Australia is on the cusp of achieving something truly remarkable – not to mention unprecedented in modern world history.
In 26 days, as the clock ticks over to April 1, Australia will likely have bested the Netherlands to lay claim to the title of the longest economic expansion on record, entering our 104th quarter of economic growth without recession.
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The Dutch winning streak kicked off in 1982 thanks to the biggest natural gas field in Europe and lasted for 103 quarters before the Netherlands succumbed to the turmoil of the global financial crisis in 2008.
In the first of three significant European elections in coming months, Dutch voters will go to the polls next week and have a strong chance of electing an anti-Islam, far-right politician called Geert Wilders, who has spent the past 13 years living in protective seclusion after death threats from Islamic militarists over this controversial views, including wanting to close all Mosques and comparing the Koran to Mein Kampf.
![Illustration: Jim Pavlidis.](/web/20170307180136im_/http://www.smh.com.au/content/dam/images/g/u/r/3/g/y/image.related.articleLeadwide.620x349.guqwzd.png/1488883127039.jpg)
Meanwhile, back at home, the news that Australia has avoided a technical recession with growth rebounding in the December quarter was greeted with little more than a shrug.
It deserves much more recognition than that.
Australia has just pulled off the Great Escape.
The end of the end of the mining boom is almost here. We made it.
We've escaped the resources curse which has defined our economic history.
Not only will we beat the Dutch, we've beaten the economic curse which bears their name, "Dutch disease".
A 1977 article in the Economist coined the term to describe how large resource booms tend to suck the life out of other parts of the economy, like manufacturing, by raising wage costs and the exchange rate.
Australia has suffered Dutch disease in several periods during our history, most notably in the first 1850s gold rush. In a fascinating speech in 2010, then Reserve Bank deputy governor, Ric Battellino, recalled how that gold rush led to a doubling of shepherds' wages in just three years and contraction in the number of NSW manufacturing firms from 165 to 140.
Indeed, of the five major mining booms that Australia has had, the majority ended in double digit inflationary outbursts.
At the time, Battellino hoped that this most recent China-induced mining boom would be different, thanks to our floating exchange rate, a more flexible labour market and more soundly based frameworks for monetary and fiscal policy.
Seven years later, it turns out he was right.
Since the mining investment boom peaked about four years ago, the Aussie dollar has fallen significantly, supporting other exporters. Wages growth has fallen too, which isn't great for workers, but certainly helps us to recover our international competitiveness.
Lower interest rates have also responded to cushion jobs growth in other sectors.
All in all, we've survived the biggest commodity supercycle in our history relatively unscathed. Income growth has been disappointing recently, compared to previous gains, but those gains have not been unwound. Australia today is a vastly richer country than it was before the boom.
According to a recent testimony to Parliament by Reserve Bank governor, Philip Lowe, we are now 90 per cent through the fall in mining investment that has dragged on growth for about four years. While there are no major new investments on the horizon, mining companies have now begun investing again in upkeep of their existing infrastructure.
"Higher prices have given them the confidence to do a bit more sustaining investment – that is a positive development," Dr Lowe told the parliamentary committee. "We hear that in some areas, partly in Western Australia, the higher prices are encouraging people to at least think about exploration again, whereas exploration activity had fallen way off. It is still going to be a headwind for a little while, but not like the headwind we have had for the last four years."
Meanwhile, several other economic winds blow in our favour.
Most notably, the skies have opened on our agriculture sector. Unleashing havoc in our cities, the rains have breathed new life into our exports of cotton, wheat and sugar.
And Asia's burgeoning middle classes continue to underpin a boom in education exports, with foreign student numbers only likely to benefit further from America's great intellectual leap backwards.
Lastly, state governments have finally begun to address Australia's yawning infrastructure gap, most notably in Sydney, which has turned into one giant, rain-soaked worksite of late.
Obviously, our economy is not without its challenges.
While activity levels are sound, prices growth has been weak. In theory, booming corporate profits should trickle through to higher wages, but they haven't yet. Business spirits remain dampened by political uncertainty. And there has been a worrying rise in household debt relative to income as low interest rates fuel a house price boom in some capital cities. While the Reserve Bank is likely to stay on the sidelines for most of this year, the next move in interest rates will be up – barring any new international shocks – which will be a major test for our newest indebted households.
Aussies are fond of talking ourselves down. And caution is warranted. But we are about to lay claim to the strongest economic performance in world history.
And that will be worth celebrating.
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