Up turn and Down turn

Lessons from Two Economies: How Australia and Bhutan Outpaced a Global Crisis

Why is Australia’s economy growing while so many other nations face a downturn? For Bhutan—a small nation nestled high in the Himalayas—this question offers a fascinating parallel rather than a million-dollar mystery.

According to data released by the Australian Bureau of Statistics, the Australian economy grew by 0.6% in the June quarter of 2009. During this period, only a handful of nations maintained positive growth alongside Australia, notably India, China, Indonesia, Poland, and South Korea. India’s GDP surged by an impressive 9.3% in the April–June quarter, while China reported a 7.9% annual growth clip in the second quarter. While much of the global economy struggled to climb out of negative territory, these resilient nations stood out.

Another economy that weathered the storm exceptionally well—yet remains largely overlooked in both good times and bad—is Bhutan. While Bhutan lacks the economic scale to single-handedly lift global markets or cushion external shocks, its domestic performance has been remarkable. Economic indicators from the Royal Monetary Authority of Bhutan recorded a staggering 21.4% GDP growth for 2007–08, driven largely by the expansion of clean hydropower production from its fast-flowing rivers.

The Power of Asian Trade Networks

Australia’s economic resilience stems significantly from its deep trade ties with China—the world’s fastest-growing major economy, with an insatiable demand for Australian iron ore and raw materials. China accounts for more than 17% of Australia’s total exports while supplying a similar share of its imported goods.

Historically, Australia’s primary trading partners were Great Britain and Europe. However, when Britain joined the European Economic Community in the 1970s, Australia lost key trade preferences. This shift forced the country to pivot toward the Asia-Pacific region, establishing market relationships closer to home—with China becoming a primary anchor.

Bhutan followed a similar regional strategy. Ever since opening its doors to the outside world in the early 1960s, Bhutan has maintained deep economic integration with India. Today, over 80% of Bhutan’s exports go to India, while nearly 70% of its imports originate there, driven primarily by bilateral energy cooperation and hydropower projects.

A Shared Secret to Resilience

Direct trade between Australia and Bhutan remains minimal; data from Australia’s Department of Foreign Affairs and Trade ranks Bhutan 217th among Australia's trading partners.

It might take a stretch of the imagination to see a geographical resemblance between island-continent Australia and landlocked, mountainous Bhutan. Yet, both nations share a striking commonality in their economic strategies: both have thrived during global crises by anchoring their trade relationships to the economic giants of Asia.

By aligning their resource strengths with the growth engines of China and India, both Australia and Bhutan managed to navigate turbulent global waters and emerge on solid ground.