AUSTRALIA - THE MIRACLE ECONOMY: FROM PROSPERITY VIA COLONIAL SOCIALISM AND STAGNATION TO PROSPERITY

Owing to rich endowments in natural resources and the high price of wool in the XIX c. scarcely populated Australia became the world's most prosperous nation until World War I. However, owing to the tyranny of distance, the high degree of economic protectionism, conspicuous role of public capital and periods of trade union militancy, she lost her leadership position in terms of GDP per capita after World War I. As a result, Australia slipped in GDP per capita rankings from the world's leader as late as 1921 to the 18th place in the 1980s. However, the bold economic and labour market reforms that followed the 1983 recession defined by the fiscal trilogy, accords with trade unions based on a trade-off between wages growth and superannuation contributions, the reform of the old age pension system, the de-protection of industry and agriculture backed by the obligation to publish 'Regulatory impact statements', corporatisation of state companies, introduction of the 'Charter of budget honesty', increased R&D expenditures, etc. (helped by a rise in her terms of trade), resulted in a major acceleration of productivity, a fall in unemployment, rising innovation index and acceleration of economic growth. As a result, the gap in GDP per capita between the Euro-zone and Australia that was narrowing until about 1990 keeps widening again. In comparative terms, Australia is well positioned to weather the global financial crisis.