Australia has weathered the financial crisis better than any other developed country. Last week its central bank raised interest rates, indicating its primary concern is now inflation, not growth. What were the keys? Phil Dobbie of BNET explains:
- Befriending China: Australia used to export much of what it made to the US and UK, but over the last decade much of that trade has shifted to China. In fact, some economists argue that Australia didn’t need a stimulus package—Beijing’s stimulus was enough.
- Cool-headed bankers: Australia’s proper banks have much of the credit market sewn up, largely because the country’s small population means the overall market for loans is modest. So the incentives to create insane, opaque financial products just weren’t there.
- Population growth: In the year before March 2009, Australia’s population grew 2.1%, due to both immigration and reproduction. Economists point out that per capita GDP declined over the last year, but with more people, total output still grew.
- A sensible housing market: The rising population has kept demand for housing high, which has cushioned home prices—and the family wealth tied to them.