Officials convicted of serious offences are pardoned and reappointed, weakened laws facilitate money laundering and tax minimisation, press freedom is suppressed and lax immigration controls leave open at least the possibility of terrorists establishing footholds on Australia's eastern front. The Government of Vanuatu is flagrantly disregarding fundamental standards of sound governance. Australia's turning up the heat on Vanuatu - and, by implication, a host of other mendicant island states in our supposed arc of influence - is much more pointed than a frustration with procrastination, however. One Melanesian statesman once said that if there were a local word to capture the relaxed attitude to deadlines, it would be something akin to the Spanish 'manana', without the sense of urgency. They have their own way of doing things in the South-West Pacific.

This positive sentiment for the dollar and Australian assets is battling concerns over the sizeable current account imbalance, which will force a fall in the dollar at some point.

Our currency is being buoyed by a shift of money away from the US and the expectation that interest rates here will remain firm. The Treasurer, Peter Costello, argued this week that an overvalued dollar is a large factor in our poor export performance, although equally important is the slowing world economy, with foreigners buying less of what we sell. But is the sky falling, as the cartoon character Chicken Little put it? Unemployment is at a 30-year low with consumer confidence at a 10-year high and interest rates are modest. Surging imports and weak exports mean that we are as far as ever from paying our way in the world, with the latest data showing our balance of payments as a percentage of the economy is back at the levels of the 1980s - in particular 1986, when the then federal treasurer, Paul Keating, warned the country was in danger of becoming a 'banana republic'.Īnd with a near-$14 billion current account deficit for the September quarter, you could be forgiven for thinking we are faced with a crisis. Is the Goldilocks economy starting to unravel? Take a strong Australian dollar, a surging current account deficit and mix with weak economic growth data to be released today, and it is easy to conclude things are indeed much worse than we thought.

Goldilocks economy cartoon