America's economy is approaching a big milestone.
If it keeps humming until July 2019, it will be
the longest expansion in U.S. history. It would
be exactly one decade and one month old by then.
But there's another country with an even more impressive run
It's even called the 'lucky country'
Three big lessons from Australia. Be smart.
Be organized. Be lucky. So if I've got any advice
for other countries, it's try and be as lucky as Australia
That luck has to do with Australia's treasure
trove of natural resources.
You know Australia is on the other side of the
world and sitting on tremendously valuable
minerals right at the point where the Chinese
economy is just around the corner and exploding.
Australia and all its natural resources were in
the right geographic neighborhood just as the
Chinese economy started to take off.
And it just so happens that China did a big fiscal
stimulus in 2008 and spent a great deal of money
building new cities. So all of those resources
were drawn from places like Australia. So that
also served as a huge tailwind at a time when
developed markets were in a whole lot of trouble.
The year 2008 was a time of economic turmoil
The Global Financial Crisis hit
and markets crumbled around the world.
But as it turns out this was also a year for Australia's
economic management to really show off
At the time the government had a very helpful and
very low level of debt.
One reason?
Pension reform in the 1990s.
Australia set up a compulsory retirement system called the
superannuation system. It requires employers put
money into its employees' retirement savings
Since companies and citizens have to build up
retirement savings, some of the financial burden
to pay off pensions was taken off of Australia's government
As other economies reeled in the wake
of the 2008 crisis, the Australian Government was
then able to put money directly into people's bank accounts
This boosted consumer spending in order to stimulate growth
In 2008, the Australian Government unlike some
other developed market governments actually
jumped in very quickly with fiscal stimulus, so
that helped to kind of minimize the effect of the crisis
The country's numbers continued to look sluggish
after the financial crisis. But they never quite
dipped low enough or for long enough to meet the definition of a recession.
It takes two quarters of negative growth to fall into a recession.
Australia's economy did post a few negative
quarters since 2008, but no country's perfect.
Overall Australia's economy has been managed
pretty well in recent years partly because of a
strong and stable central bank.
Australia has an independent central bank and it's
a very well-run central bank. It also has a
floating exchange rate and the exchange rate
helped it adjust to international shocks.
Australia's economic reforms gave it flexibility in times
of hardship. For example, floating the Australian dollar
In 1983, Australia's government moved the dollar onto
a floating exchange rate
This meant that the dollar would be valued by
supply and demand instead of being subject to
influence from its government or its central bank
It allows the economy to react to shocks as well
Typically when an economy is hit by some sort of
negative shock. The currency will adjust. It will
depreciate and that helps promote exports.
So it really serves as a buffer.
Another reason behind Australia's economic track
record lies in its immigration policy
Since the late 1990s, Australia has seen growth in
temporary migration, many arriving to the country
on student or temporary work visas
The number of temporary migrants peaked in the year 2000
However a recent change to immigration law in 2018
gave visa applicants more hurdles to get
through if they wanted to come to the country
Even when our GDP per capita
average incomes aren't rising by much because the
number of people continues to rise that means the total
GDP continues to rise at even more rapid pace
Part of that's underpinned by much faster population growth
Most experts think Australia's economy remains
strong in 2019, but it's not without risks
Australia's suffering at the moment from pretty
weak wage growth. That's worrying a lot of
people. There's a lot of fear right now that
China is hitting a wall. That will hit demand for
Australian products. The good news is to the
extent that the Chinese are buying commodities
hopefully will find buyers from overseas for many
of those commodities if the Chinese are not there
The bad news is the rest of the world
economy is not doing that well.
For Australia to do really well
the rest of the world has to do well