There's a few reasons, and most of them don't bode well for the future: - Since the early 2000s, there has been an unprecedented spike in the price of natural

There's a few reasons, and most of them don't bode well for the future: - Since the early 2000s, there has been an unprecedented spike in the price of natural resources like iron ore (http://www.macrobusiness.com.au/wp-content/uploads/2015/11/Capture185.png http://www.macrobusiness.com.au/wp-content/uploads/2015/11/C...). Australia is a resource rich country and so has enjoyed a significant, but temporary, increase in national income as a result. - The above has had a number of unfortunate (but avoidable) long-term effects on the Australian economy: high demand for Australian natural resources meant high demand for Australian dollars, so the dollar appreciated. This hollowed out the economy as most non-mining export facing businesses were ruined by this. Australia's car manufacturing industry is dead, for instance. This could have been managed by taxing rents from natural resources and placing that money in a sovereign wealth fund (i.e. a fund that invests in assets denominated in non-Aus currencies). But we didn't do this because we're idiots. - The government that presided over the majority of this 'mining boom' (i.e. John Howard and co) acted as if those historically unprecedented prices were the 'new normal'. Accordingly, they passed a number of budget measures that placed the Commonwealth budget into permanent structural deficit. The IMF conducted a cross-country study of fiscal spending for the last 200 years in 2013. In Australia's case it found that there have been 3 periods of 'fiscal profligacy': 1 during Whitlam (in the 70s) and 2 during Howard.[0][1] However many Australians continue to buy in to the myth that John Howard was a 'great economic manager'. - Howard's government also changed how residential real estate is taxed for property investors. Specifically, he made it more concessional for the rich, and created stronger incentives to 'flip' houses after 1 year to maximise the tax benefit.[2] - So Australians took all this new income, and sweet tax breaks, and poured it all into speculative investment in residential real-estate. [3][4][5] Out housing markets (especially in Sydney, Melbourne and Brisbane) are investment bubbles just waiting for some external shock to pop them. The mining boom is also winding down, so less national income to keep the ponzi going. In terms of private debt, we are now one of the most indebted nations in the world. - We've also kept the housing / nominal GDP ponzi by having insanely high immigration levels, unprecedented by historical standards. Of course, this had to be sold carefully because Australia is a fairly racist country. So, our previous Prime Minister John Howard made a big show of brutalising refugees, while at the same time quietly opening the immigration floodgates [6][7][8]. - With the mining boom ending and the continuation of high immigration, our major cities are reaching crush capacity. Infrastructure and education spending have not come even close to keeping up. This has kept house prices levitating for the moment, but this can't last forever. It has also reduced quality of life and employee wages and share of production surplus [9][10] So that's how Australia has managed to avoid a nominal recession for the past 25 years: by running the world's most successful ponzi scheme. But as windfall natural resource income dries up, international lenders stop lending to our banks, and high immigration becomes a mass exodus, our enormous property market bubble will explode leaving us with only a bunch of long dead industries (like manufacturing) and piles of debt. Basically a replay of the 1890s recession in Australia, which was one of the main drivers of federation. So I guess we'll be invading New Zealand soon. [0] https://www.imf.org/external/pubs/cat/longres.aspx?sk=40222.0 https://www.imf.org/external/pubs/cat/longres.aspx?sk=40222.... [1] http://www.smh.com.au/federal-politics/political-news/hey-big-spender-howard-the-king-of-the-loose-purse-strings-20130110-2cj32.html http://www.smh.com.au/federal-politics/political-news/hey-bi... [2] http://i.imgur.com/4VUGfPz.png http://i.imgur.com/4VUGfPz.png [3] https://www.macrobusiness.com.au/wp-content/uploads/2017/03/Australian-house-values-to-Income-660x504.jpg https://www.macrobusiness.com.au/wp-content/uploads/2017/03/... [4] http://www.macrobusiness.com.au/wp-content/uploads/2016/12/ScreenHunter_16592-Dec.-09-11.46-660x463.jpg http://www.macrobusiness.com.au/wp-content/uploads/2016/12/S... [5] http://www.macrobusiness.com.au/wp-content/uploads/2016/11/ScreenHunter_16297-Nov.-23-17.16-660x427.jpg http://www.macrobusiness.com.au/wp-content/uploads/2016/11/S... [6] http://www.macrobusiness.com.au/wp-content/uploads/2017/02/ScreenHunter_17403-Feb.-13-11.51-660x465.jpg http://www.macrobusiness.com.au/wp-content/uploads/2017/02/S... [7] https://www.macrobusiness.com.au/wp-content/uploads/2017/03/Australian-population-change.jpg https://www.macrobusiness.com.au/wp-content/uploads/2017/03/... [8] http://www.macrobusiness.com.au/wp-content/uploads/2017/02/ScreenHunter_17401-Feb.-13-11.51-660x489.jpg http://www.macrobusiness.com.au/wp-content/uploads/2017/02/S... [9] https://www.macrobusiness.com.au/wp-content/uploads/2017/03/Australian-workers-falling-share.jpg https://www.macrobusiness.com.au/wp-content/uploads/2017/03/... [10] https://www.macrobusiness.com.au/wp-content/uploads/2016/11/ScreenHunter_16336-Nov.-25-10.57.jpg https://www.macrobusiness.com.au/wp-content/uploads/2016/11/...