Australia: The New Economic Model?

Twenty years ago, Prime Minister Lee Kuan Yew of Singapore referred to Australia as "the poor white trash of Asia."

He wasn't far off the mark. Australia's economy was stagnant. Its average per capita income had plummeted from 4th to 19th in the world. Immigration had slowed to a trickle. Other than its well burnished image as the land of bommerangs and fair dinkum folk, Australia didn't seem to have a clue as to where it was headed.

That all changed with the election of a Labor government in 1983. And again when the Conservatives regained power. And yet again last week when Treasurer Peter Costello further tweaked an economy that has grown steadily for an astounding 16 years and shows no sign of slowing down.

What were the tweaks?

Personal income tax cuts for the fourth straight year.

Reforming banking laws to improve savings.

New funding for national infrastructure improvement and scientific research.

Can you imagine any of that happening in the U.S.?

Today Australia is the strongman of Asia. Per capita income has climbed to 8th in the world. Unemployment has been halved and net household worth has doubled. All citizens have access to free health care. And immigrants are flooding in, making Australia one of the most diverse countries anywhere.

How did Australia do it and what can Americans learn? Peter Hartcher of the Financial Times says that

Its socio-economic arrangements offer an alternative to the two familiar options of the American versus the European. [Prime Minister John] Howard says the key is balance:

"There is much in American society that I admire but I have long held the view that the absence of an effective safety net in that country means that too many needy citizens fall by the wayside. That is not the path that Australia will tread. Nor do we want the burdens of nanny-state paternalism that now weight down many economies in Europe."

Not bad for a country that started out a dumping ground for Britain's worst criminals.

WALTZING DOWN TO MALTIDA

Joining the flood of emigrees to Australia are New Zealanders, who are arriving there at the rate of about 400 a week.

New Zealand risks becoming a mere "shell country" if it continues to lose people to Australia at the current rate, former Prime Minister Jim Bolger said in a speech to his center-Right National Party.

Bolger said that so many "good people" were migrating that New Zealand faced the "hard question" of whether it should become part of Australia as a "conscious decision" or simply be "absorbed by osmosis."

Given the historic rivalry between Kiwis and Aussies, you probably didn't know that Australia's founding 1901 constitution gives New Zealand the right to become a part of its larger neighbor if it choses to do so. The clause has never been revoked.

Losing 400 citizens a week is not small beer for a country with a population of little more than four million, and the rate has doubled in the past two years.

High taxes are often blamed for the exodus. (It sure can't been the scenery, which is some of the most spectacular anywhere.) The announcement of further personal tax cuts in Australia only heightened fears that the numbers will rise.

Maoris, who tend to be paid less than New Zealanders of European extraction, are fleeing their ancestral homeland at the greatest rate. One recent study found that if present trends continue, within a few decades more than one third of all Maoris will live in Australia.