Thanks to Prime Minister John Howard, the Lucky Country is luckier than ever.
BY MARY KISSEL
Sunday, March 5, 2006 12:01 a.m. EST
SYDNEY--Australia celebrated 10 years of conservative government this week under its seemingly indestructible prime minister, John Howard. Amid a flurry of tributes, toasts and spotlights that blanketed the nightly news here, Mr. Howard did little more than say he's "still surprised" to be in office, and smile. Somewhere, Ronald Reagan is smiling along with him.
Like the Gipper, Mr. Howard has fundamentally reshaped Australian society through economic reform. When elected in March 1996, the plain-talking Aussie pledged lower taxes, privatization and labor market change. A political veteran who'd been defeated in national votes before, he vowed his government wouldn't "be a pale imitation" of the Labor leadership it replaced. What an understatement.
As a result, the Lucky Country is, well, luckier today than it's ever been. Over Mr. Howard's tenure, Australia has experienced an enormously stable and robust economic boom. The Sydney stock market's capitalization has swung skyward. The central bank was granted independence and promptly brought average inflation down to around 2.5%. Employment picked up. Australians now feel a renewed confidence that strongly echoes America's vibes under Mr. Reagan in the boisterous 1980s.
All of this wealth creation has come from common sense, something Aussies seem to acquire at birth. If you give businesses the freedom to make decisions about wages, prices and employment, they'll respond rationally, Mr. Howard's government reasoned. If you encourage healthy competition among firms, only the best will prosper. If you make your citizens shareholders, they'll have a personal stake in companies' success, and productivity will soar. More Australians today own stock than are members of labor unions, thanks to Mr. Howard's reforms. That's what I'd call an ownership society, and that's why Australia's economic success is likely to continue after Mr. Howard has left office.
Another achievement has been less noticed abroad: Namely, learning to embrace current account deficits. Like the U.S., Australia has managed to grow, and grow strongly, while running a current account deficit of between 3% and 6% of GDP. This isn't a new phenomenon Down Under--they've been doing it for decades. But it's only recently that Australian elites have come to understand that deficits are sustainable, and that raising interest rates would only slow down the economy, not close the gap. Credit the Howard government and its central bank governor, Ian Macfarlane, for managing to switch the debate to inflation. That's a battle that the Bush administration is still struggling to win.
Critics frustrated with Mr. Howard's long winning streak grumble that he's simply carried on the legacy of the center-left governments of Robert Hawke and Paul Keating, who floated the domestic currency, cut trade barriers and started the privatization initiatives. Further, they say, Mr. Howard's government has benefited from a strong upsurge in commodity prices, to which the Aussie economy is heavily leveraged.
Both are true. But the Labor government leaders didn't have the long-term vision or the nimbleness of Mr. Howard, who, in his 10th year, still commands enough political influence to pass significant new reforms. Labor market laws passed only last December established one national system of industrial relations laws and new, market-oriented arrangements for setting the minimum wage, among other things. Not even Britain's Tony Blair, steaming ahead after nine years in power and without a credible opposition candidate in sight, has the clout to push through such a radical move.
On the fiscal front, Mr. Howard has also pushed forward, balancing the national books, wiping out government debt, introducing a goods and services tax to spread the tax burden and cutting marginal income-tax burdens several years running. Now, he's tackling the final--albeit messy--sell-down of the government's stake in its telecommunications monopoly, Telstra.
Like the Gipper, too, the prime minister has forged a solid, internationalist foreign policy, built on the country's long-time alliance with free nations like the U.K. and the U.S. He's also forged new friendships in Asia, as evidenced by free trade agreements and Australia's participation in regional political and economic forums.
That's not a significant change from prior Australian administrations. But what Australia has witnessed under Mr. Howard is an escape from its Vietnam-era hang-up about sending troops abroad. Australia led the 1999 peacekeeping effort in East Timor, and it's been deeply involved in securing Afghanistan and Iraq. The 2002 Bali bombings, in which 88 Australians perished, surely helped secure public support for Mr. Howard's efforts, but so, too, did the prime minister's resolve.
A recent poll by The Australian newspaper showed that 64% believe Mr. Howard has done a good job as prime minister. He certainly has more to do. With a surplus of A$11.5 billion (US$8.5 billion) for the year to June 30 and a booming economy, what better time to return that pile of cash to taxpayers? Even better, why not simplify the whole tax system, which is a muddle of complicated pension and income-tax structures?
With his kind of track record, and those kinds of ratings, Mr. Howard may just be around long enough to do all this and more.
Ms. Kissel is editorial page editor of The Wall Street Journal Asia.
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