Britain Is Getting Back on Track

War in Europe, crisis in the Middle East, growing tensions across East Asia, and a widening chasm between a beleaguered West and the Global South: Writing a Global View column in times like these is not always the happiest of tasks. But at least one good-news story has been building quietly over the last few months. Global Britain is becoming a reality and the world is better off because of it.

The world has changed since the British voted to leave the European Union in 2016. After Brexit, enthusiastic backers expected an aggressively deregulating Britain would become a kind of Singapore-on-Thames. Russian oligarchs, Chinese moguls and Arab oil sheikhs would flock to London, eager to enjoy a sophisticated financial market that was less regulated and more hospitable than either the EU or the U.S. Free-trade agreements with the U.S. above all, but also fast-growing Asian nations, would more than compensate for the loss of the U.K.’s privileged position in the EU.

That’s not how things worked out, and the world is a much tougher place for middle powers than anyone expected when Brexit passed. Even as Covid disrupted the world economy and shut Britain’s lucrative tourism sector down, the open international economy of 2016 began to wither. Russia’s war in Ukraine and deepening U.S.-China tensions ended the dream that London could prosper as a neutral financial centre. Rising protectionism world-wide made trade agreements harder to reach and highlighted the importance of belonging to big trading blocs like the EU.

On top of this, a spat with the EU over the Northern Ireland Protocol, aimed at keeping the border with the Irish Republic open after Brexit, proved a much larger problem for Britain than Boris Johnson’s government anticipated. The details are fiendishly complicated, but in his rush to “get Brexit done,” Mr. Johnson signed an agreement with the EU that Unionist Protestants in Northern Ireland saw as weakening ties with Britain. The resulting tensions threatened the stability of the troubled region, and by the end of his premiership Mr. Johnson was threatening to break his own agreement with the EU. That stance infuriated Brussels and alienated an Irish-American named Joe Biden, killing any talk of a free-trade agreement between Britain and the U.S.

That’s not where things stand today. Building on foundations laid down in the Johnson era, Prime Minister Rishi Sunak has repaired relations with European partners and Washington even as Britain has carved out a significant place in Asia. Britain at long last may be finding a role.

Britain’s recent foreign-policy successes stand on two pillars. The first is Aukus, the agreement to work cooperatively with the U.S. to help Australia build a fleet of nuclear-powered submarines. The trust among these three countries enables a level of technological and economic cooperation that potentially extends far beyond the submarine program. With Britain moving toward membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (based on the Trans-Pacific Partnership that the U.S. helped negotiate but then refused to join), the U.K. has achieved a stronger presence than any European state in the fast-growing Indo-Pacific region.

Meanwhile, Britain’s unswerving support for Ukraine has put London back at the centre of European politics. Britain’s stance earned deep gratitude from Poland, the Baltic states, Sweden and Finland. That, along with Mr. Sunak’s more constructive approach toward Brussels, strengthened pro-British feelings inside the EU and helped pave the way for the major concessions on the Northern Ireland Protocol that enabled Mr. Sunak to forge the groundbreaking Windsor Framework. If the deal, announced last month, holds up, it would remove a major stumbling block in U.S.-U.K. relations.

The payoff could be substantial. Last week Sen. Chris Coons (D., Del.), a close Biden ally, introduced a bipartisan bill with John Thune (R., S.D.) authorising fast-track talks on a U.S.-U.K. free-trade agreement. The White House plans a Biden visit next month to commemorate the 25th anniversary of the Good Friday Agreement, which ended the violence in Northern Ireland. British negotiators hope for Britain’s eventual inclusion in tech talks between Washington and Brussels.

With an unpopular Tory government facing a revived, de-Corbynized Labour Party, and with inflation wreaking havoc on British living standards and touching off waves of strikes among public employees, foreign-policy success may not be enough to save the ruling Conservatives from the wrath of the voters. But it is likely to help, and if the Sunak government can continue to carve out a serious role for post-Brexit Britain in world politics, the next election could be a much closer affair than most forecasters currently predict.

Regardless, Americans should welcome Britain’s return to the high table of world politics. A stronger Britain means a healthier West, and given the otherwise grim state of world affairs, Washington can use all the help it can get.

