The Lucky Country

Following on from his recent "glass half full” speech the RBA Governor Glen Stevens recently gave a talk entitled "The Lucky Country", in which he sought to reiterate his views about the strength of the economy and its stark contrast with the "glass half empty" view taken by many commentators and business leaders. The speech was another strong effort aimed at bolstering confidence in our economy, but it's worth speculating on the title of his talk.  The phrase "The Lucky Country" was coined by author Donald Horne in his 1964 book of the same name. Far from being a boast, Horne used the term as a criticism of Australia's political and business leadership, who he perceived were content to allow the country to prosper purely on the back of its natural resources, rather than creating an innovative or clever society - in his words, "Australia is a lucky country, run by second-rate people who share its luck".  Horne has since revised his views to a degree ("Things have changed for the better. But the jury is still out", he wrote in 2004) but you have to wonder if Stevens had this sub-text in mind when he penned his recent speech.     

In regard to the detail in Stevens' speech, he noted that some of the negative views about Australia's economy are rooted in the view that Australia's relative prosperity was a product more of luck than of good management.  While there may be some aspect of luck in terms of the boom in Chinese demand for Australia's huge stockpile of natural resources, Stevens noted that some of the keys to Australia's strength had nothing to do with luck, including:

- the strength of Australian financial institutions going in to the global financial crisis

- the scope that existed within the Australian economy for substantial macroeconomic policy stimulus, and the effectiveness of those measures in sustaining growth

It was also noted that while there had been modest declines in house prices, these had stood up remarkably well, partly as a result of the fact that repayment pressure on borrowers had moderated as interest rates have fallen: