Australia: not spared but prepared to manage the worst

Authors

Rod Eddington

In Brief

Australia began 2008 hoping that the growing global financial crisis might pass it by. Our major trading partners in Asia were in better shape than their American and European counterparts and our underlying economy was sound. All this is still broadly true, but it is clear that the Asian economies in general and the Chinese economy in particular are not as ‘decoupled’ from the global economy as many thought. Australia has not been spared from many of the economic challenges other nations face as its Asian partners struggle with problems of their own.

The new Australian Federal Government under Prime Minister Kevin Rudd has worked hard at home and abroad to lessen the economic fallout following the global financial crisis. The Australian economy has slowed significantly and this foreshadows increasing unemployment in 2009. Keeping that increase as small as possible is a priority for businesses and governments alike.

The climate change challenges remain a major issue across the nation. Ross Garnaut’s report – the Garnaut Climate Change Review – has been followed by a Government initiative to reduce greenhouse gas emissions. The ensuring debate has sometimes generated more heat than light but the journey has begun and government and business will need to work together to find the best outcome.

As promised, the new government recognized the many hardships suffered by indigenous Australians since European settlement in the late eighteenth century. In apologising to them on the nation’s behalf, Prime Minister Rudd began a new chapter in the journey of Australian reconciliation.

Australia’s banks have fared much better than most of their global counterparts. Sound management and sensible regulation have combined to underpin their position. They have their challenges too, but they are manageable. The last year has underlined just how important a sound banking system is to a nation’s economy.

The year ahead – 2009 – brings with it plenty of economic uncertainty. However, Australia is well placed. Lower interest rates and energy costs help, and the Government’s fiscal stimulus is well timed. Australia’s strong trading links to Asia are broad and soundly based. They reinforce the strong government-to-government ties in the region that have been a priority for successive Australian governments.

Australia’s challenges will require focus. National productivity growth has slowed substantially. Skills training and education must be re-energised if the country is to remain competitive. After several years of rapid growth, commodity prices will fall across the board. Hopefully, better weather will give the nation’s farmers some much needed relief after a string of years of drought reduced agricultural production. Parts of the national infrastructure are badly stretched and the resulting congestion is costly to both the economy and the community.

These and other challenges must be met if Australia is to emerge from 2009 stronger and more robust.

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Sir Roderick Eddington is CEO of J P Morgan, Australia, Chair Designate of the ANZ Bank Board, a member of the Board of News Ltd and Head of Infrastructure Australia. He was formerly Chairman and CEO of British Airways and Cathay Pacific.

This is part of the special feature: Reflections on developments in Asia in 2008 and the year ahead