The Economy What Australia Did Right: Australia Has Been Run by an Irresponsible Socialist Government since 2007, but It Was the Only Developed Nation to Never Go into Recession in 2007-08. Here's How
Eddlem, Thomas R., The New American
On paper, one would expect the openly socialist Labor Party of Australia to be far to the economic left of both American political parties. After all, Australian Prime Minister Kevin Rudd's party presides over a government that administers socialized medicine, extracts higher tax levels, and induces greater economic regulation than is seen in the United States. His party--which has run the Australian government since 2007--is a member of the Socialist International. Conservatives might assume, if they didn't look any further, that the Australian economy is sinking far worse than the U.S. economy and is perhaps on the verge of becoming an economic basket case.
But that assumption would be dead wrong.
Australia's economy grew 0.6 percent more (2.4 percent versus 1.8 percent) than the United States' in 2011 and 1.3 percent more in 2012, and will grow 1.0 percent more in 2013. In every significant economic metric, the Australian economy has significantly outperformed the U.S. economy over the past decade: lower unemployment, higher economic growth, higher household income growth, etc. Australia actually has a higher per-capita gross domestic product (GDP) than the United States for the first time in more than a century--and that gap is widening. Moreover, in the global "Great Recession" of 2007-08, only one advanced country never went into recession: Australia.
In economically significant matters, Australia's Labor Party has actually been far to the economic right of both the Democratic and Republican Parties in the United States. The Australian Prime Minister Kevin Rudd has continuously stressed the need for not only balancing the national budget, but bringing it back into surplus to pay down debt, and cheered the nation's expansive semi-privatized retirement system. And the Australian central bank has promoted a policy that punished savers far less than the U.S. Federal Reserve Bank.
Reason #1: National Debt
Part of the reason behind Australia's strong economic performance is that John Howard's National Party had nearly paid off the country's national debt by the time it went out of power in 2007. By way of contrast, the Republican Congress under President Bush larded on more debt in the first part of the last decade, with new entitlement programs such as Medicare Part D, wars in Afghanistan and Iraq, and tax cuts. In 2007, Australian government debt was just 10 percent of the nation's GDP. The U.S. debt-to-GDP ratio was almost 65 percent the same year.
Countries with high national debt levels tend to grow far slower than nations with low debt levels, losing about 0.75 percent of GDP growth every year on average for every 50 percent of debt as a proportion of GDP the nation carries. The cumulative effect of carrying a heavy debt over time is devastating to an economy. Although economies that manage their own currency (such as the United States with its dollar) suffer significantly less severe immediate economic damage from heavy national debt than do countries with a common currency, such as countries in the EU that use the euro, the debt load has clearly had a greater negative impact on the U.S. economy than Australia's economy.
Since 2007, the Labor Party has run deficits and increased Australia's national debt to 29 percent of GDP, which has been irresponsible. But Washington's irresponsibility has been of an entirely different scale: The Obama administration has--with the compliance of congresses controlled by both parties--increased U.S. debt to more than 100 percent of the nation's GDP.
And there's a key difference in rhetoric between Australia's Labor Party and the leaders of America's two major political parties. Australian politicians at least talk about paying down their national debt, while U.S. politicians of both parties only talk about keeping deficits at "manageable levels." Australian Labor Party Prime Minister Kevin Rudd made the following observation in a column for the Australian newspaper The Age on July 25. …