Australia at the crossroads of globalization
A decade ago, Woolloomooloo Wharf stood as a derelict eyesore from an earlier era. Now it glitters with a Taj hotel, a top restaurant, and loft-style condominiums popular with actors like Russell Crowe. Indeed, Sydney's waterfront is thriving, boasting amenities such as doggie day care, $10 lattes, and a superyacht marina.Skip to next paragraph
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For 15 years, Australia has grown at an average 3.7 percent clip without any sign of recession. The stock market is up 37 percent this year, and, last week, registered a record number of trades. The boom has slashed unemployment, doubled the country's wealth, and taken care of all but pocket change on its debt.
The success has bolstered the political fortunes of Prime Minister John Howard, who just marked 10 years in power. Yet it goes deeper than one man's stewardship. Few countries have better leveraged globalization than Australia - transforming a once-isolated market into one that's taking full advantage of Asia's, and particularly China's, dynamism.
"Globalization does have winners and losers, but mostly we're a winner," says John Edwards, chief economist with HSBC Bank Australia Ltd. in Sydney. "When farmers in Korea protest against globalization, or miners in Germany protest globalization, they're protesting against us."
Australia's winning recipe does not hew to a hard-line economic libertarianism. Government turned to labor unions to help secure productivity gains, and Australia maintains one of the world's highest minimum wages, for instance.
At the turn of the 20th century, Australians were the richest people on the earth - a result of piles of gold and natural resources. But that advantage gradually eroded, until high unemployment and soaring inflation in the early 1980s convinced a left-leaning government to ditch protectionist policies and force Australian businesses to compete globally.
What followed was "an astounding period of reform," says Mr. Edwards.
The Australian dollar was floated in 1983, and trade tariffs - from clothing, auto, and wool industries - were slowly dismantled. The banking sector opened to foreign companies, seeding what would become a vibrant investment banking community - one of the pioneering industries here now, along with international education.
Major state-owned firms were privatized. While the selling of the phone company and the national airline still rankles some who say service has declined, the move also inspired many ordinary people to become shareholders in the companies. Today, 55 percent of adults here own stocks - the highest comparable rate in the world, says a national exchange spokesman. That is not counting any of the retirement accounts requiring workers to deposit 9 percent of income - some in stocks - now mandated by the government.
Higher wages, once granted easily by the government, now involve horse trades with unions. This, along with new technologies, kicked off dramatic gains in productivity.
For the most part, reformers have kept voters on board by sticking to the notion of the "fair go." This deeply held Aussie value means looking out for those at the bottom of the heap. Through all the reforms, Australia has continued to set minimum wages per industry. Benefits like healthcare, pensions, and prescription drugs are also means tested, directing more to the poor than the wealthy.
"The safety net that Australia has, which is not as generous as Europe's, has been arguably more effective at providing a cushion under those who have been adversely affected by economic changes," says Saul Eslake, chief economist with ANZ Bank in Melbourne.