Australia is waking up to an economic nightmare. It is a nation living high on the hog, enjoying the best of first-world standards in her lifestyle and trying to pay for it on a third-world budget. National consumption simply cannot be matched by the means to finance it. In short, Australia is broke—bankrupt!
The combined impact of the loss of her traditional British and European markets, plus the huge wage push since the 1970s, has finally caught up with Australia’s 17 million population. The country has literally priced itself out of its markets.
Having hitched itself over the past decade to the East Asian region, the combined impact of high wages at home, cheap Asian imports and the effect of the Asian economic meltdown on the Aussie dollar has decimated the Australian economy. The effect has been a weak and vulnerable exchange rate, declining commodity prices impacting her huge mineral reserves, persisting trade and current account deficits, increased external debt and a net increase in external liabilities. The Aussie dollar has devalued by 21 percent over the past 18 months. By September 1997, her huge net external liabilities amounted to US$199,550.
The Australia of today lives on cash flow and does its best to bury its head in the sand to ignore its liability to those who’ve underwritten its gluttonous consumptive habits. To match its net external liabilities, Australia’s foreign-exchange reserves would need to grow by more than 15 times their present rate. The effect of the Australian dollar’s devaluation, combined with continuing repayments on existing foreign debt obligations, is setting the nation’s government an impossible task in attempting to steer Australia through the rough economic seas ahead.