The Land of Opportunity Down Under: Australia

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1:01David McWilliams: To understand the economy, you have to understand human nature. This podcast is powered by Acast.

1:28How are you doing there? It is time for the podcast. The podcast comes from down under. It comes from Australia. Not only Australia, it comes from Brisbane, John, where I am getting in touch with my inner flamboyant gay man. It's about time, Mike. I know, it's unbelievable. It's the freedom to come out when you're down here. It's the freedom to come out. I am cycling around Brisbane, which is an amazing city for cycling around. I'm listening on my headphones to the great Donna Summer. Now, don't ask me why. What a great track. Don't ask me why Donna Summer came into my head. But there's something very, very liberating.

2:08I'm channeling my inner Priscilla, the queen of the desert here, as we speak, okay? This is an Aussie gay tune. Cycling around, listening to Donna Summer, kind of singing to yourself, is as gay a thing as I've ever done since I tried to learn rollerblading in the 90s in Hyde Park. Well, I have to say, Mike, I do like the pattern on your hot pants. My hot pants? Well, it's very good. Yeah, yeah. It's a sort of a marsupial pattern. It's particularly nice. It's a very Aussie one. No, I am in this very flamboyant city. Sorry, sorry, listeners. John and I are just taking the piss here again, as always.

2:43But yeah, I am down in Brisbane.

2:47David McWilliams: Now, Brisbane is an interesting city in Australia because there has been, John, for years and years, this extraordinary competition between Melbourne and Sydney. You know, who's the prettiest, who's the best, who's the biggest, et cetera. Yeah. Interestingly, for most of Australia's recent history, Melbourne was the capital city. When I say the capital city, Canberra's the capital city, but I mean the capital capital in the sense of... Cultural capital. Cultural capital, commercial capital, artistic capital, all that sort of home of Nick Cave, all that sort of carry on, right? Yeah. But in the last half century, Sydney has wiped the floor.

3:26But the best way to look at this is the Olympics. So 1956, when Ronnie Delaney won the 1500 metres, the Australian Olympics, it was in Melbourne. Oh, I didn't realise that. And the 2000 Olympics, I think it was 2012, was it 2000, was in Sydney. So nothing underscores the eclipse of Melbourne and the rise of Sydney like the fact that a half century ago when Australia got the Olympics, it was in Melbourne. And now more recently, it was in Sydney. And Sydney is like big and brash and pretty and beautiful. It has the harbour. Whereas Melbourne is, was the commercial capital or the commercial and artistic city, the commercial and artistic centre of Australia.

4:09However, Brisbane as a result has been kind of largely ignored. It's up the coast, past the Gold Coast. and it was for years and years. So it's the capital of Queensland. Yeah. Queensland is known as the Texas of Australia. Is that derogatory or what? Yeah, completely derogatory. I mean, Queensland was run by a guy called Bielke Peterson, right? Who was the governor of Queensland, who was a absolute out and out right-winger, fascist guy, hated the aborigines hated immigration from the um pacific islands etc etc for years and years and years and of course went down in a blaze of corrupt glory in the 1990s but for many many years queensland was regarded as you know texas yeah yeah maybe as a result of that because there was no big competition between like melbourne and sydney brisbane kind of created its own cultural vibe And I'm here doing the Brisbane Writers Festival.

5:12That's just what has me in my hot pants, John, cycling around the city. Handing out copies of your book. Handing out copies of my book and copies of everything. Handing out copies of everything. Handing shit out. And your phone number. Yeah, handing shit out to everybody, exactly. My address, my phone number, all that sort of thing. But the amazing thing is the river, the Brisbane River is huge. And they have these extraordinary, what they call the sea cats, which are this taxi service, a ferry service, all the way around the city. It only costs 50 cent. All public transport is 50 cent Aussie cent, which is about 25 euro cent for us.

5:50So it's incredibly cheap. That's proper, isn't it? That's proper. Yeah, it's really proper. It's got the whole thing going on. And again, today's podcast is going to be a kind of a celebration of all things Australia. What I want to do is I want to look at the fact, John, that this is a country that has not had a recession in nearly half a century. Now think about that. Digest that. In 45 years, so nearly half a century, this country has grown every single year. This is an unparalleled economic success. And the question I want to pose is, why did this happen? What is going on here that isn't going on anywhere else?

6:32So I'll give you another statistic in terms of Irish people. In 2004, there were 55 ,000 Irish-born people here in this country. Today, there are 103 ,000. So the Irish population has doubled in the last 20 years, right? People are flocking here. The kids are coming here. I mean, I don't know almost anybody who doesn't have a child, a cousin, a mate, a son, a daughter in Australia working at the moment. the place is full of young Irish people. Absolutely. Well, as you know, my niece Lara is there with all her mates and my brother-in-law Morris is there. And Morris, you know, moved over there. I don't know, it must be nearly 10 years ago.

7:17Maybe it's more, but he really found his groove. He's in Adelaide and he really found his groove in Australia, along with the wife and kids now. It's like me in the hot pants, you know, you find your groove. I'm not sure if he was on rollerblades, but anyway. Well, listen, listen, I tell you. Anyway, so my point is I'm out here. I'm out and I'm flamboyant and I'm loving it.

7:38David McWilliams: But I want to talk to you about the reasons for the success of Australia. Because it is unparalleled. We've never seen anything like this before in any recent economic history. So, for example, if you take the period I'm talking about, the 40, 45-year period from the late 1980s, right? So the 40-year period, right? Contrast what has happened here with what has happened in the United States. So the United States is always known as the flamboyant home of capitalism. It reinvents itself. It's innovative. All that sort of stuff, right? The Americans have had, in the last 40 years, three major recessions.

8:22Yeah. They'd won after the Gulf War. They'd won after the dot-com crash. And they'd a massive one after the financial bubble, right? Yeah. They have had their currencies been up and down all over the place. Their politics has lurched from centrism to populism, and it's whiplashed back to populism, as we know. The United States has experienced all sorts of economic and financial turmoil. Contrast that with the Aussies. The reason I'm comparing them is they're broadly new societies, quite similar, et cetera. The Aussies have just gone through everything. They went through the global financial crisis, and absolutely nothing was impacted here.

9:02So, Mike, why is that? And, you know, in the last 40 years, 45 years, as you say, it's been growing. At what rate? What was the kind of the growth rate over the time? It's been growing about 2 % or 3 % all the time. Now, to get a sense of that, that means... Which is not huge, but it's ticking over and it's consistent. Well, it's not huge, but it means if it's growing at this rate all the time, the economy is expanding dramatically, right? Because it's cumulative, you know? Yeah. But just to give you a sense, right? I mean, like, Australia is the sixth largest country in the world. It's also the largest island in the world.

9:37Yeah. It's also an island that is also a country. Yeah. It's the first continent that was conquered by sea, by humans. It was also the last continent that was conquered by sea, by humans. It is home to, and you'll enjoy this, John, the largest living thing on Earth, which is the Great Barrier Reef, which is alive. Ah, yes, you're right. Just up the road from us here, right? It has the same land mass as the United States, but it has a population which is no bigger than the combined population of the Netherlands and Belgium together. So that just shows you how vast the place is. It's a continent with no people in it.

10:17Oh, sorry, what is that population? 27 million. Now, they have a target of a population of 40 million by 2050, and I'll talk to you about that again. Oh, okay. So, yeah, so the Aussies are basically, they're talking about repopulating the country, are populating the country. And they've massive, massive immigration. They've massive change in the perception of immigration, who should be here, who wants to be here. It's basically Australians have realized in the last three or four decades, they're actually Asians. They're not British. They're Asians. They live in Asia and Asia is their future. But I'll give you some other crazy statistics about this place.

