Maybe Aussies’ thriving economy not just luck after all
A multi-decade mining boom in Australia has seen it dubbed the “lucky country” — with its economy thriving after an unprecedented Chinese demand for hard commodities.
In recent times, as the mining slowdown inevitably starts to bite, the question has become how to transition Australia’s domestic economy away from a reliance on the mining sector and ensure future growth.
After a recent trip across the ditch the answer appears to be steady as she goes.
As Australia enters its 27th year of expansion (a world record), business confidence is strong and the labour market remains tight with unemployment running at 5.5 per cent.
Some of this can undoubtedly be attributed to a “second wind” in commodity prices, but a lot of this confidence also appears to be supported by Australia’s ongoing population growth. Typically, Australia has been a nation of immigrants — and migration in pursuit of opportunity is not a new concept.
Despite the influx of foreign labour, real GDP per capita is still high by global standards. Coupled with the willingness of the Australian Government and private sector to invest in large-scale infrastructure projects (the country has an A$800 billion infrastructure backlog), as well as renewable energy initiatives, this has given the Aussie economy considerable impetus.
Whilst the adjustment in the economy is ongoing, Australia retains a strong fiscal position with favourable terms of trade and ongoing non-mining investment.
So what are the parallels for New Zealand?
Although we’re at an undeniable disadvantage from a population base standpoint, many of the growth drivers above hold true. As a destination, New Zealand remains equally popular for migrants despite some of the commercial realities.
But conflicting forces seem to be at play on this side of the Tasman.
On one hand we are looking to limit the use of foreign labour, and in the same conversation pushing initiatives such as light rail to Auckland Airport, or Kiwibuild’s goal of building 10,000 new homes each year for the next 10 years.
In the absence of foreign labour, this seems merely a pipe dream.
Auckland’s population is projected to reach 2.3 million by 2043 (an increase of 833,000 from just under 1.5 million), and the decisions we’re making today will undoubtedly drive future growth in the economy. Building quality infrastructure (and not just within Auckland) not only sets us up for the future, it also helps stimulate and support our current economy.
For many, it may seem unpalatable to follow the lead of our big brother across the Tasman, but if you’ve taken a trip around Sydney lately (or indeed any of Australia’s major centres), no doubt you’ll rank the public transport as far superior — as just one example.
So, maybe in Australia’s case, it’s not so much a matter of luck after all.