We Canadians have been quietly congratulating ourselves about how our economy has outperformed the U.S. in recent years. We were immune to the worst of the financial crash, avoided the U.S.’s housing bubble and even the oil crash hasn’t hurt as much as some feared.
But maybe we should stop comparing ourselves to the U.S., and start comparing ourselves to another country whose economy is a lot like ours — but who has been kicking our pants, economically, for years.
That country would be Australia.
Buildings on the Yarra River in Melbourne, Australia. (James O'Neil via Getty Images)
Bank of Montreal chief economist Doug Porter has been calling Oz “the Lucky Country” for its impressive ability to grow through thick and thin.
“Australia has not been in a recession for more than 25 years now, a world record,” Porter wrote in a recent client note.
That's right, the last time Australia had a recession, Vanilla Ice was topping the charts and the Soviet Union was still a year away from dissolution.
Since the start of the century, Australia has averaged 3 per cent economic growth per year, compared to 1.9 per cent in Canada and 1.8 per cent in the U.S., Porter noted.
In those 25 recession-free years, there have been only three quarters when Australia’s economy shrank.
Meanwhile, if Canada’s economy shrinks this quarter — as economists now largely expect — that will be the third quarter of shrinkage for Canada just since last year, Porter noted.
Similar economy, similar problems
Australia’s economy parallels Canada’s in many ways, particularly its reliance on commodity exports (iron ore in Australia’s case). And in both cases, the downturn in commodity prices has hurt, but hasn't thrown these countries entirely off course.
Maybe the more notable parallel to Canada is Australia's overheated, super-expensive housing market. In Australia as in Canada, there is a lot of talk about how much foreign (mainly Chinese) investors are responsible for the price run-up.
Houses in the exclusive Sydney suburb of Double Bay. (Fraser Hall/Robert Harding via Getty Images)
Those high house prices have made Australians, like Canadians, among the most indebted people in the world. And in both countries, many observers fear that huge debt could lead to an economic crisis.
When the OECD last week warned Canada to get a handle on out-of-control house prices, it gave Australia an even harsher warning: Its house prices are likely about to experience a “dramatic” crash, the international agency said.
But, like in Canada, Australia’s housing market keeps defying predictions of doom. The country’s two largest cities, Sydney and Melbourne, keep seeing double-digit house price growth, similar in scale to Toronto and Vancouver.
Australia's average house price now stands at the equivalent of C$550,000, compared to $508,000 in Canada.
So when Canadians compare themselves to another country (as we like to do), at least on economic issues, maybe we should be looking at Australia instead of the U.S.
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