Examining Australia's unbroken growth
June 30, 2017
Australia has regularly managed to buck the prevailing economic trends over the past two and a half decades. For the last 26 years, the country has seen its economy grow without any sign of interruption.
Even in 2008, when other economies crashed and slumped during the global banking and financial crisis, Australia's continued to buck the trend. It again overcame the fall in commodity prices two years ago without any serious wounds.
No nation on earth has spent such a long time without experiencing a recession, meaning two consecutive quarters of GDP contraction.
Fuelling growth
The Netherlands' economy previously recorded growth for 103 quarters at a stretch between 1982 and 2008. But the financial crisis put an end to that lengthy period of expansion. Australia's GDP, though, has continued to grow.
"A generation of Australians has grown up without ever experiencing a recession," said Scott Morrison, Australia's Finance Minister. "This is a tremendous national achievement, but we can't expect it to continue."
The services sector - including financial services, tourism and education, among other areas - remains the nation's economic engine, accounting for two-thirds of gross domestic product.
"Australia has one of the most stable banking systems in the world," explains Heribert Dieter, a Senior Fellow at the German Institute for International and Security Affairs (SWP), a Berlin-based think tank.
In recent times, there's been an accelerated demand for real estate. "We have seen an average of up to 17 percent growth per year - in cities like Sydney and Melbourne."
Australians are also sanguine about their economic well-being, and this optimism is fueling consumption regardless of the general decline in incomes over the past three years, experts say.
Linked to China's growth
"Australia is one of the countries that have benefited most from Chinese growth and industrialization over the past three decades,“ says economist Saul Eslake from the University of Tasmania.
China has long been considered as Australia's most important trading partner, with a third of the country's exports now delivered to the Asian giant. Raw materials are at the center of Australia's exports industry, with products like iron ore and cabbage fetching large profits.
But that boom in raw materials, from which Australia has benefited for years, is now over. "The fact that Australians have a strong customer for their goods and services is first and foremost positive," says Kemper. "As long as China is doing well, Australia too will do well."
However, this dependency on China's economy becomes a problem when it hits a snag, the expert pointed out. "That is why Australians have started looking for new partners and new products, and at the end of the year, a free trade agreement is to be negotiated with the European Union."
With the aim of reducing this dependency on China, Australian Prime Minister Malcolm Turnbull is pushing for increased investments in new technologies.
Environmental cost
Given the country's geographic conditions, Australia could have been at the forefront of renewable energy technologies. "But they've been sleeping," criticizes Dieter. Many other nations have given their own economies a boost by promoting renewable energy and climate protection. The Australian government, however, denied climate change for a long time, even as its per capita CO2 emissions remain one of the worst worldwide.
The Australian government ratified the Paris Climate Agreement last year and has agreed to reduce the nation's greenhouse gas emissions by 28 percent by 2030. But it's still sticking to its coal for now.
Despite its record growth streak, SWP's Dieter has a negative view of the economy's future. "The prospects have worsened, but perhaps there will be a new commodity boom driven by India, which is still a vague hope."
If all conditions remain the same as present, it would be difficult for Australia to maintain its high growth.
"I'm very positive in the meantime," says Werner Kemper. "It has been going very well for exactly 26 years now, and why shouldn't that continue for another 26 years?"