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Alternative Strategies - A year away from the City - February

Patrick HealyIn early 2010 there are worse places in the world to be than Australia.  Today it is 28oC and the sun is shining in an almost cloudless sky.  Shorts and swimwear are the preferred clothing.  Even without spending too much time on the beach my tan has progressed from Café au Lait to near Americano.  We were in Sydney for New Year and the celebrations were extravagant.  The fireworks around Sydney Harbour Bridge cost around $4.5m and the spending was visible in a display that was long and undeniably spectacular.  The festivities were good humoured and the impression of optimism was tangible.  The feeling in the rest of the country outside of Sydney seems positive also, not just the expected informality (the Prime Minister commentated on the cricket on Boxing Day) but noticeably different from the crunch driven gloom of the northern hemisphere.

For the Lucky Country things are, as they say around here, pretty sweet.  The FT also believes that Australia is in the sweet spot with Australian banks amongst the strongest in the world in terms of capital and exposure to credit risks.  By a lot of other economic measures Australia is doing well and the Governor of Australia’s Reserve Bank felt confident enough to raise interest rates in December, a third successive rise.  It will be a lot warmer in the UK before the Bank of England is so sanguine.

Photograph by Lucy Reeve.

As a visitor from Britain I try not to think too hard about the record level of the Australian Dollar against Sterling.  It is still ‘around’ two dollars to the pound but the ‘around’ has moved from over 2.2 to under 1.8 in the last year.  Ouch.
Clearly Australia has been a beneficiary of the strength of the recovery in Asia and the fact that it is economically more linked to these countries rather than to Europe or the US has minimised the effects of the downturn.  It has also helped to be rich in natural resources at a time when the new engine of world growth is hungrily devouring all the raw materials it can find.  China is now Australia’s biggest trading partner and it’s not just iron and uranium that is fuelling this but also large Australian agricultural exports.

Talking to people in the tourist industry, there seems to have been a bit of a fall off at the top level, as wealthy Europeans and Americans tighten their belts but the continued growth in China seems to have helped even there.  I thought of this yesterday when I was on a raft near Lady Musgrave Island on the Great Barrier Reef and could scarcely get in the water for the crowds of Chinese tourists.

There also seem to be larger numbers of gap year students than usual as new graduates defer their return to shakier job markets.  In a steady job market there is work here for students and even picking grapes in the Hunter Valley now pays about AUD$20 an hour, as one slightly bitter winemaker told me.  The hostels are doing well and there seems to be no let up in demand for the traditional backpacker expeditions to surf, dive and generally have a good time in the sun.

Another possible sign of the growth and attractiveness of Australia has been the relative ease with which we could find friends formerly from the UK and now based here with whom to spend a few days.  It does not seem to have been too hard for them to move here in terms of residency, employment or acclimatisation.  If you are starting a family then a move to Australia has a lot going for it in terms of lifestyle, housing and other broad measures of quality of life.  Incredibly most of them seem to believe that it is possible to live a full life beyond the orbit of London.

Photograph by Lucy Reeve.

Of course, rather than feeling triumphant the real essence of the positive mood of Australians is the hunch that they have dodged a bullet.  The economy was just the right mix to avoid the worst effects of the global crisis.

There has been some unkind commentary that the relative lack of sophistication of some of the financial markets here was one of the things that protected them from the damage experienced elsewhere.  Talking to a friend who has worked in some of the best institutions in London and is now working for a large Australian bank he noted that when he first came to his new employer it was like ‘entering a time warp’.  For whatever reason, it has served them well.

Australia is a big, thinly inhabited country.  The population is concentrated on the coasts but even there the spread of low-rise houses gives the air of a place with lots of room to spare.  I had forgotten how American a lot of Australia can feel and there are some of the same myths about ‘the frontier’ and an expansiveness that perhaps is harder to find in cramped Britain.  This is an America that has not had the global role or pretentions of the United States and has not suffered the same great fall.  A less populous country but one that seems to have squared a relationship with the new powers on favourable terms.

There may be a perception that there have been winners and losers in the credit crisis but it is probably more accurate to say that there have been those that have lost less than others and that has resulted in a change of their relative position.  Australia has lost very little and has been one of those relative beneficiaries and there has been a realignment of its position relative to the UK.  How permanent this is will depend on the resilience and adaptability of the UK economy.

Patrick Healy was the Group Head of Risk Reporting for Man Group plc
© Patrick Healy

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