For decades, Australia has leaned into its reputation as the lucky country. But luck, as it turns out, is not an economic strategy.

What once looked like resilience now appears increasingly fragile. Beneath the surface of rising property values and steady headline growth, the Australian economy is showing signs of strain that can no longer be ignored.

Recent data paints a sobering picture. Australia has recorded one of the largest declines in real household disposable income per capita among advanced economies.

Wages have failed to keep pace with inflation, meaning many Australians are working harder for less. On a per capita basis, income growth has stalled and, at times, reversed.

And yet, on paper, things still look relatively solid. GDP is growing. Unemployment remains low. But that growth is increasingly being driven by population expansion rather than productivity.

More people are contributing to output, but not necessarily improving living standards.

That distinction matters.

For years, Australia’s economic success rested on a powerful combination: a once-in-a-generation mining boom, a credit-fuelled housing market, strong migration and a property sector that rarely faltered. Between 1991 and 2020, the country avoided recession entirely, building enormous wealth in the process.

But much of that wealth is tied to property. Around two-thirds of household wealth sits in real estate, inflated by leverage and sustained by demand. It has worked, until now.

The problem is the supply side of the economy has not kept up.

Housing supply is falling behind population growth. Rental vacancies are near record lows.

Construction firms are collapsing at an elevated rate. At the same time, massive infrastructure pipelines are competing with residential projects for labour and materials, pushing costs higher and delaying delivery.

The result is a system under pressure from all angles.

Despite near full employment, productivity growth has stagnated for years. In simple terms, Australians are putting in more hours without generating more output per hour. The economy is running faster, butgoing nowhere.

Meanwhile, government spending continues to expand. Public debt is approaching $1 trillion, with spending now accounting for a record share of GDP.

The gap between spending and revenue has been filled by borrowing for decades, adding further pressure to an already stretched system.

This is where the uncomfortable question emerges.

Has Australia become too reliant on a model driven by rising property values, expanding credit and population growth?

As asset prices rise, households feel wealthier and borrow more. Banks lend more. Governments collect more revenue. Migration fuels demand. The cycle reinforces itself.

But when productivity stalls and debt outpaces real income, the system begins to depend on constant expansion just to stay stable.

It is not a collapse scenario. But it is not particularly stable either.

Nowhere is this more evident than in housing.

The National Housing Accord targets 1.2 million new homes over five years, yet current completion rates are well below that pace. With approvals falling and construction costs rising, the gap between supply and demand is widening, not narrowing.

Housing is also one of the largest contributors to inflation, with costs rising sharply across rents, construction and utilities. Yet the private sector, from small investors to major developers, is struggling to make projects stack up in the current environment.

This brings the policy debate into sharper focus.

Tax settings such as negative gearing and capital gains concessions have undoubtedly boosted demand over the past two decades. But they have also supported supply. Removing them may ease prices briefly, but risks deepening the supply shortage over time.

That is the paradox.

Policies designed to make housing more affordable can, in practice, make the shortage worse if they discourage development. The optics may appeal, but the economics are far less forgiving.

It is also worth remembering that most property investors are not institutional players. The majority own just one investment property. They are, in many cases, ordinary Australians using real estate as their primary wealth-building tool.

Undermining that system without replacing it with a viable alternative risks unintended consequences, from reduced supply to higher rents and increased inflation.

So where does that leave Australia?

At a crossroads.

The country can continue to rely on population growth and rising asset prices to drive economic activity. Or it can shift towards a model built on productivity, innovation and sustainable growth.

The latter is harder. It requires structural reform, long-term thinking and political discipline.

But it is also the only path that leads to genuine, lasting prosperity.

The question is no longer whether Australia has been lucky.

It is whether it can evolve before that luck runs out.

Paul Miron is the Co-Founder & Fund Manager of Msquared Capital.

Britain Is Getting Back on Track

Successes in Ukraine and the Pacific and Rishi Sunak’s leadership shore up standing lost to Brexit and Covid.

As housing drives wealth and policy debate, the real risk is an economy hooked on growth without productivity to sustain it.