeeming features about the economy why have the RBA cut interest rates again to a record low?

        The economy is a basket case - interest rates lower or at the same level as inflation (I mean REAL inflation not the bulltish rates published to make the government look less incompetent that it is) is just stealing money from the people who are hurting most - self-funded retirees - who now cannot even maintain the value of their capital - never-mind live off it.

        Commenter
        Percy Phelps
        Location
        Norbury
        Date and time
        December 04, 2012, 4:24PM

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