Australia’s poor corporate performance compared with Britain can partly be explained by the structure of our economy. Australia has an asymmetrical industry structure in that we rely excessively on primary materials to fund our imports. A country which has a a larger manufacturing export (or even import replacement sector) can use its export income for investment. When the global economy goes into a downturn they can, to a greater degree, go it alone.
However, Australia is heavily reliant on the international economy for capital. When there is an excess of liquidity in the global economy (1880, 1920 British loans, 1950-70, and the present) Australia experiences economic growth. This industrial structure and Australia’s heavy reliance on international liquidity for investment is one of the reasons why Australian economic growth is mainly driven by the housing industry (which is very sensitive to liquidity) and then flows on to other consumer and manufacturing sectors.
The Australian dollar is often referred to as a proxy for world growth for this reason (connection with international liquidity, reliance on raw materials and energy exports and tourism), and it’s one of the reasons why we have a big finance sector which profits from this uncertainty and liquidity driven economic environment.
But big companies need to do better than the average of world growth, and need steady injections of investment (especially manufacturing, research and tech companies) and Australia is an uncertain environment that does not facilitate their growth.
Get Crikey FREE to your inbox every weekday morning with the Crikey Worm.