AUSTRALIA / NO WORRIES?
Australia is rich, tranquil and mostly overlooked. But its current prosperity was far from inevitable
In 1991, after a nasty recession, the country began a period of uninterrupted economic expansion matched by no other rich country
¤ Luck in having an abundance of minerals ¤ In the 1990 s many thought they were evidence of an incorrigibly “old”, low-tech economy doomed to decline ¤ Australia’s terms of trade—the ratio of its export prices to its import prices—seemed stuck at unfavourably low levels Nevertheless, Australia had escaped both the Asian crisis and the recession that hit America in 2001. Five years later came the GFC, that, too, failed to drive Australia into recession
Over a period of 20 years, from 1983 to 2003, governments of the left and of the right carried out the reforms that have made Australia one of the most open and flexible economies in the world
¤ The incoming government in 1983 led by Bob Hawke was the first to take serious remedial action ¤ The government floated the Australian dollar, deregulated the financial system, abolished import quotas and cut tariffs
¤ By 2003 the effective rate of protection in manufacturing had fallen from about 35% in the 1970 s to 5% ¤ Foreign banks had been allowed to compete ¤ Airlines, shipping and telecoms had been deregulated ¤ The labour market had been largely freed, with centralised wage-fixing replaced by enterprise bargaining ¤ State-owned firms had been privatised ¤ A capital-gains tax and a valuedadded tax had been brought in, and the double taxation of dividends ended. ¤ Corporate and income taxes had both been cut
Constitutionally, the reforms have destroyed the “Australian settlement” Demographically, by freeing the labour market and operating a colour-blind immigration policy, the reforms have created an increasingly cosmopolitan society