Australia: Wealth and Despair

By Suter, Keith | Contemporary Review, March 1999 | Go to article overview

Australia: Wealth and Despair


Suter, Keith, Contemporary Review


The Australian economy is doing well but many Australians are not. This is the best way to sum up the country's prevailing mood. There is great despair amid great displays of wealth. This article deals with three issues: the good news on the economy, the social indicators that show the growing despair among ordinary people, and the lack of new thinking on how to cope with Australia's problems.

In 1901, Australia was reputed to have the world's highest standard of living. By 1960, it had fallen to fourth place (behind the US, Canada and Sweden). It is now around 18th. This still puts it in the top 10 per cent of the world's countries (the United Nations has 185 member-nations).

American economist Paul Krugman, writing in Fortune magazine in December 1998, called Australia 'the miracle economy of the world's financial crisis'. Its rate of economic growth (about five per cent) was one of the best performances in the industrialized world. Australia has now had eight years of uninterrupted economic growth - the longest period of growth in its history.

This is all the more remarkable given that Australia is still following the export formula that worked so well a century ago: close to two-thirds of Australia's exports are still rural and mineral commodities. This is a risky strategy. More export revenue is now to be made in services (such as banking, insurance, tourism and education). The world needed what Australia exported in 1901; that is not necessarily the case today. As societies get richer, their proportion of expenditure on, for example, food stuffs declines (there is a limit, say, to the amount of bread that a person can eat) and instead their tastes run to services (such as overseas travel).

Additionally, international commodity prices are very low and Australia's two and a half decades of economic rationalism has reduced the featherbedding still enjoyed by its competitors. For example, Australia could export coal to Germany (the Australian is a better quality than German coal) at a lower price (even including shipping costs) than the current cost of German coal. But the German Government prefers to subsidize each miner on the basis that it is better to subsidize the miners than have them sit around all day on unemployment benefits.

Furthermore, Australia is a country of almost 19 million people, with an economy about the size of South Korea or the Netherlands. It represents less than two per cent of the gross global product. It is vulnerable to international economic fluctuations. The Australian dollar is the sixth most traded currency in the world by currency speculators.

Despite these limitations, the Australian economy, according to statisticians, is doing well. Australia is viewed internationally as a good place to emigrate to. It is estimated that the Australian High Commission in London receives more applications for British emigration than any other High Commission or embassy in London.

But all this is at odds with social indicators. Here are eight recent social indicators and a case study of banking. First, in November 1998, the National Centre for Social and Economic Modelling in Canberra reported that about one in every eight Australian children lives in poverty (about 600,000 children). There are four key reasons why a child lives in poverty: the head of the family is either unemployed or a sole parent; one (or both) of their parents is self-employed; or their parents belong to the 'working poor'. Some non-governmental organizations which raise money to assist Third World countries are now running programmes to assist Australian children.

Second, the 'working poor' are now attracting more attention from social policy analysts in Australia (and even more so in the US). The working poor are people who are in employment but their wages are so low that they still remain below the poverty line. This is a return to Dickens's Victorian England.

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