10:55Kind of blow your mind, right? There's more things that can kill you here than anywhere else. including those hot pants now we have of the world's 10 most poisonous snakes all are australian all of them okay five of its creatures from spiders to jellyfish from octopus stonefish are the most lethal of their type in the world it is an exceedingly dangerous place to go strolling around it right and yet it's an amazing amazing country the population that i just talked about, the 27 million, all of them live in 2 % of the landmass. Right. Along the coasts, yeah. Along the coasts, they haven't built a major city here for 100 years.

11:37Right. But that'll just give you a sense that everybody lives in these conurbations. So what you get when you're here is a sense of the vastness, of the emptiness, of the oldness of the place, right? The fact that it's so old, and we're going to do another podcast, maybe next one, John.

11:56David McWilliams: We're going to do three podcasts on down under. First one is this one on the recent success of Australia. Second one I want to do is a more of an anthropological one on who lives here, what has been the recent history of the place, what's the economic history, what's the fusion of ecology, environmental economics, and Shumterian economics we'll come back to. Yeah. Okay. And then I want to do a final, maybe more critical one, which is what is it like now to live in a country with the highest house prices in the world, right? Because all this idea of people living here and all the immigrants coming in, et cetera, et cetera, plus financialization, plus the fact that the banks here are very aggressive in lending has pushed the price of property up completely.

12:44So you can't have a conversation here with Aussies without them focusing on the cost of living. I was in the hairdressers, John, yesterday, right? And... Not a barber's, a hairdresser. Oh, not a barber, a hairdresser. Getting styled. The hairdresser was from Sydney and we were having a chat and she was just saying, it was just interesting because the only conversation I was having with her was about the price of everything. She was like, basically, it has become very expensive for Aussies to live here. So on the one hand, it's an incredibly successful society. But on the other hand, the success has not been evenly spread out.

13:22And my friend, the hairdresser, he and I were bonded about discussing all sorts of carry on. But anyway, let me come back, right? There are five reasons, John, and we do them in turn for Australia's success. One is immigration in the last 25 years. Two is the fact that Australia is China's quarry. And by that I mean it is a big hole in the ground out of which all sorts of resources are mined. And they have basically surfed the resource boom for the last 25 to 35 years. They've also been very lucky geographically that they're located in Asia because up the road from here, from Indonesia, China, Korea, Vietnam, And of course, India itself, two billion Asians have been dragged out of poverty, kicking and streaming in the last three decades.

14:20And those two billion Asians want consumer goods. And the consumer goods are based on resources and the resources come from here. So we'll talk about that as well. But then there's other things which I find interesting.

14:33David McWilliams: They have an independent central bank. I know this can seem a little bit arcane, but this is an economics podcast when we're not with hairdressers in hot pants listening to Donna Summer. The central bank independence and flexibility is very important. Yeah, hang on a second. What do you mean? How is the Australian central bank different? So I'll tell you, so there's a very flexible central bank here. So contrast the central bank here, the Reserve Bank of Australia, to the ECB. The ECB's only mandate is low inflation. Yeah. The Reserve Bank of Australia's mandate is low inflation plus economic growth, which means they're much more flexible.

15:16So what they do is when there is a downturn anywhere, they allow the Aussie dollar to fall. This allows Aussie exporting companies to actually become more competitive, not less competitive. Okay. So the central bank is very, very flexible in how it uses the exchange rate. And listeners will know that I am a big fan of flexible exchange rates. I always have been. So they're more like the Americans in that way. They use the currency as a way to adjust to any problems on the outside. They're quite confident about that. Whereas we in Europe are not confident because we've inherited a German view about money, where the Aussies have a much more freewheeling attitude to money.

15:58And I'll give you another thing. This is the home to the greatest gambling industry in the world. Aussies gamble more than anywhere else. Anywhere else in the world, more than the Chinese. Aussies gamble much more, right? And I think they have this sort of gambling instinct when it comes to money. And the central bank reserve, the reserve bank reflects that. So the central bank has, as you've always explained before, the ability or the government have the ability to have their hands on both levers, both fiscal policy and monetary policy. And that gives them an awful lot more control and they can be a little more nuanced with stuff.

16:37Well, what they do is they're not afraid to drop the currency, the value of the currency, when they see problems coming down the road.

