The luck of the Aussies

Even as the world seems caught in a financial meltdown, has Australia managed to escape? Mark Beeson

By Mark Beeson Published 06 October 2008

Australia is famously known as ‘the lucky country’. Although this was originally meant ironically, in many ways, it is. Despite embracing many of the financial sector innovations that have undone the American economy, Australia has an underlying economic lifeline: its vast natural reserves of iron ore, coal and gas mean that, as long as China’s economy continues to expand, its overall position is much healthier than the other Anglo-American economies that embraced and promoted neoliberalism with such enthusiasm in the 1980s and 1990s.

Significantly, Australian policymakers can only take some of the credit for this. One reason why the Australian financial sector is not as badly affected as elsewhere is because Australia ‘luckily’ had its own financial crisis nearly twenty years ago. When Australia’s sleepy banking sector was liberalised by a notionally left of centre Labor government, it precipitated precisely the sort of entrepreneurial lending and recklessness that have brought America’s financial sector to its knees. A desperate chase for market share culminated in Australian banks writing off nearly A$30 billion of unrecoverable debts by the early 1990s.

This may seem small beer in today’s climate, but it nearly led to the death of one of Australia’s big four banks, and represented a major crisis in a relatively small economy. As a consequence of this near death experience, the banking sector is now in a comparatively strong position. The banks are generally soundly capitalised with low levels of non-performing loans and limited exposure to the troubled housing sector in the US — an important consideration given the housing bubble in Australia and high levels of individual indebtedness. Moreover, there has been very little lending of the ‘sub-prime’ variety in Australia, and demand for housing has remained comparatively strong.

Both sides of politics in Australia have made fiscal probity a big part of domestic policy following the experiences of the 1980s and early ‘90s. Government debt has largely been paid off, and compulsory superannuation schemes have become the order of the day. The newly installed government of Kevin Rudd has used windfall tax revenues from the booming resource sector to bankroll the ‘Building Australia Fund’.

With more than A$20 billion to invest, it is overseen by a relatively independent semi-government authority, Infrastructure Australia. The federal government is now being urged by state governments and local business to spend this money in classic Keynesian style, in order to promote growth and insulate Australia from the impact of any global downturn.

True, Australia is lucky to have the option. It may not be enough, however. Australia still has the economic profile of a developing country, in that much of its affluence is propped up by a resource sector that remains hostage to developments in the international economy over which Australian policymakers have no control. If China proves not to be ‘uncoupled’ from the downturn in the US and its growth slows significantly, Australia will almost certainly be plunged into recession.

Despite Australia’s historical role in promoting the supposed merits of small government around the region, its own structures of governance remain extensive and — by contrast with the US, at least — surprisingly competent. Australia’s policymakers have moved quickly to coordinate the activities of Treasury, the (independent) Reserve Bank, the Australian Prudential Authority and the Australian Securities and Investment Commission. The hope is that these agencies will be able to provide a coherent and coordinated response to the international crisis and insulate Australia form its worst effects.

It will be an interesting test of the capacity of a relatively small, peripheral economy to withstand the backwash of global crises. The long-term geopolitical significance of recent events was clearly revealed when Rudd suggested he looked to China to underpin Australia’s long-term economic fortunes. The reality may be that no matter what Australia does, its fortunes remain dependent on the price of things that are dug from the ground.

