The Australian miracle
Summary: The Soviet Union is falling apart, a war is raging on the Persian Gulf, the German band Scorpions is achieving a worldwide hit with "Wind of Change", and in Switzerland people are battling their way through the real estate crisis. It's the year 1991, and at the other end of the world, the economy is teetering into a severe recession. Thousands of Australians are losing their jobs and several banks are collapsing. It is a "recession that has taken Australia," says Australian Treasury Secretary Paul Keating at the time - and is rising despite his controversial statement on the Prime Minister.....
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Maybe Keating was right - because since that crisis year of 1991, there was only one direction for Australia's economy: it went up, uninterrupted until today. For 28 years, the country, which covers a whole continent, has not experienced a recession. For a long time, a western industrialized country has never lived in a permanent boom - at least not based on the generally accepted definition that the decline in gross domestic product in two consecutive quarters means a recession. At the previous record holder, the Netherlands, the big financial crisis of 2008 ended a 24-year boom. However, Australia's economy has sailed unscathed by this global crisis, thanks in part to a billions stimulus from the government, and continues to grow today, almost as if there were no limits.
Why is that? What are the Australians doing better? And what does a boom like that with a continent and its people, of which a whole generation knows nothing else, than a country that, at least in statistical terms, only ever gets richer year after year?
Boom thanks to raw materials
In search of the reasons for this long-term upswing, it pays to look at the skyline of the Western Australian city of Perth. Some of the skyscrapers in the center, reflected in the lakeside Swan River, shot up in the 1980s. It was a wild time when the Labor government liberalized the hitherto tightly regulated economy, drastically lowered tariffs, and left the banks on the leash. The speculative upswing ended in the hustle and bustle of 1991 - along with half of Western Australia's Cabinet, too much attached to speculators, behind bars. In fact, the country has learned from the mistakes, narrowed the inflation, gave the banks rules again.
Since then, many more skyscrapers have grown into the mostly blue skies of Australia's major cities. On Perth's towers, inscriptions show who helped make things so steady: BHP Billiton, Rio Tinto, Fortescue, Woodside - on the top floors are the names of the big mining corporations that shaped the upswing for a long time. 1300 kilometers north of the city, they bring ore mines from the semi-desert of the Pilbara region in gigantic opencast mines, have them set up kilometers of trains from the 500-ton truck to the coast and from there to China, India and Korea.
In the east of the continent, the same happens to coal, dredged in millions of tons from the soil of the states of New South Wales and Queensland, exported to energy hungry China. Although the released carbon dioxide accelerates the warming of the global climate, which suffers the already hot-tempered Australia in particular. Nevertheless, enormous coal reserves in the hinterland of Queensland are to be developed. It's just too important for the country's economy: well over half of Australia's export volume comes from natural resources.
About one third of Australia's exports go to China. As long as its economy grew at a rapid pace, Australia was also doing well. China's boom simply pulled the country along. In cities like Perth, the so-called fly-in fly-out jobs in the mines became a symbol of the money that needed to be earned: fly out to the mines for eight days, working in 13-hour shifts at 45 degrees heat, then back to town for six days off.
That was over when, after the great financial crisis of 2008, China's demand for mineral resources declined and commodity prices fell. In the middle of Perth's city center, there are also construction fences behind which excavation pits hide for the foundations of skyscrapers, which were planned and approved but never built. In resource-rich Western Australia, growth has been flattening for almost ten years.
Even Australia's industry has not grown along in the past 28 years, on the contrary: Only about seven percent of all employees earn their money in the manufacturing sector. Cars no longer produce the country. As the last of four car makers that were still producing in Australia at the turn of the millennium, Holden, a traditional brand belonging to General Motors, closed its factory gates in 2017. The Holden Commodore is imported today from Germany, it is a Umgelabelter Opel Insignia, whose control - left traffic - is built on the right side.
However, it does speak for Australia's economy that the end of the mining boom and the widespread deindustrialization have so far only hit the region - and were virtually unnoticeable in the major cities of Sydney and Melbourne. About 88 percent of employees work in the service sector, which proves to be very robust. And this is mainly because the China business is an important, but only one reason for the ongoing growth. The second, possibly more decisive, main reason is immigration.
Although Australia keeps boat people away from its shores with rigid methods. Immigrants with a visa and most of all with a vocational qualification, however, let in as large a number as in the country as in the western states only Canada. In 1991, about 17 million people lived in the country, by the end of 2018 there were 25 million. More population means more people working and increasing the gross national product.
So is built vigorously in Australia. In Perth, for example, typical single-family homes now stretch more than 100 kilometers along the beaches of the Indian Ocean. Who can, buys a house in Australia. Anyone who already has a smaller one buys a bigger one as soon as possible. This is made possible by rising real estate prices, which in the cities have seemed to know only one direction for decades: steeply upwards.
Thus, broad sections of the population were able to absorb increasing mortgages on the rising value of their homes, and in turn made larger houses of them. The construction and real estate industry has become the sector with the associated credit business, which drives economic growth the strongest.
Not everyone benefits from this. Ever fewer young Australians can afford a home, the home ownership rate has fallen to a historic low of 63.5 percent. Anyone who buys a house anyway, must be deeply in debt. Economists are warning about the time when historically low interest rates should rise again and house prices should fall. Then, in particular, those "Battlers" who are struggling with relatively low service wages and high living costs in the first place could be in the greatest difficulties.
Warning signs suggest that Prime Minister Scott Morrison's national-liberal governing coalition may soon have to face tough economic times. Overall, gross domestic product rose in the second half of 2018 and in the first quarter. But it has gone down per capita. Australia's economic miracle could also come to an end.