Monday, October 01, 2007

Economic Boom Down Under in Australia

We don't hear much about it in the U.S., but Australia is in the middle of a huge economic boom, with a record low unemployment rate of 4.3% and a record high stock market that has more than doubled in the last three years (see chart above).

Here's a report on job vacancies reaching a record high in Australia, and how "the unemployment rate is tipped to fall to a fresh historic low as bosses struggle to keep young and restless workers seeking to cash in on the commodities bonanza (coal and iron ore are Australia's two largest exports)."

Alan Greenspan praises Australia
in his new book (The Age of Turbulence) as a model of what can happen when governments deregulate their economies, crediting former prime minister Bob Hawke with "a series of significant but painful reforms, especially in labor market reform." Greenspan also pointed to the tariff reductions and the floating of the Australian dollar, which he said "sparked an amazing economic turnaround."

Another article reports that
"In the past two weeks, the International Monetary Fund and international credit rating agency Standard & Poor's have both heaped praise on the performance of the Australian economy and its economic management."


At 10/03/2007 4:41 PM, Blogger Unknown said...

I live in Australia and have done well out of our share market boom. I also agree that a lot of current prosperity was due to the previous Hawke/Keating governments changes in the mid 80's.

A few clouds on the horizon are: (i) all that money sloshing around has meant house prices have boomed, making Australia one of the least affordable countries in the OECD (ii) household saving is -2% (worse than the US) - people are spending it faster than they are getting it; (iii) credit card and housing debts exceed 30% of gross income in many cases, so any soft landing when the boom ends (and they always end) will have some nasty side effects.

However I would guess we have a few good years left of this boom. The great stock price growth is based on realistic P/Es (i.e. not a bubble) and the governments runs a surplus so we are on a solid footing for now. One negative affect of the surplus is that infrastructure is being run down in some areas.

We also have socialised health care, of varying quality, but on avegerage OK.

- David


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