Australia creaks under the weight of its own success

Sydney

AUSTRALIA is close to seizing the global crown for the longest streak of economic growth thanks to a mixture of policy guile and outrageous fortune. But the nation is creaking under the weight of its own success.

While growth is being underpinned by population gains and resource exports to China, failure to spur productivity has meant stagnant living standards and electoral discontent; a property bubble fuelled by record-low interest rates has driven household debt to levels that threaten financial stability; and a timid government facing political gridlock could lose the nation's prized AAA rating as early as May because of spiraling budget deficits.

Australia's last recession occurred in 1991 and was a devastating conclusion to eight years of reform designed to create an open, flexible and competitive economy. But it also proved cathartic, paving the way for a low-infla…