The Lucky Country - no recession for a generation

Australia was dubbed the lucky country as a somewhat of a ironic term, but the description has been largely misquoted from an insult to a positive. Penned by Donald Horne in 1964 in his book of the same name; Hornes critique of the nation is "Australia is a lucky country run by second rate rate people who share its luck."

We may well fit Horne's description as the lucky country as we have avoided a recession for over a quarter of a century. Prior to the 1990/91 recession we had become accustomed to a recession every seven years or so. Post 90/91 recession we have had a number of economic downturns from the Asian currency crisis, the tech crash, the GFC and Chinese demand slowdown but we have somehow managed to avoid a technical recession.

Tell that to anyone caught up in the downturn and they will struggle to pick the difference. We are now in the midst of an economic downturn and people are feeling uneasy, people are feeling we have delayed an economic downturn but still feel we are going to pay the debt somehow. Even though we have managed to avoid a recession, the household debt we have accumulated during this period is now the largest risk to the economy.

Our failure to squander the twin mining construction booms by firstly paying off debt before taking on more debt without initiating a sovereign wealth fund for future generations. The Howard Government established the Future Fund to cover the expenses of federal government retirement obligations with $156 billion of funds currently under management. However, this isn't a true sovereign wealth fund for the benefit of all Australians, just senior public servants.

To a lesser extent, there is a Medical Research Future Fund, Disability Care Future Fund, Education Investment Fund and Building Australia Fund but the funding is well under what they should be. Whilst some may argue the retirement savings of Australians held in superannuation with over $2 trillion in funds under management is a wealth fund.

This is the fourth largest pool of retirement savings in the world constituting a form of wealth fund, this is a private series of funds and not a sovereign wealth fund as such. There is however plenty of discussion that the funds under management still won't fully finance the retirements of the majority of Australians and the federal government will still be required to partially fund.

Our concerns are the investments that could decline in value following an economic downturn similar to Black Monday, the Tech Crash and the GFC could wipe out the values of retirement accounts when we do finally suffer a major economic downturn resulting in a lenghy and costly recession sending our retirment funds to money heaven.