Australia's alleged exceptional economic performance in the face of the global financial upheavals that began with the Asian Crisis in 1997, has long confounded the experts. While the so-called Asian Tiger economies dropped like flies following the currency crises of late 1997 and early 1998, their trade partner Australia, according to the latter's government indicators, powered ahead with consistently high economic growth rates, and a relatively stable stock market performance that mirrored, without the extremes, the U.S. Dow Jones Index. On June 1, Australian Treasurer Peter Costello gloatingly revealed yet another stand-out performance by the economy for the March quarter of 1999, that recorded annualised GDP growth at 4.8 per cent—the highest growth rate in the developed world. But, buried within the Australian Bureau of Statistics (ABS) figures, is all the evidence one needs, to show that the growth in the Australian economy is simply a debt-fed bubble, which is expanding so rapidly that it is about to burst.

Australia's 4.8 per cent growth came despite a massive 3 per cent contraction in national economic output as measured in the usual GDP terms; the so-called 'growth' was fuelled almost entirely by consumer spending—which is in turn driven by the mysterious force called 'confidence'. Real consumer spending has grown by more than 10 per cent in the two years to March. According to the ABS, this breaks down into 23 per cent more motor vehicles being bought than in 1997, 22 per cent more telephone calls, 16 per cent more alcohol, 15 per cent more clothes, 14 per cent more education, entertainment and non-car transport, 13 per cent more restaurant meals and 12 per cent more household energy.

Yet, while spending has splurged, household savings have collapsed, from 5.6 per cent of after-tax income in 1997, to just 0.4 per cent this year! In dollar terms, this is a drop in household savings from $18 billion in 1997, to just $2 billion now. (These, and all following figures are quoted in the Australian dollar, which is US$.64.) While savings have collapsed, debt has skyrocketed: in the past 6 months alone, housing mortgages grew by an annual rate of 12 per cent, personal loans grew by 20 per cent, and credit card debt grew by 24 per cent.

Nationally, all of this debt-driven consumer spending has produced record levels of foreign debt, and record trade and current account deficits. In December 1997, the Australian government stopped keeping monthly current account deficit (CAD) figures, probably in anticipation of the impending record deterioration. The quarterly CAD, which is the trade deficit, or excess of imports over exports, plus the net income deficit, for the March quarter was a massive $8.9 billion, or 5.9 per cent of GDP. Last year, the Opposition Treasury spokesman Gareth Evans was attacked for 'undermining consumer confidence', when he observed that a current account deficit of 6 per cent of GDP was regarded as 'Banana Republic' levels. Today, the 5.9 per cent level is seen as just the beginning: a massive monthly trade deficit in April of $1.9 billion is certain to push the CAD well above 6 per cent.

The April record trade deficit brought the trade deficit for the first 4 months of 1999 to a massive $6.35 billion, compared with $2.85 billion for the same period last year, and just $55 million in 1997. At this rate, Australia is heading for an annual trade deficit of around $20 billion, and a current account deficit of about $40 billion. Forced to address the stark reality of the CAD figures, Treasurer Peter Costello tried to put a brave face on them: "You would expect at a time when your domestic economy is strong and your export opportunities are weak, because of a downturn in the rest of the world, you would expect pressure on your current account deficit," he said lamely.

Spurred by the trade deficit, foreign debt has ballooned. In the year to March, net foreign debt (total foreign borrowings minus total foreign lending, government and private) rose by $17 billion, or 7.5 per cent, to $241.6 billion. This was only half of the increase in total net foreign liabilities to owners, shareholders and lenders over the same period, of $36 billion to $354 billion. Almost 80 per cent of Australia"s foreign debt is owed by corporations, and more than half of it by banks, which, stretched to the limit, have been forced to borrow overseas, to finance the consumer spending spree on foreign imports. For the two and one half years from mid-1996 to the end of 1998, the foreign debt of Australia's banks rose nearly $60 billion, going from $75 billion to $134 billion.

So, even in orthodox economic terms, Australia's economy is in dire straits. In physical economic terms, it is much worse, as the rural sector has been devastated, and the all-important manufacturing sector is evaporating. Since 1996, 30,000 manufacturing jobs have been lost in Victoria alone, which is historically the heart of manufacturing in Australia, while over 300,000 manufacturing jobs have disappeared nationally since the late 1980s—a huge number in a nation of only 18 million people.