16:46David McWilliams: And that gives their competitive industry a chance to actually compete in a highly competitive market. Yeah. But there's another thing going on, which is you talk about fiscal policy, right? So despite the fact that over the last 40 years, I mean, they have elections every three years. So the governments are changing all the time. Yeah, that's mad. Yeah. You would think that would lead to instability. And one of the best ways to look at instability would be, for example, the government debt GDP ratio. Because if it's an unstable government, governments will spend too much, etc., etc. Australian government debt to GDP is 40%, right?

17:22It is 100 % in the UK. It is 100 % in the US. It's 200 % in Japan. It's 120 % in France. That's amazing. Yeah. So they're kind of pragmatic. the politicians here, despite the shouting and roaring, the left, right, and all that sort of stuff. Actually, when it comes down to running the country, they run it very well. So that's the kind of pragmatic side. But there is also, I think, there's an Aussie energy. They're a bit like Americans, right? They're the sort of people, like they're kind of in-your-face capitalists, right? At one level. And they're very, they're quite aggressive when it comes to capitalism.

17:57They're the sort of people that would appear in their own TV commercials. You know that sort of person? Yeah, yeah, yeah. You know, in the States, in the States, if a guy with a hairpiece saying, I defy you not to buy my sauna. Yeah, yeah. All we have is mattress wick. Mattress wick, exactly. But I think the best thing for Irish people, right? If you want to get a sense of flamboyant American capitalism, listen to a Harvey Norman ad, right? Yes, yeah. Because Harvey Norman is an Australian company and it has the same ads everywhere. Just listen to one coming out in the back of the Uber, right?

18:30Just right now, right? Harvey Norman. And it's kind of flamboyant. So you could imagine a whole nation of Harvey Normans

18:37David McWilliams: appearing in their own ads for hot tubs on afternoon television, right? That's what they feel like. But it has got that lovely sort of sense that you can do anything, you can get up and go, etc. But that comes from the immigrant mentality, you know? I think so, yeah. Yeah, it's the same as America, because they're all, you know, one time or other immigrants to America. and the same with Australia. And as we know, there's an immigrant mentality which is just all about getting up off your arse and working. Yeah, exactly. And then, of course, we also have the other tribe here, which you've got the immigrants and whatever.

19:14And then you've got the Bogans, who I quite like, right? And I'll tell you about the Bogans. The last time I was here was years ago, and I was in Fremantle. And Fremantle is over in the West, and I've never seen an Aussie Rules game. Right, yeah. Aussie Rules is basically GAA for good-looking fellas. For tough fellas as well, though. For tough fellas, but, you know, they're fit. And everyone's quite body conscious because it's a beach culture and all that sort of stuff. Now, I can tell you the daily temperature is like the surface temperature of Mercury. It is so fucking hot.

19:47David McWilliams: And I, with my beautiful olive complexion, go out to this game, right? So with the Fremantle crowd, right? And the Fremantle crowd, again, are all Mediterranean, immigrants of Mediterranean descent. And they look beautiful. The hotter it is, the brighter it is. The more their sallow skin looks olive and sallow and their green eyes and their brown eyes. And they look amazing. So I'm with this maid of mine who's from Fremantle. And then I look and there's a knot of fellas about seven seats down. There's about eight of them. And they look like water for GAA in the sun. But they're not, they're Aussies.

20:27David McWilliams: And they're getting hammered and they're also eating hot pies. Like you're getting a Middlesbrough football match. And then, except that it's not minus two, it's about 100 degrees, right? And they're getting more and more hammered and I'm becoming more and more aware of them. They're getting louder and more raucous. And their skin is beginning to peel and they're not looking well and their eyes are all red and they're drinking too much and the gargoyle's going down and I'm really aware of them. And my mic goes, You guys, you see those blacks there? That's what your country gave us. He says, they're Irish bogans.

