Australia Part 1: The lucky country

Australia is often called ‘the lucky country’ after a book of the same name by Donald Horne, an intellectual and journalist. Australia’s wealth, he observed back in the 1960s, was based almost entirely on minerals like iron ore and aluminium.

Horne argued there was an irony in this, because as a consequence of the easy wealth, Australia, "showed less enterprise than almost any other prosperous industrial society.”

But the irony is probably lost on most Australians, who reckon their country is just lucky. “Who cares why, let’s party,” seems to be a common attitude.

The country is flippantly said to be a ‘desert surrounded by drunks.’ Australia is a continent, about two thirds the size of the United States, with a population of just 20 million people having a good time based on the mineral wealth from the huge deserts within.

But the lucky country has also been pretty smart. Australian banks, unlike US and British banks, largely stayed away from toxic loans or their derivatives that caused the 2008 worldwide crash.

Earlier this year the Australian Government borrowed money to put together a highly stimulatory budget – which included sending everyone who earned less than $80,000 a cheque for $940, increasing pensions and a big spend-up on school buildings.

The Australian government also promptly dropped interest rates to encourage spending. Unemployment increased to 5.4% despite these measures, but Australia’s housing market has stayed near its 2007 peak. Yesterday, the National Australia Bank announced business confidence in its monthly survey hit a seven-year high.

Impressively, it is one of the few countries in the world not to enter a recession in 2009.

In terms of trade, Australia’s biggest customer is Japan, followed by China, then Korea. Australia supplies the raw materials to growing Asian economies. Its reliance on mineral exports puts Australia in a very different situation from say Germany, which relies to a large degree on exporting luxury and engineering products to the United States.

Germany, like France and Japan, fell into recession this year, Australia did not. Australia now has a higher average standard of living than the large European countries – not to mention better weather and beaches.

Most people would be surprised with how Australia makes its money. Its largest export is coal, used mostly to run power stations and make steel. Other big mineral exports include iron ore, gold, oil and natural gas – pretty much in that order.

Then there’s aluminium ore for anything from jet planes to pots and pans; and copper for wiring in TV sets and computers.

Much has changed in the past few decades – Australia used to be on the sheep’s back, but it now makes more money from wine than either wool or wheat. Who would think Australia makes more from gold, which generally sits in vaults doing nothing, than it does from essential resources like oil.

Mining, though, is not without risk or cost – beautiful landscapes can be tarnished and the rights of aboriginal communities are sometimes neglected (though this has improved greatly in recent decades).

Coal, itself, is a sunset industry. Consider its biggest user China. Although China has been building a new power station every four to six weeks, the country is aware of its contribution to global warming. Long term, Australia’s export economy relies too much on carbon, coal and oil which soon will be taxed more, become scarcer or both.

But there’s still little to be worried about. If China moves from coal to nuclear power, Australia will sell the uranium fuel instead. If China stops growing at some point, there’s always India. And weaning countries away from coal is easier said than done.

Australia’s mineral exports are now proportionately about twice what they were a decade back. Manufacturing, which used to be a guiding light, is now far less important. For example Australia’s car industry, which traditionally makes huge gas-guzzling Fords and Holdens, is in the doldrums. But added-value manufacturing exports overall are still increasing, although at a lower rate than mining.

The lucky country is even making money from teaching. Many foreign students go to Australia, so it is not surprising that education and some other services like tourism, taken together, are just as big as boring old coal.

Australia looks like it will continue to be lucky for decades. It has diversified to a reasonable degree providing a safety net if demand for its resources changes.

For now though, they can bask in the comfortable knowledge of one simple fact – that almost everyone needs what they have.

By Lawrence Watt

Photo/Wikimedia Commons – Sydney Harbour. Photo by Rodney Haywood.