Political Crossfire Forums

So, I don't mean to downplay the quite notable achievements of the Australian economy, but the growth has been caused by a large confluence of factors which will make future growth more difficult. More than anything else, Australia's great success I'd argue has been driven by carbon. Even if you're only at 9% of gdp for exports, the impact of the economy is much higher. Look at the absolutely huge amounts spent on capital purchases and investment to fund the huge coal and natural gas projects, those don't count as exports for gdp calculations, but they feed the export industries. As we start to see China switching away from rapid industrialization and export-oriented growth to something more sustainable, you'll see not just exports fall, but also lots of industries that rely on exports. Housing has become amazingly unaffordable, which is a headwind to growth. The rise of the Australian dollar has done a number of Australia's manufacturing industry. And with a renewed emphasis on transitioning away from carbon, Australia's large resource base won't provide the same benefits that it did in the past. In no small part that is because margins are shrinking as costs of doing business in Australia are becoming very expensive. Look at the cost blowouts on Chevron's Gorgon project, or some of the mines even.

Having said all of that,I'm not intending to downplay the amazing success that they've had. I would put very good money on the line to wager that the next 21 years won't be as good to Australian economy, however, as the current run is quite unsustainable imho.

I think in the modern world to say a holistic approach to an economy has worked, and will continue to work is fraught with danger. Australia began putting in place strategies that served us well riding the Asian tiger for as long as we have. So the trick is to continue to develop policy that will serve in the future. Before these recent oil discoveries Australia had been working towards positioning itself as a net energy exporter. Time is going to tell if that direction is a good one or bad. China's development can not go forever, I think we all agree on that. So Australia needs to find the next trick in its bag so the transition can be as smooth as possible.

The Australian housing market has troubled me for a while. I actually expected it to spiral down during the 2008 world down turn but it still managed to at least maintain its current position. Australian manufacturing has been in the doldrums for a generation, the growing service industries have taken up a lot of slack created by this stagnation. But that kind of points back to the original point. Specific sectors may have troubled years, but there is enough flexibility now, the economy can cover some of these reverses without diving into recession.

Wizard: i agree with a lot of what you said. It's just difficult because the fewer possible levers you have the more likely you are to have a shock or international trouble lead to recession. And given that you haven't had a recession in a while I don't think you'll have the capacity for higher leverage or something to help bring you out.