The country dodged the worst of the global financial crisis thanks to China, which bought its iron ore and coal and then sent over tourists, students and investors
Reuters | Singapore Last Updated at August 24, 2018 17:42 IST
Australia’s political scene is looking almost Italian. Scott Morrison on Friday became the country’s sixth prime minister in less than a decade, after Malcolm Turnbull was forced out. The economy has so far been immune to such upheaval but that could easily change.
Australia has avoided a recession for almost three decades, a remarkable feat for an advanced economy. The country dodged the worst of the global financial crisis thanks to China, which bought its iron ore and coal and then sent over tourists, students and investors. A growing population has helped, while a housing boom created wealth, buoying domestic demand.
Complacency about the economy has left politicians with more time for ugly infighting. No prime minister has completed a full three-year term in the past decade but their own parties rather than voters are often to blame. Leadership challenges are easier than in many developed countries because Australia’s lower house of parliament has just 150 seats, compared with Britain’s 650 seats. The upshot is “revolving door” leadership.
The lack of continuity has made it harder to enact reforms to keep the country competitive. Australia is benefiting from China’s infrastructure spending spree but growth may slow as monetary policy is tightened. Reforms in areas such as corporate tax, the environment and energy are therefore all the more pressing. For example, the $1.3 trillion economy has vast coal, natural gas and uranium resources but cannot agree on a policy to end blackouts. And high electricity prices hinder economic activity.
While politicians are fighting with each other, voters are growing disgruntled. Backlashes against political elites contributed to Britain’s vote to leave the European Union and the election of US President Donald Trump. While Australia’s political system provides some buffer against a lurch to the extremes, both parties contain politicians who espouse radical policies on issues like immigration.
Morrison, who was treasurer before taking over as prime minister, is milder than some and markets have reacted well to his arrival. Plus the central bank is trusted by investors to promote financial stability. But there are some signs of weakness: inflation and wage growth are sluggish, house prices are rising at a slower pace and consumer confidence is waning.
If Australia keeps growing, it may be despite the politicians in Canberra rather than because of them.
First Published: Fri, August 24 2018. 17:42 IST
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