21:06Bogans. Bogans. So anyway, all I'm saying is it's been kind of fab, but the bogans are tradies, they're tradesmen. They work hard, they get up early. It's a sort of a can-do culture. Now, all of that together, all of that, we'll do the numbers in a minute, John, But all of that together is a sort of a heady brew of economic optimism, which has absolutely come together in the last 40 years.

21:34David McWilliams: As the Australians have gradually shed their British skin and adopted a much more cosmopolitan outlook and much more get up and go outlook. Because for many, many years, Australia was basically Britain stuck in Asia, in this continent. It was very much Scottish, English. Interestingly, still the largest ethnic minority in Australia with over 900 ,000 people born in that country are English. So it's a very English country. You know, we don't tend to think of the English as an emigrant nation, but they have been a hugely successful emigrant nation for the last 300 years. The English leave in great numbers.

22:18It's because they don't hang out in English areas. There's no English ghettos. It's a sort of oxymoron, you know, where there's Irish ghettos, right? There's Irish areas. There's no English areas. So it's got a very, very odd feeling. Yeah, yeah, yeah, yeah. Okay, so let's get into the numbers. But first of all, let's get a message from Mattress Mick.

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24:12Okay, Mac, you are sitting there in your hot pants in Oz, in the blistering heat. In the blistering heat, exactly. You're just glowing there. You're glowing. I'm telling you, John, you'd love it. It's the new me. But let's get into what makes Australia tick. You were talking there about five main things. One was kind of immigration and the population and people. The other thing was the resources, the natural resource which they're blessed with. You also talked about a well-run, well-functioning central bank. Then you talked about the pragmatic attitude of the Australian government and the Australian people.

24:53And then there's also that attitude of Australians, which is that kind of get up and go, possibly born out of the kind of immigrant mentality. So let's get into this a little bit more.

25:04David McWilliams: Well, the immigration story is fascinating. Very, very briefly, the Aussies are a society where 31.5 % of all Aussies are born overseas, which is phenomenal. It's a huge number. Yeah, it's the highest in the world. So 8.6 million out of 27.2 million people are foreigners. We're not born in this country. And that is the highest share in Australia since the 19th century, and it's the highest share in the developed world. Which means that this is an unbelievably cosmopolitan. place. Now contrast that with what it used to look like. Australia used to be British. It had a white Australia policy only.

25:46David McWilliams: It had a British policy only. It was very, very much favored towards being a British colony in the middle of Asia. And after the Second World War, something really struck the Aussies, which was the following. In the Second World War, Australia fought, of course, on the side of the British and with the Americans. But the Australians were threatened by the Japanese. The Japanese wanted to invade Australia. They made it as far south. We forget this. The Japanese made it as far south as Papua New Guinea, and they were on their way to Australia. And at this time, Churchill tried to urge the Australian Armed Forces to redeploy their resources to India and give Australia, if needs be, to the Japanese because Churchill wanted to protect the jewel of the crown of the British Empire, which at the time was India, not Australia, because Australia was seen basically as a large sheep farm down in the middle of nowhere.

26:50David McWilliams: Wow, I didn't know that. But they didn't quite understand the full extent of the resources that Australia had, obviously. The resources were only found after the Second World War. Yeah, yeah, yeah. So this really pissed off the Aussies because they realized that, number one, they couldn't depend on Britain because Britain's real bias was towards preserving India from the Japanese rather than Australia. That's the first thing. And the second thing is they also realized that Britain was just simply too far away. that when actually, when the shit hit the fan, Britain didn't have the power, it didn't have the naval power, it was too far away.

27:31David McWilliams: And the third thing was what protected the Aussies at the end of the day from Japanese invasion wasn't Britain, it was America. So the Americans turned the Pacific War in 1942 against the Japanese, the Battle of the Midway and all that sort of stuff. And so suddenly the Aussies realized that their real ally is the United States. Right, okay. So they kind of pivoted away from Britain psychologically, although the place was still very, very much a British colony, a British protectorate, etc. But they realized, number one, that they couldn't depend on Britain because it was too far away. They also realized, number two, that they're geographically in Asia.

