Australia Kissed Recessions Goodbye

A blog about business and economics.
Feb. 24 2012 1:57 PM

How Australia Kissed Recessions Goodbye

Australia's embattled Prime Minister Julia Gillard speaks during a press conference in Melbourne on February 24, 2012.

Photo by CAROLINE PANKERT/AFP/Getty Images

Australia is currently undergoing an amusing leadership battle between two titans of the Labor Party, incumbent Prime Minister Julia Gillard and Foreign Minister Kevin Rudd who used to be Prime Minister until his then-deputy Gillard deposed him in a swift intra-party coup. Perhaps related to the relative lack of substance in the leadership battle, Australia is awesome at fighting recessions. While American economic commentators have looked at two straight long "jobless" recoveries and concluded that the very structure of the world economy has changed, Australia . . . just skipped those recessions:


I would sugges that not coincidentally, while Australia is better than the USA at avoiding prolonged periods of agonizing mass unemployment and wage stagnation, they're not as good at generating consistently low and stable inflation:


People sometimes try to tell you that Australia is just a story about commodities exports to China, but I think the inflation numbers are telling. Around the late-90s boom, Australia's inflationary peak was much larger than ours and then when they corrected downward they weren't as aggressive about it as the Fed was. After the global financial crisis the US CPI slipped into negative territory specifically because of tumbling commodity prices, but commodity-oriented Australia kept inflation positive and then re-inflated a bit. These things can be done if you want to do them.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



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