Over the years, unions, business, consultants and academics have urged Australia and Australians to emulate countries as diverse as Hong Kong, Singapore, Ireland, Sweden, Japan and the US.
The list isn’t conclusive, but those worried about our economic and social progress have often looked for answers in other countries: lower taxes, higher taxes and higher welfare payment, high investment, attracting the right people, close Government-industry/business co-operation.
The mantras have been many and the reports frequent on how we could model ourselves on others to improve.
So, as we stand and await our turn in as the great recession washes over the world, its intriguing to note that of all those countries, Australia is still doing better.
Hong Kong is in recession, as is Ireland, the US is certainly deep in the mire (as is nearby New Zealand), Sweden is slumping faster than us as its car and truck building sectors collapse. Japan is in a recession, as is Germany and in both countries, it will get much worse before it gets better.
Both Japan and Germany face growth contracting by more than 2% this year; South Korea and Taiwan, two Asian tigers, are rapidly slowing to a halt with exports down 20% in recent months. Taiwan is handing out shopping vouchers for consumers to spend by September.
This morning there was the shocking news that Japanese exports plunged a huge 35% in December, after record slumps in industrial production in November and in machinery orders as well.
Bloomberg said it was the sharpest decline since 1980. The Finance Ministry said December’s drop eclipsed a record 26.7% decline in November. Economists predicted a 30.3% contraction.
And figures also released this morning showed that the South Korean economy contracted 3.4% in the December quarter.
Ireland, which has used low tax to lure businesses and labour to the country, is now imploding as the financial system comes apart. The controversial guarantee in October of last year that forced countries like Australia to follow suit, has proven to be an illusion after Anglo Irish Bank was nationalised a week ago in the wake of a scandal involving secret loans for the board and senior managers, including a former CEO and chairman who hid his loans in another at each balance date and audit.
Now Ireland’s economy is forecast to shrink by around 5% this year by the European Commission and yesterday it was joined at that level by a surprising contender in Singapore. Both could end up being the worst performing major economies of the year.
A day ahead of the country’s 2009 budget, which is expected to see its huge cash and investment reserves raided to keep jobs and activity flowing in the economy, Singapore’s economy is looking the sickest in Asia.
For many in Australian business and politics, that will come as a shock. They, especially on the conservative side of politics, have urged us to follow Singapore’s low tax, open approach, with targeted Government support to find winners in business.
No longer; the targeting has missed and the economy is in retreat, as the Ministry of Trade and Industry said on its website yesterday.
“The Ministry of Trade and Industry (MTI) announced today that Singapore’s GDP growth is likely to be -5.0 to -2.0 per cent in 2009, lower than the -2.0 to +1.0 per cent growth range it had forecast on 2 January 2009.
“The forecast for inflation in 2009 is also revised downwards to -1.0 to 0 per cent.”
Our turn will come this year, but the one common thread so far in this slump is that countries depending on exports of manufactured goods and lots of services (especially financial services) are being hit surprisingly hard. That’s why Germany, Ireland, the UK, Japan, South Korea and Taiwan are feeling a lot more pain than say Australia.
Next week we will find our consumer and producer price inflation is falling, but is still high relative to countries overseas. Some will worry, others will fret, but compared with the forecast of price deflation for much of this year in Singapore, our fading cost pressures will be a virtue.