28:13David McWilliams: Number three, they also realized they didn't have enough people. And this is where the immigration comes in. So, A, they didn't have enough people, and Britain didn't have enough people. That's Ireland, England, Scotland. I'm including Ireland in this, right? Even though we weren't part of that in the Second World, that's their perception, right? But we just simply didn't have enough people to populate Australia to the level of which it needed to be populated. Because remember, it only had 5 million people in the Second World War. So they opened their doors to Greeks, Greeks, Yugoslavs, Italians, Portuguese, and Spaniards.

28:50David McWilliams: Particularly Greeks, Yugoslavs, so Croatian, Serbs, Montenegrins, Macedonians, and Italians. And why those countries and not, you know, the France and Germany and Denmark and wherever else? Well, interestingly, all of those countries had very, very serious proto-fascist or fascist governments in the Second World War, right pro-german once those people lost i.e. once the brits the americans and the communists won together a lot of people had to leave those countries very quickly right because a lot of retribution there was a lot of score settling that's the first thing second thing is italians greeks and yugoslavs were very poor after the second world war their economies were completely destroyed they had nowhere to go in the yugoslavian case you know you had the communist government coming in under Tito.

29:45David McWilliams: In the Italian case, you had a huge amount of people from southern Italy wanted to leave. In the Greek case, you had this ongoing 1950s crisis between Greek communists and Greek militarists and right-wingers, which went on for a long, long time. It was a civil war. And similarly, in Portugal, you had, you know, Salazar's government, which was not really a dynamic government. And of course, you had Franco in Spain. So the Italians, Spaniards, Greeks, They came here. Two million of them came here, right? They were called New Australians. A huge amount of people. This is why the Aussies are so good at coffee, right?

30:18David McWilliams: It wasn't the Brits brought coffee here. It was Greeks and Italians. And again, that's why Melbourne is the second largest Greek metropolis outside of Athens. Right. It's the second largest Greek city in the world. So all these people came. They sort of changed the dynamic, et cetera, et cetera. So they replaced or at least added to the existing population of Irish, English, and Scottish who were here and Welsh, right? And so there was a sort of a Mediterranean flavor to Australia, which became very evident in this 1970s and 1980s as the kids of those immigrants became first-generation Aussies.

30:54David McWilliams: Now you have an extraordinary immigration from India and China. There are 700 ,000 Chinese-born Australians, right? So it feels very Asian. And there's 916 ,000 Indian-born Australians. So again, you have this huge change. Of course, you've got Pacific Islanders, particularly around here in Brisbane, the Pacific Islanders. This is their main port of call. This is where they come. And this is the city they hang out in. And you've Indonesians, you've Vietnamese, you've Koreans, you've a huge amount of Japanese tourists here. So basically what you have is an Asian melting pot fused with an existing British population and leavened by a Mediterranean population, all of which is pushing the population towards 30 million.

31:42David McWilliams: And all Australian governments, right and left, have a target of 40 million Aussies by 2050. So they're doubling down on immigration. That creates its own problems. We'll have a podcast about that maybe next week. But that's the essential economic chemistry of the place, John. Right, okay. So that's the story of the Australian population and its diversity. So tell us about the resources element. It's fascinating because up until the Second World War, Australia was a large sheep farm. That's exactly what it was. They exported sheep, very pleasant, slow-moving, not particularly dynamic place of sheep farmers, right?

32:25And they exported sheep all over the world.

32:28David McWilliams: And that was their thing. But then in 1952, I'm going to tell you a story of a guy called Lang Hancock. It's a great Aussie name, Lang Hancock, right? How are you? Yeah, and because the country is so vast, people fly little planes around here all the time. The farmers might have farming estates that could be as big as counties in Ireland, right? One farmer. So this guy, Lang Hancock, he's basically in his aircraft in Western Australia. I mentioned Perton, Fremantle, Western Australia, Port Headland, all these places. These are very, very remote places, right? And he is basically, you know, piloting over this massive empty tract of land that he owned, but there was nothing on it at all.

