The recent stock market plunge should remind Australians that they live in a vulnerable country as well as a lucky country. While there may be severe problems ahead, over the past two years Australians have been fortunate enough to be debating what to do about a second mining boom rather than dealing with excessive public debt or high unemployment – or both. Dealing with the problems of prosperity is an easier job than dealing with dilemmas of austerity.
Booms aren’t without their problems, of course. They increase inflationary pressures and lift the value of the dollar, which can hurt important sectors of the economy that employ many people. Booms also make us more vulnerable to events in the global economy because they intensify our susceptibility to a decline in international demand for our resources and the continuing supply of foreign money. They can also contribute to rising inequality if governments do not effectively distribute the proceeds of the boom across society and between generations. These oscillations have tested Australians throughout their economic history, and the end result has generally been reasonable.