Australian Governments have squandered an era of stunning prosperity.

In case we had any doubt, one thing we know for sure about 2015 is that the mining boom is over. Coal and iron ore prices have tanked, more than $100 billion has been wiped off the market capitalisation of our mining firms, and our trade deficits are worsening.

In further confirmation the budget deficit revealed on Tuesday was a shocker. The boom had given public revenue a windfall, allowing the Howard-Costello Government to finance tax cuts and to run a lazy fiscal policy, and allowing the Rudd-Swan Government to dodge the global financial crisis. But those days are gone.

Some may say that this is just business as usual – Australia’s economic history is one of commodity booms and busts. This boom is the fourth in the last fifty years. Although commodity prices may still fall further, in time excess stockpiles will be run down, easily-recovered ores will be depleted, and prices will start to recover. That’s been the nature of the commodity cycle.

“She’ll be right mate, if we can just hang on”.

But what we’re living through is not just another cyclical trough. Rather, it’s a fundamental change at the global level, and for Australia it’s almost certainly the end of a 200-year economic era.

To deal with each in turn.

The China boom – it won’t come again

The boom just past was exceptional because it coincided with China’s phase of extraordinary industrialisation and infrastructure investment.

The scale of China’s demand is hard to comprehend, but a couple of figures give us some idea of its magnitude and uniqueness. For example, in the three years from 2011 to 2013, China used more cement than the US had used over the entire twentieth century. And at its peak China was producing 800 million tonnes of steel a year, four times the amount any other country has ever produced.

It would be foolish to believe that China or any other country will ever see such a rapid expansion in resource-intensive growth – a growth driven in part, by its ideological legacy of central planning which puts so much emphasis on capital investment.

More basically, even as economies grow, new lighter and stronger materials are displacing older materials. For example, carbon fibre is displacing aluminium and steel in airplane and car manufacturing. Even where traditional metals are not completely displaced, new alloys and improved designs are making for lighter, and therefore less resource-intensive structures.

Then there’s coal. Most level-headed financiers and even economists in energy companies understand that thermal coal has no future, but the “coal is good for humanity” idea lives on in Australia. Coalition and Labor politicians are still gung-ho about the Galilee Basin project. They not only fail to understand that the world has changed; they also fail to understand how Australia must change, because 200 years of “she’ll be right” history is coming to an end.

The end of our “settler society”

Economic historian Ian McLean, in his 2013 book Why Australia Prospered, describes Australia as a “settler society”. Settler societies are mainly “New World” countries where colonists have displaced Indigenous populations – usually brutally – and have exploited easily-won natural resources. As a typical settler society Australia has enjoyed strong economic growth (some of which is a statistical artefact because depletion of natural resources is not taken into account), boosted by immigration, which in turn has kept the population young and healthy, thus keeping budgetary demands for health care and pensions in check.

Investors have done well, helped by a growing market and opportunities for unearned profits in areas such as land speculation in expanding cities. Like other settler societies we have been highly dependent on foreign capital, attracted by prospects of further growth. Those foreign capital inflows have kept our currency highly valued, allowing us to enjoy a high material standard of living.

Ever since 1807, when John Macarthur made the first shipment of Merino wool to England, the Australian economy has operated on the “settler society” model, providing raw or semi-processed commodities for others to add value.

That model has given us a bumpy ride, but time and again, just as it has looked like ending, there have been other strokes of luck – Lang Hancock discovers vast iron ore deposits in the Pilbara, the Japanese economy recovers from the devastation of war, the Chinese decide to ditch the austerity of communism. As Donald Horne wrote 50 years ago, “Australia is a lucky country, run mainly by second-rate people who share its luck.”

This time there isn’t much luck on the horizon, but we still have second-rate policymakers and managers, most of whom don’t realise that the “settler society” days are over.

The dominant thinking in Canberra, particularly as expressed by Treasurer Scott Morrison, is that “small government” and corporate and personal tax cuts might keep Australia “open for business” a little longer, staving off the necessary adjustments until after the next election (State premiers, who have the hard job of delivering services, are much more frank about the need for higher taxes).

Blame Labor for that. They threw money around everywhere and far ked things up right left and centre . Billions and billions went on people smuggling alone when Labor tore down the borders. Howard had the economy going great and Labor stuffed it back up. The economy has never been the same.

Kat wrote on Dec 18^th, 2015 at 12:36pm:


how much has the alps failed invitation to illegals cost us ?

Sprintcyclist wrote on Dec 18^th, 2015 at 12:40pm:


maxi the kat's got it's nickers in a knot 

the good ole boys wrote on Dec 18^th, 2015 at 12:27pm:

Howard & Costello were in power at a time of a boom. what did they do? They spent all the boom time revenue, $350Bn p1ssed up against the wall. Worse than that their profligacy, tax cuts, pork, middleclass welfare etc were built into the Budget.

Howard & Costello are the cause of many of our economic and Budgetary problems still now. Clowns!

Kiron22 wrote on Dec 18^th, 2015 at 1:16pm:


Yeah, right.

Jovial Monk wrote on Dec 18^th, 2015 at 1:18pm:



monk, you dill.

how can anyone with 1/2 a brain say that giving taxpayers tax cuts is government "p1ssing that money up against the wall"
it is the ONLY legitimate thing a government SHOULD do when they have extra money.
if there is any "p1ssing up against the wall being done" as a result, in what possible way is the government responsible for this.

then we have the SHEER LUNACY of rudd with a cash splash BORROWED at interest .

you must apologise immediately to John and Peter...our finest team ever.

gillard/rudd/swann...

a mining tax that earnt no money
change border policy and cost 10 bill a year
NDIS started with no funding.
a "thought bubble"  to take over public hospitals
NDIS wastage and blow outs.
cash splash to dead people
on again/off again carbon policy.

they are not fit to replace the batteries in Peter Costellos calculator 

Wee Johnny would have better served the country stashing that cash into an inviolable account as a prop against the blatantly obvious rising costs of healthcare and aged pensions and so forth..... instead they've stashed the futures fund away for their own benefits in the Caymans .......

Place looks and sounds more and more like some third world banana republic dictatorship, with the 'franchises' all going to family and friends of the ruling elite, who also use guns to ensure they remain in that position.

Just reading up on the Mafia in Sicily... a coven of rich landholders began some amazing stuff there.... set up even labour pools and loans for collectives under their own control......

How familiar it all sounds......