Dutch dollars down under
Is Australia in danger of catching the Dutch disease? Lest there be any confusion, this has nothing to do with soft drugs, canal jumping, total football, wooden footwear or cycling royals. It is the economic malady that infects a country when its resources sector becomes so very dominant that it has a distorting and damaging effect on its manufacturing. Revenues from natural resources make the national currency so strong that the country's other exports are simply too expensive to buy.
A resources-linked currency, the strength of the Australian dollar is bonza news if you are importing goods from abroad or a tourist visiting a foreign country because your money obviously goes a lot further. It is also quite useful for mortgage holders, because the strong Australian dollar is suppressing inflation and thus reducing the pressure on the Reserve Bank of Australia to increase the cost of borrowing. Tellingly, interest rates have been on hold since November.
But the soaring Australian dollar is near disastrous for manufacturing companies which export and the Australian tourism industry, whatever the much-vaunted Oprah Effect.
It also means that the phrase "the wonder from down under", which was coined after Australia avoided recession in the aftermath of the global financial crisis, is wholly inadequate in describing the economy as a whole. Instead, Australia has a two-tier economy. A wonder economy centred on the country's quarries, and the rest.
I've written a piece here about the fortunes that are to be made in the mining states, where employees in their early twenties without a university degree can earn up to $220,000 a year.
But I'm keen to harvest your comments on the broader question of whether the mining boom has made Australia economically complacent, and whether enough money is being invested in higher education, trade apprenticeships and research and development. Right now, Australia's national prosperity is based on digging things up rather than being inventive, creative or ingenious. And crucially, its own economic strength is increasingly dependent on China's inexorable rise.
When economists predict a golden Australian era lasting until mid-century and reflect on the once-in-a-generation mining boom - or super-cycle, as it is called - the temptation always is to think China. But should Australia be trying harder to boost others sectors of the economy, ever mindful that it is in danger of going Dutch?
PS: I didn't think so at the time but the last blog, I suppose, was a textbook example of the "light the blue touch paper and step back" form of the genre. Feisty stuff, and lots of material to pick up on for a future blog. Thanks, as ever, for the comments. I'm still not sure why threads get shut down. I will find out.