The resource blessing

This is a season of real joy for all.

The Australian economy continues to perform at a steady, rapid clip generating record numbers of jobs and wealth;  pulling people out of poverty and making the inexorable process of change much easier.

Yes, luck played a part, in particular our huge resource endowment as well as the geographic blessing of being in Asia and our British heritage of common law and language.

However, luck was not the main factor.  Resource endowments have, through history, proven more often to be more of a curse than a blessing.

They have often generated wealth without effort, thereby distorting the focus of economic and political life from generating wealth to capturing wealth.  Argentina, Venezuela, Nigeria, Indonesia and now Russia are all examples of the potentially destructiveness of resources wealth.

Australia has been able to avoid the curse and used its huge resource endowment well.

It has achieved this primarily through the quality of its political system and related institutions -- our Westminster parliamentary system;  our constitution;  the dominance of two political parties;  a professional bureaucracy;  a vigorous, free press;  an independent judiciary and active civil society.

In the late 1970s, when the lucky country's luck was beginning to run out, we could, as many argued we should, have gone down the Argentinean path and tried to use our resource wealth to sustain the status quo.

Indeed we pursued this path for a while under Malcolm Fraser.

Instead, during the 1980s, we chose to use our resource wealth to fund wholesale change with the aim of competing with the world.

The path towards reform did not come easily and took leadership from all quarters.  But it did happen and it has paid off greatly.

There is no doubt that the steady improvement in our quality of life over the past decade is a direct result of those decisions.

Of course other factors have been at play, including a technological revolution and the historic rise of China.

But while these have helped us, it has been the huge increase in productivity and competitiveness of the Australian economy engendered by reform that has been the main driver of our good fortune.

In recent years, complacency and a recalcitrant Senate have resulted in the pace of reform slowing.  And if this were to continue, it is only a matter of time before it translates into a slowing of the economy.

Again, however, our political institutions appear to be responding.  The take-home message from the recent federal election was that the electorate wants more of the same.

That is, it wants policies that sustain a rapidly growing, stable economy.  It judged the Coalition as best suited to do this and as a bonus, gave it control over the Senate.

In so doing the electorate removed one of the main impediments to sustaining our good fortune.

Of course, we and the world face many challenges, the greatest being not to shoot ourselves in the foot.

However, we face this from the position of a vibrant and growing economy and the knowledge that our political institutions are up to the challenge.

Have a Merry Christmas.

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