Australia: the 'lucky country’s' luck runs out

The global downturn has finally caught up with Australia.

The Australian economy has expanded for 22 years in a row. It avoided recession in 2009 thanks to China's appetite for its many raw materials. But the lucky country' is now facing tougher times, and the change of government will make little difference to the country's prospects, says Martin Whetton of Nomura Securities.

Now that Chinese growth has slowed and it is trying to promote consumption rather than investment, demand for commodities has cooled and Australia can no longer rely on its mining sector to keep the economy going. Unfortunately, policymakers "have been trying without much success" to galvanise other potential components of GDP growth, says Assif Shameen in Barron's.

The shrinking manufacturing sector has been hit by the high Australian dollar of the past few years, a result of the commodities boom. Consumers, having racked up high debts in the previous two decades, are not going on a renewed spree, even though interest rates are at historic lows. Low rates have breathed a little more air into the housing bubble, but not spurred much spending. Retail sales grew at their weakest pace in half a century in the year to July.

Unemployment is ticking up and "as fiscal revenues shrink, it will become harder to keep the budget deficit in check", as the FT points out. The surplus of the past few years has already melted away and the annual overspend will total 2.5% of GDP this year. All told, growth is set to halve this year from last year's 4% pace and is not expected to pick up soon. The rich world's star performer of recent years looks stuck in the doldrums.

Recommended

Forget austerity – governments and central banks have no intention of cutting back
Global Economy

Forget austerity – governments and central banks have no intention of cutting back

Once the pandemic is over will we return to an era of austerity to pay for all the stimulus? Not likely, says John Stepek. The money will continue to …
15 Jan 2021
Of course bitcoin is a bubble – a bubble you can’t ignore
Bitcoin

Of course bitcoin is a bubble – a bubble you can’t ignore

Bitcoin’s wild ride is being called a bubble by many. And it is, says Dominic Frisby. But that’s not necessarily a bad thing. And it’s a bubble in whi…
13 Jan 2021
The price of this commodity has almost doubled since the start of the year
Gas

The price of this commodity has almost doubled since the start of the year

Liquefied natural gas (LNG) is fetching record prices in Asia, almost doubling in the last two weeks alone. John Stepek explains why this is so import…
12 Jan 2021
The charts that matter: the dollar bounces, bitcoin soars, Tesla roars
Global Economy

The charts that matter: the dollar bounces, bitcoin soars, Tesla roars

As bitcoin and Tesla go stratospheric and the US dollar rebounds, John Stepek looks at the charts that matter most to the global economy.
9 Jan 2021

Most Popular

Bitcoin: fool’s gold or the new gold?
Bitcoin

Bitcoin: fool’s gold or the new gold?

With bitcoin hitting new highs last week, and close to becoming a mainstream investment, is it really gold for the 21st century?
15 Jan 2021
Forget austerity – governments and central banks have no intention of cutting back
Global Economy

Forget austerity – governments and central banks have no intention of cutting back

Once the pandemic is over will we return to an era of austerity to pay for all the stimulus? Not likely, says John Stepek. The money will continue to …
15 Jan 2021
The MoneyWeek Podcast: bitcoin special
Bitcoin

The MoneyWeek Podcast: bitcoin special

Merryn talks to bitcoin experts Dominic Frisby and Charlie Morris to get the lowdown on the cryptocurrency to find out why it's such a huge global phe…
15 Jan 2021
Free 6 issue trial then continue to