Melbourne, Australia and San Francisco, U.S.A. — Australia set a new world record on June 30, 2012 of 21 years of continued economic growth – an achievement unmatched by any other developed country in recent times. While the global economic crisis endured, Australia’s trade with Asia, mining industry, and business supportive government drove positive growth for the country in 2012.

Each of the first three quarters of the 2011/2012 Australian financial year reported positive economic growth of 1.0 percent, 1.0 percent and 0.9 percent respectively according to the Australian Bureau of Statistics. Exact growth for the fourth quarter will be reported by September, but it is forecasted by HSBC to continue the positive growth pattern.

“The Australian economy has proven itself to be dynamic and robust over the past 20 years,” said PricewaterhouseCoopers Economics and Policy leader Jeremy Thorpe. “Australia’s economic strength is envied across the world. Thanks to a resilient natural resources sector, the Australian economy is well positioned for future growth.”

While natural resources attracted investors to Australia from around the world, specific regions have benefited from a focus on high-tech sectors and reinvestment in local economies. Despite making up just 3 percent of Australia’s land mass, the state of Victoria – where the city of Melbourne is located – is responsible for almost a quarter (24 percent) of Australia’s economy and has AAA credit ratings from Standard and Poor’s and Moody’s. Victoria’s economy is larger than that of Singapore or Hong Kong.

A combination of household consumption, private business investment and Victoria’s exports has driven growth. Despite the high Australian dollar, Victorian goods exports grew by 4.6 percent in the last quarter and more than nine per cent over the year.

The most recent release of Australia’s National Accounts showed that final demand within the state of Victoria had increased by 1.8 percent over the March quarter and 2.7 percent over the year. Victoria’s growth over the last quarter was the strongest of all states with exception of Western Australia which is the beneficiary of the mining boom.

Melbourne is the center of the $1.4 trillion Australian pension industry as well as headquarters of the country’s leading sovereign wealth funds and half of Australia’s leading banks. It is one of the world’s foremost biotechnology hubs and home to more research universities than any other city of its size.

Its expertise in information communications technology has drawn major investment from Microsoft, IBM and Computershare, and the network operations center for the ambitious National Broadband Network. Studies show that companies conducting R&D in Melbourne bear 88 percent less tax burden than in the United States.

“Victoria has always hosted a diverse and smart economy,” said Michael Kapel, Commissioner to the Americas for the Government of Victoria, Australia. “The government of Victoria continues to offer innovative ways to encourage growth, including recent incentives such as the R&D tax credit, which makes Melbourne one of the most attractive locations in the world for R&D. We are inviting US companies to follow the likes of Microsoft and IBM to come to Melbourne and be part of one of the world’s most reliable and dynamic economies.”

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Global economic conditions today are awfully bleak and momentum in global economic growth is certainly uncertain. The European fiscal fiasco jeopardized global growth as a whole and further situations became aggravated with the inability of European leaders to put in place a plausible accord that can ensure a bright future for the Euro Zone.

Reasons for fiscal complications of the eurozone are many and varied, but perhaps fiscal dissonance among member nations is the prime cause for this economic menace. Eurozone as an Economic Union almost failed to maintain fiscal integrity with respect to expenditure patterns of the government and solely focused on monetary management overlooking the totality of fiscal significance.

The root cause of the delayed response to the Sovereign Debt crisis is nevertheless the limited capacity or lack of willingness on the part of the European Central Bank (ECB). A return to economic stability relies on ECB allowing greater authority and becoming a last-resort lender to troubled economies,

Industrial orders in the eurozone fell by 6.4 percent in September, the steepest decline since the dark days of 2008. Another closely watched index, based on surveys of the purchasing manager in manufacturing and services is also precarious, falling below 50 percent to 47.2, where anything below 50 implies shrinking activity.

“Europe is going into recession, if not already in one,” according to Frederic Neumann co-head of Asian Economic research at HSBC. Pranay Gupta, Chief investment officer for the Asia Pacific region at ING in Hong Kong, said “Europe is where the United States was three years ago.”

The financial crisis of 2008 was firstly an output of regulatory deficit over the financial industry and a consequent credit crunch that followed, along with other events such as death of Lehman. However, the eurozone economic headwinds is basically due to exhausted state resources and the high cost of borrowing.

Recently, Germany suffered from a lack of strong demand for its 10-year safe bunds with the government selling only 3.6 billion euro bunds. The results suggest that “Germany is not immune to increasing risk aversion in the euro–zone but market”, according to Marc Chandler of Brown Brothers Harriman.

“The only thing that would work is printing Euros, paying down the debt and risking inflation” said Dave Rovelli, Managing director of U.S equity trading at Canaccord Genuity. The only alternative in sight is to establish a consensus among European leaders as to how to get out of this mess and also, how to avoid falling into the same trap in future.

Image Courtesy of   http://www.flickr.com/photos/europeancouncil/

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