Wandering China

An East/West pulse of China's fourth rise from down under.

Down Under’s a land of economic wonder #China [The Age]


On Australia staying good value despite the diminishing returns on the Chinese resource economic wonder.

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Down Under’s a land of economic wonder
David Potts
Source, The Age, published December 2, 2012

Australia’s financial strengths may not be quite as the government claims, but they do exist.

When Julia Gillard said the budget surplus was one of the seven economic wonders of the modern world – hmm, she can say that again – it got me thinking about the other six.

Australia skating around the GFC, for which the government takes credit at every opportunity, would have been a nomination but for one nagging doubt. When Treasury is telling you to spend like there’s no tomorrow, which kind of comes naturally, how hard is that?

To this day Treasury is convinced it saved the economy, even though the budget is paying for it now.

Never mind that its claim is based on its own economic model. When you’re judging your own race, it’s pretty hard to lose. No, the real economic wonder was China holding up commodity prices.

Happily, we do boast a few home-grown economic wonders. One would have to be the Productivity Commission, which is funded by the government only to tell it what it doesn’t want to know. Having an independent economic body with no vested interests is priceless.

And look at super: a marvel the way it has been made farcically bureaucratic and complicated, though I was thinking more along the lines of its sheer size.

There’s $1.5 trillion sitting there at last count, making little ol’ us – actually by GDP per head we’re the seventh-wealthiest country – one of the most superannuated nations.

That amount is so enormous, it’s out of this world.

Which reminds me: if the Bureau of Resources and Energy Economics can get excited about the investment pipeline for oil and gas projects being so big it would, updated in current dollars have paid for landing man on the moon, then surely there’s enough super there to send somebody to Mars and back? Pity, then, your share probably won’t be enough to retire on.

Another sight to behold is the dollar, also a hero of the GFC, which as the sixth most traded currency has become an international plaything way out of proportion to our trade. Mind you, having a AAA rating these days is a marvel in itself.

Let’s see, that leaves two economic wonders of the modern world left.

I’d nominate Japan as a sort of economic anti-wonder, since it’s been shrinking on and off for about three decades. Even the population is falling. Japan has become the unwitting-but-fascinating model for economists of ageing demographics in action. Amazingly, it’s still our second-biggest trading partner.

Yet the greatest global wonder of all must be how some of the smartest financial operators so readily stash money into US or Swiss short-term government bonds at a negative interest rate.

That’s right, they’re paying the government for the privilege of taking their money for a while when a good mattress would have done.

Could never happen here.

Follow David on Twitter: @moneypotts

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Filed under: Australia, Beijing Consensus, Chinese Model, Economics, Environment, Finance, Government & Policy, Influence, Infrastructure, International Relations, Public Diplomacy, Soft Power, The Age, Trade

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