Recently, the Australian government published its economic statistics for the first quarter of 2010.  Many feared that Australia would join other developed nations by showing two quarters of negative growth - the main indicator of a recession.  But it didn’t.

Australia’s Gross Domestic Product (GDP) grew by .5% last quarter.  Granted, this wasn’t a stellar performance, and it certainly doesn’t mean that they’re out of the economic woods.  However, it does show that Australia must be doing something right.

That “something” appears to be a continuing robust economic stimulus program that focuses on investing in infrastructure.  This stimulus package was initially spearheaded by Australian Prime Minister Kevin Rudd in 2008. 

It is important to note that another major factor for Australia’s ability to maintain economic growth is the existence of its massive mineral resources.  Mining makes up 5.6% of its GDP (compared with 1.6% in the United States), and it accounts for 35% of its exports, mostly to Asia.  As The Wall Street Journal pointed out last week:

“NO doubt the Rudd government's big budget stimulus helped keep Australia out of recession last year. But mining was at least as important in producing the unexpectedly good performance.”

However, it has been the continuing investment in infrastructure that has kept Australia’s people employed and has kept them from seeing the negative GDP growth experienced by many of its trading partners.  Australia’s unemployment rate currently stands at 5.2% compared with 9.7% in the United States.  Much of its employment strength lies in the jobs created and maintained by Australia’s ceaseless quest for new and improved schools, roads, bridges, railways, water and waste systems, etc.

Prime Minister Rudd took a strong stand on infrastructure investment early on, and he has ignored the concerns of the deficit hawks ever since.  In December of 2008 he said:

“..the benefits of the Federal Government's infrastructure spending on roads, rail and education outweigh any concerns about Australia slipping into a budget deficit.

When the history of this government is eventually written, whenever that might be, we want it to be known as a government of nation building.."

Unlike many other developed countries, Australia continues to hold infrastructure spending as being a top priority.  Much has been written lately about the US’s recent emphasis on deficit reduction as opposed to expanded stimulus spending.  Nobel Prize winning economist Paul Krugman points this out succinctly in his New York Times op-ed article entitled “Lost Decade – Here We Come.”  His concern is that the deficit hawks may force us into a decade of stagnation, similar to that which occurred in Japan in the ‘90s.

Other major world economies are also feeling the deficit pinch.  As Andrew Leonard points out today in Salon, the United Kingdom appears to be taking “the wrong medicine” by changing their main economic strategy to deficit reduction rather than Keynesian stimulus.

The need for infrastructure investment in the United States goes beyond just the immediate economic benefits.  As Bob Herbert pointed out in a series of op-ed articles in The New York Times (see here, here and here) our infrastructure “must” be improved:

“Ignoring these problems imperils public safety, diminishes our economic competitiveness, is penny-wise and pound-foolish, and results in tremendous missed opportunities to create new jobs on a vast scale.

Competitors are leaving us behind when it comes to infrastructure investment. China is building a network of 42 high-speed rail lines, while the U.S. has yet to build its first. Other nations are well ahead of us in the deployment of broadband service and green energy technology. We spend scandalous amounts of time sitting in traffic jams or enduring the endless horrors of airline travel. Low-cost, high-speed Internet access is a science-fiction fantasy in many parts of the United States.”

Australia is blessed with having a wealth of commodities that has allowed it to become Asia’s mineral warehouse.  But it also has the economic leadership needed to set a strong course of fiscal stimulus during hard economic times.

Let’s hope that global leaders begin to focus on the positive steps taken by Australia to both stabilize its economy and to improve its internal living conditions through infrastructure investment.  It remains to be seen whether the economic weaknesses in its trading partners may ultimately pull it down, but based on the successes it has had to date, there can be no doubt that Australia’s stimulus program has provided a major long-term benefit to all of its citizens.

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the same mining rudd has stopped in its tracks ??

rudd inherited a very sound machine. he's now buggered it

rudd inherited a very sound machine. he's now buggered it

The stimulus did nothing apart from putting the country further into debt, and paying extra money mainly to low earners so they could feed the pokey machines. (and whatever else they did with it)  

The good financial performance of Australia had more to do with Beijing  than Canberra. As usual, the Americans are blissfully ignorant of the true situation.

No public companies or banks should be bailed out - ever. They should have been given the same priority as Iceland.

The financial institutions should have had more of an ouch factor. The GFC wasn't really so bad from their viewpoint. If a few of them had been allowed to fail then it would have been etched into the subconscious of economists everywhere that this must not be allowed to happen again.

As it was, nobody learned any lessons, except that  some financial institutions are indestructable because regardless of what stupid policies they pursue, governments will bail them out with public funds.

The stimulus did nothing apart from putting the country further into debt, and paying extra money mainly to low earners so they could feed the pokey machines. (and whatever else they did with it) 

The good financial performance of Australia had more to do with Beijing  than Canberra. As usual, the Americans are blissfully ignorant of the true situation.

No public companies or banks should be bailed out - ever. They should have been given the same priority as Iceland.

The financial institutions should have had more of an ouch factor. The GFC wasn't really so bad from their viewpoint. If a few of them had been allowed to fail then it would have been etched into the subconscious of economists everywhere that this must not be allowed to happen again.

As it was, nobody learned any lessons, except that  some financial institutions are indestructable because regardless of what stupid policies they pursue, governments will bail them out with public funds.