As economists debate whether Shinzo Abe can end Japan’s long funk, I can’t help but wonder if another wealthy, seemingly world-beating economy isn’t headed for its own lost decade: Australia.
This mere suggestion will strike many as hyperbolic. The economy Down Under has avoided recession for more than two decades. The government enjoys a fiscal position that inspires envy in Washington and Tokyo. There remain vast resource deposits underground, while new infrastructure is coming online to extract and ship that treasure to China and elsewhere.
Australia’s good fortune, however, looks to be waning. Slowing growth in China, driven in part by the government’s efforts to rebalance the economy, has devastated commodity prices: Iron ore, Australia’s biggest export, now fetches half of the $140 per ton it did last December; coal prices have tumbled as well. These are long-term, not cyclical trends. And unfortunately, the trajectory plotted by Prime Minister Tony Abbott over the last 14 months has left the country less prepared for that difficult future than when he took office.
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