Why Australia’s Miracle Economy Is Failing

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Australia—the land of sandy beaches, koalas, and flat whites. The land Down Under has also long been known for its prosperous economy, with many calling it "the lucky country." But that might be starting to change.

Australia's economy has been described as a miracle economy, but miracles don't last forever. On the surface, things look good. The economy continues to grow, but in per capita terms, it’s actually going backward. In other words, while Australia’s economy isn’t in a recession, its people are.

“We’ve started a rule that we only eat out once per week. We really watch what we spend, and we have a budget for everything.”

So, how did Australia's economy get here? And is the country running out of luck?

Miracle Economy
Australia is one of those rare countries that has avoided a recession since the early 1990s—if you exclude the pandemic. This resilience is largely due to its vast natural resources. The country has seen multiple mining booms, catalyzed by China’s rapid growth following its entry into the World Trade Organization and the global economy.

Australia is the world’s second-largest exporter of coal and a leading producer of iron ore, natural gas, and gold. Natural resources account for nearly 60% of the country's exports. Between June 2023 and June 2024, mining alone contributed $280 billion in export revenue—more than the entire GDP of New Zealand or Greece.

Another key driver of Australia's economic growth has been its population. Over the past 20 years, international migration to Australia has grown by 35%, far outpacing other developed nations. Australia has always been an “immigration nation,” and strong population growth has underpinned its economic expansion.

In fact, the Australian economy grew every year for the past three decades—excluding the pandemic. It even grew during the global financial crisis, unlike major economies such as the US, Canada, and the UK, which entered recession.

But recently, Australia has hit a rough patch.

Per Capita Recession
Kim Dao, a 30-year-old small coffee shop owner from Vietnam, moved to Australia in July 2017. Last year, she and her boyfriend spent six months searching for a one-bedroom apartment. Despite constant applications, they kept getting rejected. Every inspection had a long line of people.

Kim’s experience is far from unique.

Cost of Living
Australia is grappling with a housing crisis. Home prices continue to rise as demand exceeds supply. Median house prices relative to income show that Sydney is the second most expensive city in the world, after Hong Kong.

And it's not just housing costs that are soaring. Bloomberg’s “barbecue index,” which tracks the prices of common barbecue ingredients like pork, beef, ice cream, cheese, and vegetables, shows that all have risen significantly since 2020.

Because Kim’s business requires fresh ingredients daily, she constantly faces price fluctuations. “It’s hitting us hard. But we know people are suffering too, so we hesitate to raise our prices. Still, we’ll soon have to.”

While inflation is a global issue, Australia’s wages haven’t kept pace. People are paying more for everyday goods but not earning more. For over two years, real wages (adjusted for inflation) were negative.

Even though Australia’s overall GDP has grown, GDP per capita has declined. Between March 2023 and December 2024, per capita GDP fell for 21 consecutive months.

In short, Australians can now afford to buy and save less.

Household disposable income was growing steadily—until the pandemic hit. Since then, it has fallen below the OECD average.

Housing Shortage
One major reason is housing. While the country welcomed immigrants, it didn’t expand housing supply quickly enough to meet rising demand.

When borders reopened after the pandemic, a large influx of people returned, putting pressure on limited resources—especially housing. Land use and development are restricted by strict planning regulations. There’s a significant lack of affordable and social housing, which has created a massive gap in the market.

Rental affordability is at its lowest since at least 2008, with a large portion of incomes going toward rent and mortgage payments.

A good indicator of economic health is the ratio of spending to income. In Australia, household debt is over 200% of household income—one of the highest in the world. By comparison, US household debt is about half of that.

Productivity
Another concern is productivity. In simple terms, productivity is how much you produce from your existing resources. Higher productivity means more profits, better wages, more economic activity, and higher tax revenues.

But Australia’s productivity has been stagnating. Over the past decade, GDP per hour worked has remained flat—marking a “lost decade” of productivity growth. Before the pandemic, Australia’s productivity was higher than the US. Afterward, it fell behind.

The economy is heavily reliant on services. The care sector, including disability and aged care, is now the largest in Australia. These industries are generally less productive compared to sectors like mining or manufacturing.

Startups, which often drive productivity growth, are also struggling. Australia’s startup funding per capita is far lower than in many other countries.

Challenges Ahead
Boosting productivity and economic dynamism will be a major challenge for the Australian government in the coming years.

“This is a whole new world of uncertainty. We’re seeing policy uncertainty from the US, a slowing China, and global instability. Our job is to provide cost-of-living relief in a responsible way, while also making our economy more resilient.”

Some politicians have called for major economic reform. Australia hasn’t seen substantial reform since the 1990s.

On the manufacturing and mining fronts, there are opportunities to foster innovation, attract investment, and enhance competitiveness.

The government has already introduced a plan to boost green manufacturing and high tech. However, analysts say the funding is too limited and that more needs to be done to identify growth opportunities.

This is particularly critical in a time of global trade tension, as countries impose tariffs on one another.

Fixing the housing crisis will also be crucial. Australia still enjoys a strong reputation as one of the world’s top-performing economies. But if the productivity story doesn’t improve, the country risks losing its relative economic standing.

Give every team member a self-evolving AI agent that executes work, builds tools, automates outreach, and learns new skills by writing its own code - tailored to their exact role.

moxby agents don’t assist - they do. From building dashboards to writing content and running full workflows, each agent adapts to its user, evolves, and delivers results. This is real AI execution.