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Bouquets or brickbats coming?

  • April 7th, 2011

The Economist has profiled Australia as the beneficiary of an extraordinary resources commodity boom.

"Commodity booms have come and gone in Australia’s history but no boom this strong has lasted this long."

 The article mentions the Chilean wisdom in salting away surpluses during historical windfall periods.

"Australia could bring some relief to squeezed exporters by saving, not spending, the proceeds of the boom. That would reduce the inflationary pressure at home, resulting in lower interest rates and a cheaper exchange rate. Households are doing their bit, saving 9.7% of their disposable income compared with less than zero in 2004. The government is also tightening its belt, albeit more gingerly. Having run a budget deficit of 4.4% of GDP in the last fiscal year, it expects a surplus in the fiscal year ending on June 30th 2013, including the proceeds from a mining tax.

Should it tighten its belt faster? In Chile a fiscal law obliges the government to run budget surpluses whenever the economy is at full employment and the copper price is above its long-run equilibrium, as estimated by an independent panel. A similar rule in Australia would imply a budget surplus of 2% this year…". Chile’s government adds to a “stabilisation fund” in fat years, and withdraws from it in lean."

The sting for us is a note saying

"Over the coming weeks, The Economist will profile several economies at the centre of wider global trends. The first is Australia, a bellwether for other rich commodity exporters such as Norway, where the terms of trade have improved by 38% since 2004, Canada and New Zealand"

International agencies like the OECD give their evaluative reports to governments ahead of release so they can get their spinners spinning.  Our government may have to wait for publication to react to an Economist report. Wanna bet on whether we'll be an example to admire?




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