SYDNEYBenighted land of the "white trash of Asia" - a phrase once used by
Singapore's former leader Lee Kuan Yew - or superstar of the developed world? A
generous, liberal and multicultural society or one defined by animosity to
aborigines, Asians and asylum seekers?
Australia attracts little attention
except when one of those three problems surfaces. Yet the country has an
enviable record of progress, whether measured on a 10- or 30-year time frame.
A once exclusively white society has been
transformed by multiethnic immigration, especially from Asia. Australia's
economy kept growing through Asian crisis and American recession. Does Australia
have something to teach the world? Has the "lucky country" just been lucky
again? Or will recent gains prove temporary as fundamental weaknesses catch up
The government badly mishandled the
recent asylum-seeker crisis and has been rightly accused of blowing it up for
crude electoral purposes. Yet Australia has not acted very differently from
other rich nations faced with illegal immigrants posing as refugees shipped in
bulk by well-financed rings. Its problems with its Asian neighbors arise because
their policies are to push all such people toward Australia.
Local concerns are not a replay of the
"yellow peril." Most of these "refugees" are from West Asia and South Asia, not
Australia's East Asian neighbors. They offend against local instincts of fair
play in a country with a large orderly refugee intake.
There is an ongoing debate in Australia
on migration, but this is mostly about numbers, not race, and cuts across
political and class boundaries. Many social conservatives want more immigration
for economic reasons, while many liberals and unionists want less, for
environmental or worker-protection reasons.
Immigration has not only transformed the
look of Australia, it played a role in the transformation of its economic
institutions. Twenty years ago this was the developed world's least open
economy, with high tariffs, exchange controls and a labor market dominated by
large unions and a centralized wage-fixing system. Strikes were part of daily
Subsequent liberalization has brought
dramatic productivity gains - which spurred trade growth, especially with Asia -
and integration with the world's financial markets. A positive competition
policy has helped bring down inflation and spur business efficiency. All this
has been achieved while prices of Australia's commodity exports have been
generally weak. Reform plus migration, not luck with prices, has been the main
ingredient of performance.
But what next? Some aspects of the
Australian economy look too much like the United States for comfort. The
downside of growth has been the huge buildup in foreign debt. Capital market
liberalization has enabled Australia to finance current account deficits
averaging 4 percent of gross domestic product. Net debt is now 60 percent of
GDP, double the level in 1985.
Most debt is in Australian dollars, so
the country does not need to worry about an Asian-style crisis. But
stabilization of foreign debt and household debt levels is long overdue and will
slow future growth. Meanwhile any sharp rise in world interest rates would badly
None of this may bother the Asian
investors who are attracted more by Australia's political stability, social
freedoms and easy lifestyle than by expectations of quick profits or fast GDP
growth. Foreign portfolio investors should continue to find Australia's share
prices relatively attractive.
Australia's period of outperforming may
be over, however. Its lead over Asia in areas such as higher education may also
be eroding. It will continue to be an example of the merits of political and
ethnic diversity, but has too often indulged in ill-judged lecturing of
neighbors and overidentification with Western allies.
Indeed there is curious contrast between
Australia's rapid economic and social change of the past 30 years and the slow
progress of its political relations with Asia. Poor Australian awareness of the
region can be partly attributed to a decline in the quality of the country's
media. Parochialism have become more marked even as the nation has opened to the
world. The "white trash" jibe is dead but not yet buried.