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Satyajit Das

Australia's Luck Has Run Out

Gaudy numbers mask serious flaws in the country's economic model.
A debt bomb is growing.

A debt bomb is growing.

Photographer: Darrian Traynor/Getty Images

Australia’s record of 26 years without a recession flatters to deceive. The gaudy numbers mask serious flaws in the country’s economic model.

First and most obviously, the Australian economy is still far too dependent on “houses and holes.” During part of the typical business cycle, national income and prosperity are driven by exports of commodities -- primarily iron ore, liquefied natural gas and coal -- that come out of holes in the ground. At other times, low interest rates and easy credit boost house prices, propping up economic activity. These two forces have combined with one of the highest population growth rates in the developed world (around 1.5 percent annually, driven mostly by immigration) to prop up headline growth.