Much of the wealth of present day Australia is predicated on being able to dig big holes in the desert and sell the contents, mostly iron ore, to the Chinese.
While Australia is by no means a single product economy it is true that we are heavily dependent on mineral sales and much of the current strength of our dollar is based on this.
If the Chinese were to stop buying things might become very different, very quickly.
So to understand the results one need to look for analogies. The most common one is New Zealand, equally remote, smaller, poorer but not grindingly so.
There are problems with this – New Zealand is more compact for one thing and without a vast rural hinterland – and has in recent years seen a substantial part of its educated population move overseas to find work, to Australia in the main.
I think there’s a better analogy – Argentina.
- Both are geographically remote from Europe and North America
- Both have a population that lives mostly in a handful of cities
- Both have a large and underpopulated, and largely underdeveloped, hinterland
- Both achieved substantial prosperity in the latter half of the nineteenth and the first half of the twentieth century on the back of agricultural exports
- Both suffered as a result of the 1973 oil shock and from having their agricultural products increasingly excluded from European markets
There are of course differences. Menzies, despite a tendency to demagoguery was no Juan Peron and one could never in one’s wildest dreams cast Dame Pattie as Evita. The Whitlam Dismissal was certainly no coup and subsequent dirty war.
But these are details – both economies have been on a wild ride – bursts of prosperity, inflation, a collapsing exchange rate and the rest. While Argentina’s has been wilder than Australia’s, the Australian economy viewed over the last thirty years has not been a model of steady planned growth. It’s been up and down and all over the place and while the Australian dollar has never collapsed as badly as the peso it has almost halved in value on several occasions.
And yet, despite the problems both countries have managed to hang on to some sort of prosperity most of the time.
So when the iron ore runs out, and the desert becomes full of rusting railway lines running to abandoned mines we might well be better looking at Argentina as a model, rather than New Zealand.