33:11David McWilliams: And he lost his bearings in a storm and he had to land this little small plane. And he landed on basically a thing called the Western Shield, which is a part of Western Australia. And as he got out of the airplane, he realized that he was actually standing almost on solid iron. He could see the iron under his feet. Right. Okay. Wow. And he discovered that he owned, he didn't even know this, 100 kilometers of nearly solid iron. He owned at the back of this mountain, which he'd bought for Tuppen's Ha 'penny because nobody wanted it. It's like finding a treasure chest. Exactly. And from almost nothing in 1950, the reserves of iron ore in Australia by 1960 were 20 billion tons.

34:02Hancock alone, this geezer, controlled iron ore reserves that were greater than the entire of the United States and Canada combined. Wow.

34:12David McWilliams: So it was a fortuitous discovery. And of course, then they started to realize because the continent is so old, John, because the geological formations are so old, there was just stuff under the ground. Loads of stuff. So they found bauxite, nickel, magnesium, uranium, copper, lead, diamonds, tin, zinc, all things. And suddenly Australia realizes is that it has become the quarry of the world. Yeah. And the mining boom took off. And of course, with mining, you get speculation, you get gambling, because it's a certain type of geezer is a miner. By the way, we have a huge listenership in the minds of Queensland, because I met two South African guys only two days ago who came to a book talk I was giving in Brisbane, two Afrikaners.

35:05Wow.

35:06David McWilliams: They're both avid listeners to the podcast, not Irish at all, and they're up in the coal mines, and they say they all listen to them in the mines. Fantastic. Hello down there in the mines. So in 2025, iron ore alone is forecast to earn the Australians about$113 billion in revenue, right? That's a quarter of all commodity exports. Australia is the second largest exporter of coal in the world. It owns 26 % of the world market. It is amongst the top three in liquefied natural gas. Now, if you think about this, what this allows the Aussies to do is it allows them to run consistent trade surpluses.

35:50David McWilliams: Now, this is very important because the consistent trade surpluses means that the Aussies can import all the good manufacturing goods from Asia, particularly China, and pay for them with these resource dollars. So it's a kind of a free lunch for Australians. And that's why, for example, so Australia is in effect a massive, massive quarry with a really good marketing department in the sense that you kind of think of Australia as surfing and blonde-haired people and all that sort of stuff. In fact, what it is, it's a big mine with a great branding department. Yeah. Now, of course, they've been absolutely fortuitous.

36:28David McWilliams: As I said at the top, two billion Asians have been brought out of poverty since 1990. These people need Australian energy. They need Australian resources to surge, to power their surge. They've already made market. Yeah. So being Asian in the 21st century, John, is like being European in the 19th century from an economic perspective. You're in the right place. Gotcha. Yeah, yeah, yeah. So they're the two major factors. Now, we've already spoken about the central bank and how that works and how it's different in Australia. But you also mentioned pragmatism. Explain that one. So the kind of pragmatism that the Aussies have, I'll give you a really good example of this, right?

37:09David McWilliams: You know the way you have these world most livable cities, indices, which are always, every year, and people look and say, where's our city, right? Now, Melbourne is consistently ranked the fourth most livable city in the world. It's kind of near-perfect scores on stability, healthcare, infrastructure, right? And it's far outranks kind of Western capitals like Paris, which is 31st. Now, that's fascinating because usually quality of life indicators are directly correlated to the amount of money the state is spending on healthcare and on infrastructure and all those good things in housing. Now, fascinatingly, even though Australian cities constantly are higher on quality of life, Australian life expectancy is very, very high, health metrics, not just when people die, but the many years they remain healthy, all those really fascinating and crucial parts which tend typically to be linked to healthcare and government spending.

38:08David McWilliams: in Australia, contrast this with France, right? Australian government spending is about 38 % of GDP. French government spending is 57 % of GDP. Oh, wow. So what the Aussies are doing is they are getting a more social bang for their expenditure book. Now, what is this? It means what they're doing is they are spending much more productively. They are much better at public infrastructure than the rest of the world because they are delivering incredibly high levels of quality of life, but they're not spending half as much. So the implication is the spend that they are spending is actually cleverer than the spend that we are spending in Europe.

