Gareth Morgan, director of Gareth Morgan Investments
A certain smugness pervades the air when New Zealanders discuss the Aussie economy. Those poor Aussies are struggling to prevent the Budget deficit exploding under the pressure of pre-election promises. Their notorious “add-ons” to production costs undermine their competitiveness and encourage Australian firms to relocate here – the latest a boot company by the name of Blundstone. The imposition of higher indirect taxes and the fall in the value of the $A is likely to push their rate of inflation over 2% – the September quarter result is due out today. The balance of payments deficit remains doggedly around$3 % of GDP. These economic fundamentals compare miserably with New Zealand’s: Hence the self-satisfaction that permeates conversations about our colonial cousins.
Our image of Australia, however, is dominated by political events – or more precisely, troubles. The torturous process of getting the Budget through the Senate was captured crudely but effectively by one cartoonist (Australian, of course) showing Mr Dawkins pushing the proverbial uphill. Mabo has raised the spectre of decades of dispute over native land titles. The question of Paul Keating becoming the first president of the Australian Republic has taken on new urgency since Sydney won the right (costly obligation) to stage the Olympic games at the turn of the century. Mr Keating wants an Australian to open the games and Paul’s about as dinkum as they come.
But the real issues about Australia’s economic prowess lie beneath these political currents and indeed beneath the aggregate economic statistics. For instance, they have been expanding their exports significantly faster than we have over the last four years – 8.5%pa cf NZ’s of 6%pa. Furthermore, a greater share of their exports is in fast growing manufactured goods and their spread of markets is wider than New Zealand’s.
The rate of growth of their manufactured exports suggests that at the firm level Australian companies are pretty internationally competitive. While micro-economic reform may be lagging at a political level, managers have recognised the commercial forces that will garrotte their companies unless they institute changes. In some cases the pressure comes via the unbearable humiliation of being out-performed by New Zealand companies.
As was the case in New Zealand, some firms are not waiting for government- instituted labour market reform. Commercial imperatives and growing realism are pushing managers and workers to co-operate in achieving international competitiveness – and clearly not simply on wage rates. New Zealand’s Lion Corporation well illustrates the process on both sides of the Tasman.
Australian industry is far better plugged-in to the fast growing Asian economies than certainly New Zealand, and probably any other western developed economy. The Australian dairy industry exports over A$1bn worth of product into Asia – for instance it flies yoghurt to Singapore and sells more cheese to the Japanese than we do.
For a bunch of diggers keener on other past-times they can still play a mean game that produces some pretty good results – their economy is expected to grow by over 3% this year.
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