Mark Beeson is Professor of International Politics, University of Birmingham

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Tags: Economy 2008

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16 comments

Thu, 2008-10-09 03:08 — Jonathan B

Dear Mark Beeson
Very interesting although aglomerate perspective on the financial situation. I refuse to call it a "crisis". Ah don't you just love capitalism??
Really though I want to make some comments about the comments of Douglas Chalmers. Every time a New Statesman contributor even breathes the word "Australia" Douglas gets on his trusty hobby horse and takes the debate off to his favourite spots - racism, the downtrodden, climate, indigenous Australians and Australia's cocky view of its importance in the world. NOT for a moment do I disagree with the underlying importance of resolving these issues Doug but they are not central to every NS article about Australia - Mark's included. For example your comments about emigration. Enjoying as we have a strong Aussie dollar just which group of Australians would you deny the right, pleasure or opportunity to leave the country, even for a while, to make their fortunes? Is that bad for Australia as you so strongly assert? Where's your proof? NONE - just personal opinion. Anyway - they are all coming back now so your argument holds no water at all. Re the terrible story of Mukesh Haikerwal - all that we can objectively obtain from Dr Hailerwal's assault is that random acts of sensless violence are perpetrated by persons who have NO REGARD for race, class or profession of their victims. For you to assert otherwise really betrays your pathalogical inability to articulate cause and effect. Why do you do this Doug? Do you really hate the reality of Australia as a comparatively successful & happy place for most people to live? Where are you trapped in your mind? Your comments about Australia becoming more racist and ignorant are just another example of your biased anecdotalism. (In your comment #3) please give us one instance of a perons from "more civilized culture(s) rocking up and being disgusted at the really pretentious white Anglo settler society?" Their words please - not through your regurgitated spew. Rgds JB

Thu, 2008-10-09 11:41 — Douglas Chalmers

Where are you trapped in your mind, Jonathan B? Oh, in Australia - in the 1950's - i see, uhh. Perhaps you and net.noobie would like to "take the debate" off your pretentious image of yourselves for a while - and look at how the rest of the world views you?

While we are at it, let's add the now very incompetent QANTAS as a further risk to the welfare of travellers/visitors to Australia. The past year or so has seen a dozen or so untoward incidents, some of them very serious. Mostly, they seem to have related to shoddy work by engineers in Australia http://www.theage.com.au/news/travel/australia/recent-incidents-on-qanta...

By the way, are you working for the Australian government - or is this again just typical of the kind of rude response from Aussies nowadays?

Fri, 2008-10-10 01:21 — Diego1

Melbourne my home town is full of different races which are proud to call this wonderful country their home. I do admit there still is racism but hardly noticed by the majority of immigrants. I came here when I was 10 from Uruguay and I wouldn't leave anywhere else.

New citizen tests introduced by the Howard government have restricted many good candidates from calling this country home which is a shame because if those test were around when we applied for citizenship we probably would of been rejected due to our lack of knowledge of the English language and Australian history. Is time for those useless tests to be abolished.

Fri, 2008-10-10 01:24 — Jonathan B

Dear Doug, glad to see you have acknowledged me for the first time in almost a year since I have been commenting at NS blogs about your myopic perspective of your motherland. A bit wayward of you to opine that I am trapped in the 1950s or that I work for the Aussie Gov't - wrong on both counts. I am talking about TODAY Doug, unlike you who go on and on about past events in Australian history to (allegedly) prove your drivel about contemporary Australian society. As for me being rude Doug, please, have a bit of resilience to casual blog comment. Don't take it too seriously or you'll have a heart attack. I tell you what - you respond to my main question - why do you hate to acknowledge Australia's success as a great place to live and I will apologise for being "rude". Regards Jonathan

Fri, 2008-10-10 03:52 — Douglas Chalmers

Jonathan B, "...about your myopic perspective of your motherland....", I note that this is a website based in Britain, not Australia. Only a (white) Aussie could be so narrow as to assume that those who comment on a topic about Australia are Australian - or that they should be told "....if you don't like it here..... leave, pack your things and go..." as per your accomplice in ignorance, net.noobie, or your own "...regurgitated spew...".

Despite the IMF stating this week that Australia is economically well enough placed to survive the recession (but not a depression) and still have some nominal growth in the short term, that has been at the expense of Australia not being such a "...great place to live..." for aged and disability pensioners. The government has continuously stood on their necks and starved them of around $80 per week per person in social security so that it could ramp up their budget surplus to the A$20 billion which it continues to rudely brag about.

Obviously, there is still something false about the Australian economy and only the low-populated mining states (WA + NT) will have any growth. The rest of the country will effectively be in recession for some time. That the government is so desperate that, despite repeated pleas, it wilfully starves social security recipients, the aged and the helpless to achieve its economic status is is as unconscionably crude as the people (two gangs of incompetent lawyers) who run the place.

