The lucky country

Australia’s reputation as the lucky country has taken a beating this year with widespread bushfires and floods.

The news it’s beating the recession has helped to counter that, but is it luck?

The Age puts it down to two factors:

One is the economic story . . . Stunningly high coal and iron ore prices, a decent wheat harvest and the Federal Government’s rapid-fire stimulus have all done their bit to shield Australia from the worst of the crisis.

Yet only partially: output per head, the economy’s real bottom line, fell 1.6 per cent in the year to March. Unemployment has already surged by 175,000. We are part of the global recession.

But in one important way, we are not part of the global financial crisis. Our financial system has not collapsed. The Government has had to offer guarantees for bank debt . . . but unlike other governments, it has not had to provide capital to prop up the banks. The smaller banks are experiencing turbulence, some of it heavy. But the Big Four remain AA rated and highly profitable — a reminder to banks in other Western countries of how good life used to be.

Given most of our banks are Australian owned there’s some reassurance for New Zealand in this too.

Through the crisis, Australia has maintained a kind of normality. When the storm came, our house was found to be built on rock, not sand. . .

In other countries, the global financial crisis left the financial system broken: not here. Why not?

There is a broad consensus on what went right. Insiders and onlookers agree that a range of factors lay behind this success story. Some of it was luck. Some of it was good management. Some of it was good regulation. And some was due to all of these interacting in an environment that sustained traditional banking and made it profitable.

The article is worth reading in full so I’ll leave it there and finish with three questions:

* Do most of the factors which have kept Australia’s financial system fairly stable apply here?

* If our largest trading partner is growing, albeit by a very small amount, is it good for us too?

*We don’t have Australia’s mineral resources but we do have water to grow grass to feed a hungry world which our neighbour doesn’t. What’s stopping us from being a lucky country too?

3 Responses to The lucky country

  1. kg says:

    “..but we do have water to grow grass to feed a hungry world which our neighbour doesn’t. What’s stopping us from being a lucky country too?”

    Where to begin…Australia also has water and grass, much of it in areas unaffected by drought. They’re still feeling the benefits of the Ord River and Snowy Mountain schemes, yet NZ greenies and the RMA wouldn’t allow such things here.
    Australia’s productivity is higher and compliance costs are lower.
    Their welfare bill (per capita) is lower and they don’t have the drag of an unproductive, separatist, taxpayer-funded people who also help to drive up compliance costs via idiotic bilingual signs and documentation.
    Growing stuff and selling it is only part of the story–NZ needs to grow up very fast and identify the impediments to progress and prosperity and deal with them.
    I’d start with rampant bureaucracy and the RMA.


  2. PaulL says:

    Actually, NZ does have enormous mineral resources that we choose not to use. We have lots of coal, we have gold, we have energy resources (hydro, coal, geothermal) the rest of the world would kill for. We choose not to use them.

    In Australia, they balance conservation with production. They have mines in national parks. They work it out – it is usually less than 1% of that National Park. We won’t even consider it. We are the poorer for that, we need to understand that is a choice, not an absolute.


  3. Pique Oil says:

    The West Island also has been relatively self sufficient in oil until recently. This has meant they have been able to benefit from the trade surpluses. Here in NZ we have had to pay for imported oil for years and this is all money that is not available for investment in NZ.
    The West island is now importing more and more of its Oil so lets revisit this in a few years and see what the equation looks like then.
    Regulation has strangled us here in NZ and until we see a major swing away from the party political system it won’t change dramatically.


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