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An article has been doing the rounds – House of Cards – by Matt Burnie and Craig Tindale, that we highly commend. Rarely do articles array so much data in devastating order. There must be over 100 links highlighting the risky nature of our economic miracle from one industry after the other. Whilst the authors haven’t outlined the necessary solutions, the material gives a fresh perspective to a global economic system hellbent on short-term speculation. One thing is certain, Australia’s reliance on rent-seeking as a policy directive must end. Be prepared with a cup of tea as this is an hour long journey of economic intrigue.

 

I recently watched the federal treasurer, Scott Morrison, proudly proclaim that Australia was in “surprisingly good shape”. Indeed, Australia has just snatched the world record from the Netherlands, achieving its 104th quarter of growth without a recession, making this achievement the longest streak for any OECD country since 1970.

Australian GDP growth has been trending down for over forty years
Source:
Trading Economics, ABS

I was pretty shocked at the complacency, because after twenty six years of economic expansion, the country has very little to show for it.

For over a quarter of a century our economy mostly grew because of dumb luck. Luck because our country is relatively large and abundant in natural resources, resources that have been in huge demand from a close neighbour.

That neighbour is China.

Out of all OECD nations, Australia is the most dependent on China by a huge margin, according to the IMF. Over one third of all merchandise exports from this country go to China- where ‘merchandise exports’ includes all physical products, including the things we dig out of the ground.

Source: Austrade, IMF Director of Trade Statistics

Outside of the OECD, Australia ranks just after the Democratic Republic of the Congo, Gambia and the Lao People’s Democratic Republic and just before the Central African Republic, Iran and Liberia. Does anything sound a bit funny about that?

Source: Austrade, IMF Director of Trade Statistics

As a whole, the Australian economy has grown through a property bubble inflating on top of a mining bubble, built on top of a commodities bubble, driven by a China bubble.

Unfortunately for Australia, that “lucky” free ride is just about to end.

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