Fri, 2008-10-10 05:37 — Jonathan B

Dear Doug, why compound your treason by pretending you don't live in Australia or are not an Australian? I think that really proves my point about your pathological state of mind. You are also a liar now. It reminds me of St Peter and the cock crowing. IF by some twist of design in your correspondence you aren't - then yes I completely agree [for the first time] with net.noobie - stop bludging on Australia and bugger off home where you belong. I haven't made any comments at all about who else should comment about Australia other than my comments about YOUR comments Doug - don't you get it? Regards Jonathan B

Fri, 2008-10-10 07:46 — Douglas Chalmers

Well, there we are - exposed on the internet, duh! The "weird mob" going far beyond amusing weirdness (from being in the midday sun for too long, I guess - "mad dogs" and Aussies, ha ha) to blatant malicious offensiveness. "Bugger off home where you belong..." to Scotland, eh? That IS where my people come from and I take it that we don't actually require your personal permission on arrival in Australia, Jonathan B? You never did say whether you actually worked for the Australian government?

I remember once vising a small country town in Australia and being asked "Whaddya wanna come here for?" It seems that mentality is now taking over - at least until China decides what it wants to do with its quarry in the SW Pacific to stop the Japanese having it as a beach or the Indians for breathing space. This is no longer a white imperialist region, Jonathan B, even if your money walks and talks in Bali (they named a beach after crazy white visitors - Kuta) or Bangkok's bars and brothels. Its over, matey - "Bran Nue Day" in "BabaKiueria" http://shop.abc.net.au/browse/product.asp?productid=738460

Fri, 2008-10-10 07:46 — Douglas Chalmers

Then again, strategic interests may dictate that Australia will eventually be controlled by ASEAN, or at least Indonesia, in the long term as white Anglo Australia no longer even has the firepower to go with its loud-mouthed intransigent childish braying and aggressive monkeying in the region - and, as we've just seen, on the internet. How to win friends is a lesson some Aussies seem to have yet to learn, uhh. Child Sexual Exploitation in Asia - weird "As-stray-yuns" http://www.youtube.com/watch?v=kPK992fRxhc

South East Asian nations have and are taking delivery of more of the latest Russian Sukhoi stealth fighter aircraft and Indonesia alone can already effectively repel the Australian airforce and navy. Soon they will be the ones dictating terms and defeat is imminent with the wrong attitudes and approach to neighborly relations. Fortunately, many good East Asian and South Asian and West Asian (M.Eastern) people have migrated in the last couple of decades and are making up for the mental deficit.

But it obviously seems that something in the water that is affecting the Anglo whites in Australia lately, though. Not spending on infrastructure has left them with with twisted rail lines (also from the sun) and an insufficiency of public transport despite the warnings of global warming and rising oil prices. As it is, they have had to re-commission old railway rolling stock to keep up with demand. Then there are the small narrow seats on buses and trains squeezed in which either indicate their own mental narrowness or that they already do intend to sell the country off to a lot of smaller Asians - and go back where they came from, uhh.

Fri, 2008-10-10 08:06 — Jonathan B

Thanks Doug - I have done what I set out to do - get stuck into your twaddle. Read back through my comments carefully Doug - I haven't offended a single person other than possibly yourself. Unlike you. However as you feel maligned and offended I apologise. But don't whatever you do feel vindicated - you are just a silly old man with a seriously warped view of the present day Australia!!! Regards Jonathan

Fri, 2008-10-10 09:06 — Douglas Chalmers

Poor Jonathan. LOL, ha ha, hanging on the net to see my response to his words of greatness. Having made a fool of your country the same as the Australian government did with its "Where the bloody hell are you?" travel advertising last year, what is left? The future for Australia is in Asia (where it is actually joined at the hip, believe it or not) but only when you miserable lot have passed away or left.

So utterly amusing (and informative about Australians) to converse with a person who has his head trapped in his ego but is totally unaware of his predicament. This has been a laugh for everyone but you, it would seem, Jonathan B. No wonder then that, in the past decade, a million Aussies left to live and work overseas just to get away from such tripe, uhh. Now all they have to come back home to is a pathetic 60 cents in the dollar and a bunch of bozos who never were "the full quid" anyway.

So what is there to feel "maligned and offended" about, really? This is a topic about the wonders of Australia - and, oh boy, haven't we found one, ha ha. Well, they certainly do have some wild geese and wild turkeys in Australia, uhh. No wonder it was said in the 1950's by Ava Gardner that Melbourne was "...a great place to make a movie about the end of the world". Maybe the government will provide you with a "pill" too, if you ask nicely....??? http://www.answers.com/topic/on-the-beach-1959-film