How Australia’s Economy Outshines the Rest of the World

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Australia’s economy

What makes Australia’s economy one of the most stable and prosperous in the world? This article will answer this question by examining the factors that contribute to the success of the economy and the benefits it brings to the people.

Welcome to 2024! And happy January 26 – officially Australia Day.

Over the last few years, Australia Day has become a little bit contentious and we really do not want to wade into any dramas about the choice of day for Australia Day. That said, regardless of any specific day for celebrating, as financial advisers we think it makes sense to start the new year by reflecting on how, here in our beautiful home down under, we are blessed with a very stable economy. That stability is no accident. It is the end result of a lot of thought that has been put into developing institutions and processes that do a great job underpinning our financial system.

So, here is a little reflection on some of the features that make Australia what it is today. And all the other days as well.

Monetary Sovereignty

This is undoubtedly the best thing our economy has going for it. Australia enjoys a high degree of ‘monetary sovereignty’ – indeed, we are more sovereign than pretty much any other country in the world.

Monetary sovereignty refers to a country’s ability to control its own currency and monetary policy without external interference. If you have ever travelled in a country that is (i) not the US but in which (ii) US dollars are used as currency, then you have seen a country whose level of monetary sovereignty is low.

High monetary sovereignty entails the authority to issue, regulate, and manage our national currency. This lets us make autonomous decisions regarding interest rates, money supply, and other monetary matters to achieve our elected Government’s economic policies.

The higher the degree of monetary sovereignty, the more an economy is subject to the positive influences of democracy and stable Government. Greece, for example, is a country with a low degree of monetary sovereignty, and this has really made life hard in that country over the last 15 years or so.

Monetary sovereignty lets Australia be the boss of Australia.

Our Very Own Bank

The way we put our sovereignty into action relies very much on the Reserve Bank of Australia. The RBA sits at the core of our monetary system. And it does much more than just set interest rates once a month.

Established in 1960, the RBA is the country’s central bank. Its primary objectives are to maintain price stability, full employment, and the economic prosperity of the Australian people – which is a single short sentence with a very long reach. The RBA achieves these objectives through various monetary tools, such as interest rate adjustments and open market operations.

Australia’s currency, the ‘Australian Dollar’ (AUD), is also overseen by the RBA. Coins are produced by the Royal Australian Mint and bank notes are produced by Note Printing Australia – both wholly owned by the Commonwealth Government. The vast majority of our currency, however, exists in the form of bank deposits held by a network of financial institutions, including banks, credit unions, and other financial intermediaries. These institutions facilitate the flow of money within the economy, providing essential services such as savings accounts, loans, and investment opportunities. Put simply, most of the time we spend or receive money, we are actually transferring money between bank accounts.

These transfers requires a well-put-together payment system. Happily, we have a sophisticated and modern payment system that includes electronic funds transfer, credit and debit cards and real-time gross settlement systems. And we can have this system because our financial institutions all have accounts with a central bank owned by the people. You guessed it: the RBA also oversees our payment systems, ensuring their security, reliability, and effectiveness.

But the safeguarding of our economy is not a one-agency show. In keeping with the general idea of separating powers to ensure the best outcomes, our financial institutions are also separately subject to regulation and supervision by The Australian Prudential Regulation Authority (APRA).


Established in 1998, APRA’s core purpose is to protect the interests of depositors, policyholders, and superannuation fund members – that is, people with savings, loans, and insurance policies. AKA people like us.

APRA exercises its regulatory functions through supervision, policy development and enforcement. It sets prudential standards and guidelines to promote sound financial practices and risk management within financial institutions. By conducting regular assessments and stress tests, APRA monitors the financial health of regulated entities, intervening when necessary to address potential vulnerabilities. APRA’s mandate is very much to prefer prevention over a cure.

So, we have APRA to make sure our financial institutions are healthy and secure, and we have the RBA to make sure that they can easily do business with each other – which in turn lets the rest of us do business with each other as well.

Our Legal System

The work of the RBA and APRA ‘hangs’ together within a very sophisticated legal system characterised by the ‘rule of law.’ The basic principle of the rule of law is that everyone – people, companies, institutions and Governments – is subject to and accountable under the law. This principle safeguards individual rights, promotes justice, and prevents arbitrary use of power.

Australia’s legal system operates independently within our system of Government, ensuring that all individuals are treated equally before the law. This allows us an efficient way to ensure that the principles of monetary sovereignty and our monetary system are followed. This means, among other things, that our system largely works the way it should.

So, there you have it. Regardless or which day (if any) you choose to identify as ‘Australia Day,’ we think our first article for 2024 is a good time to remember that our smooth and stable economy is no accident. It has been designed very deliberately over a long period of time and it is maintained by a collection of separate but inter-related systems designed to make things fair for us all.


Leverage Australia’s economic success and achieve wealth freedom with Nicky Stafford’s wealth and business coaching.

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