38:53But they also have a much better climate and a much better kind of lifestyle. Like it's a much more outdoorsy kind of lifestyle. So people are healthier and they're more active and therefore that has its own benefits.

39:07David McWilliams: you're absolutely right but you could say the same about spain portugal italy greece all those european countries that also have smoke and drink wine the aussies like drinking wine the aussies like well they're good wine yeah and the bogans like drinking pints i was in a i was in a bogan bar the other day and you really know you're in a bogan bar when they're watching it's about 70 degrees 80 degrees outside it's beautiful hot and inside of the bogans watching motorsport drinking pints. Then you know you're in the real place. This is my little odyssey, John. I will leave you now. It's my Aussie odyssey.

39:42I have one question for you, though, at the end, because you've painted a beautiful picture of a promised land that is thriving with lots of resources and lovely, healthy lifestyle, but particularly the resources and that driving the Australian economy. But you're saying that the main market is Asia. Now, in the current climate with Trump and the escalating trade war, which could turn into a hot war with China, what would happen then? Is that kind of lights out for Australia?

40:17David McWilliams: Oh, it's a really good question. That's a really, really good question because Australia, so this gets us into the geostrategic sense of what Australia is. So Australia is what I would describe as a sub-imperial power. So the imperial power is America. And Australia can be counted on by the Americans to be the sub-imperial power in this region. So it has a very large navy, which it takes very seriously. It's got a big army that it takes very seriously. It has a huge continent to patrol, to police. It basically is the significant power around here, around New Zealand, in the Pacific Islands. Basically, this is Australia's neck of the woods.

41:04David McWilliams: And it's very, very much aligned with America, not just for geostrategic reasons, but as I said about the Second World War, for actually historic reasons. They realized, hold on a second, the Americans are the only power that is big enough to project its military power to help us. So they have a lot to lose for a confrontation in the South China Sea between America and China. And they're constantly trying to play this high wire act. So Kevin Rudd, the previous, for example, premier here spoke fluent Chinese. And they were very, very, you know, so they're closer to China. they have as I said a million Chinese citizens here they understand that they're also very close to India not just for immigration but actually geographically they're in this part of the world so they have a lot to lose but what you really realize is that even when you're here America is very far away everywhere is far away and I think you're right I think the Aussies are a bit like, remember I described the Irish as the jockey riding two horses, with the European horse and the American horse.

42:17David McWilliams: The Aussies are a bit like the Irish in that sense. They are the jockey riding two horses, the American horse and the Asian horse. And at the moment, both of those horses are just about going the right direction because Japan, Korea, Philippines, if you think of what the Americans have created, the Americans have created an archipelago around China, which is South Korea, Japan, Taiwan, Philippines, all the way around and, of course, trying to get into bed, India, Indonesia, these are big pro-American powers, right? Malaysia as well. The Aussies see that as the first line of defense against a threat to China.

42:59David McWilliams: But they are very aware of it. And when you're talking to some Aussies here, they're very aware that they are this, it's a high wire act, that for the last 40 years has gone extremely well because they've managed to export everything to China, but at the same time be in the American world and constantly be able to be pro-American and pro-Chinese. I think, and we'll leave it here, the last thing the Aussies want to do is make a choice between one or the other. So they're hoping for the fudge that basically the whole world is hoping for, which is that we just keep going along and there's tariffs raised and then the Chinese react and there's this, that, and the other.

43:38David McWilliams: But eventually, the Cold War remains... Well, the Cold War remains cold. Not hot. And then, speaking of cold, I'm going to go out and have a cold beer, John. Because that's exactly what Aussies do. Exactly. Well, I've had my breakfast. It's, you know, it's 11 o 'clock here. It's sunny. We might go have a little beer and see what I'm going to do for the day. Well, listen, I will talk to you. I'll talk to you in a couple of days' time. Good luck.

44:18We'll be right back.

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