Australians peering nervously over their own fiscal cliff

BRISBANE -- There's a deep unease stirring in Australia and it's got nothing to do with the Mayan calendar's unsettling prediction that doomsday arrives Dec. 21.

The nation's jitters stem from something more troubling than Judgment Day as it peers nervously over a Down Under version of the fiscal cliff.

Australia stepped deftly around the grenade known as the global financial crisis and strode on with a swagger as monetary Molotov cocktails exploded around the western world.

Australia has remained quietly pleased with itself since the drama of October 2008, pointing to a mining boom, prudential management and sober hands on our economic wheel in the form of federal Treasurer Wayne Swan as the reason for our financial salvation.

No place here for the gamblers who pumped up America's housing bubble with dodgy loans. No tolerance for an overpaid public sector to lead us into the disreputable address where the PIGS (Portugal, Ireland, Greece and Spain) reside.

But that self-serving smile has faded, and this week it disappeared entirely. On Tuesday, the Reserve Bank slashed interest rates to their lowest levels since the peak of the global crisis.

The official cost of money is now just three per cent, great for homebuyers and those looking for a little extra cash for Christmas shopping.

But the last of a year-long run of interest rate cuts is also an alarming sign that our miracle economy might be in desperate need of a few prayers.

The reality is that the resources boom, which kept Australia quarantined from much of the world's financial train wreck, has peaked, and there was no better sign than the fallout from our celebrated mining tax.

The mining tax, designed to cream off massive profits from high commodity prices and channel them into Treasury coffers, was predicted to bring in something like $9 billion a year.

So it was with eager anticipation the nation waited for the first installment last October. Sadly, when the envelope containing the cheque was opened, it revealed a zero. With the downturn in commodity prices, the mining tax has so far raised nothing, "bugger all," as we say.

From there things have become steadily bleaker as growth stalls, business investment smacks into a concrete wall and the federal government's much-touted return to surplus looks like Mitt Romney's dreams of the presidency.

Leading business economists predict annual economic growth will slip from 4.3 per cent in March to as low as 0.7 per cent, while growth in business investment is tipped to plunge from 16 per cent to close to zero in 2014.

The ruling Labour government has made much political mileage out of returning the budget to surplus (a wafer-thin one of $1.1 billion) by 2013, but many economists now openly predict a deficit as high as $8 billion on the back of plunging company tax receipts.

Meanwhile, our dollar, which soars on the thermals of our mining riches, has caused grief for areas such as manufacturing, retail and tourism.

Several experts muse that we may soon fall victim to the Dutch disease, that ailment that struck the Dutch economy in the '70s when strong natural gas exports sucked oxygen from other sectors. When the gas boom faded there was little to fall back on.

Our highly accomplished Reserve Bank governor Glenn Stevens is on the case. The interest rate cut obviously was designed to stimulate spending and kick-start construction, which Stevens hopes will take up slack in the tapering off of our mining boom. It looks like a sound enough strategy and Australians, looking forward to the festive-season holidays, are hoping he's right. If not, the "Mayan option'' might look like a viable alternative.

Michael Madigan is the Winnipeg Free Press correspondent in Australia. He writes mostly about politics for the Brisbane-based Courier Mail.

Republished from the Winnipeg Free Press print edition December 7, 2012 A13