C'mon, let's all cheer for the Aussies

It's not often we find ourselves cheering for the Aussies - but here goes: c'mon Aussie, c'mon, c'mon. They used to chant that across the Tasman in the 1980s before they dropped the literary pretensions and opted for: Aussie, Aussie, Aussie Oi, Oi, Oi.

That's alright. We're not cheering for eloquence of their sports fans. We're cheering for their efforts to avoid the worst of the global downturn and - by default - help buffer New Zealand from the same.

Australia is still our biggest trading partner (taking about 20 per cent of our exports) and the biggest foreign investor in New Zealand. If they can keep spending and investing its going to take the edge off things for us.

The lucky country has had a run of positive economic data this month. Last week there was news that it is not in recession. In the last quarter the economy actually grew by two shakes of a wallabies tail.

That was followed this week by the biggest jump in consumer confidence for 22 years. The Melbourne Institute- Westpac survey of sentiment, taken in the first week of June, showed a 12.7 per cent increase.

Then on Thursday came unexpectedly strong employment data. Unemployment in May rose to 5.7 per cent from 5.5 per cent in April. A marginal rise and much better than expected.

There were also signs that investors are returning to the property market with data showing the number of home loans rose 0.9 per cent in April from a month earlier. Government grants boosted the share of loans to first home buyers to a record 28 per cent.

As that last bit reminds us, all this good news comes at a time when the Kevin Rudd's Labour Party has unleashed the entire budget surplus to stimulate the economy.

Rudd committed A$10 billion ($12.7 billion) in October to boost the housing market and consumer spending and A$42 billion in February to a range of initiatives from infrastructure projects to home insulation upgrades for all.

It would have been disappointing if that didn't have some effect.

The spending is expected to create a budget deficit this year of A$22.5 billion and leaves nothing in the tank for for further stimulus down the track if it is needed.

That bit is a worry. If you took the latest export prices for Australia mineral resources at face value then it would be a big worry.

The data - the one dark cloud this week - showed an 18 per cent drop in export earnings for the March quarter. Coal, gas, copper, gold and a whole bunch of other commodities were down almost 40 per cent. But the March quarter was the big bad one for the entire globe. It was the quarter where the world's industrial output dropped more rapidly than it did in the Great Depression.

Since then hard commodities have rallied. They were up 20 per cent in May.

The question everyone is asking and - nobody knows the answer to - is: how sustainable this is rally?

It has been driven by massive Government stimulus in China and elsewhere around the world.

It is being pushed along by traders looking for somewhere to put money that is earning next to nothing in bank accounts. Even if China can keep up demand there is still a real chance the markets will over-do the rally and we will see a sharp correction which would sent fresh jitters through global finance.

But for the time being it does look like Australia has managed to side step the worst of the first phase of this downturn.

The negative for New Zealand is that our dollar gets lumped in with the Aussie dollar with currency traders treating the Kiwi as a similar commodity play.

Both have been on the rise in the past couple of months.

If our softer more edible commodities can't keep up the pace with Australia's hard minerals then we're going to see our export earnings continue to fall - unless our dollar can decouple from the Aussie.

It won't be the first time if it does. It has been as high as A90c in the past few years and was trading at about A77c yesterday. But when the kiwi floated in 1985 it was worth just A62c.

If that kind of gap opens up again it won't be great news for those who like to holiday on the Gold Coast but it will make Australia's economic buoyancy all the more helpful to New Zealand - and worthy of at least another Oi.