How Australia went 29 years without a recession

Transcript

How is it that when the rest of the world was falling apart, one country simply kept going. Between 1991 and 2020, Australia went 29 years without a recession, not a single one. It sailed straight through the dot com crash. Then it sailed through 2008, the year that broke almost every developed economy on Earth and barely slowed down. The longest unbroken run in the modern world. You might say they were better managed, but plenty of countries had sensible governments in 2008 and got destroyed anyway. So to get a real answer, you have to ask what Australia actually sells? And what it sells is what is underneath it. Iron ore, coal, gas, which was not particularly interesting until China began the largest construction project in human history and needed somebody to supply the ingredients. So while the West was watching banks fail, Australia was watching orders come in. It was not attached to the same engine everyone else was attached to. There was a second cushion too, and it works automatically. The Australian dollar is tied to those commodities. When prices fall, the currency falls with them, which instantly makes everything Australia sells cheaper for the rest of the world. The economy takes the hit in the exchange rate rather than in jobs. It is a shock absorber that nobody has to switch on. Now in 1964, a writer named Donald Horn published a book about all of this called The Lucky Country and the country loved it. They put the phrase on tourism campaigns and repeated it for 60 years, except horn meant it as an insult. His actual line was that Australia is a lucky country run by second rate people who share its luck. His point was that the wealth came from the ground rather than from anything anyone had built. And that one day, the luck would run out and nobody would be ready. But he was wrong about one thing, and it is the exception that matters. In 1992, Australia made retirement saving compulsory. Every employer must pay a slice of every wage into an investment fund and no worker can opt out. Today, that pool holds more than $4 trillion, which is larger than the entire Australian economy. They forced a whole nation to become investors by law and almost nobody else copied it. That was not luck, that was a decision. So the 29 years were mostly a gift from geology and geography. The $4 trillion is the part they actually earned.

Transcribed automatically from the video, so small errors are possible.