It’s big, it’s bouncy, and it’s the only large developed country in the world that isn’t in recession. Or that’s what prime minister Kevin Rudd says, and he should know. In the first three months of 2009, the Australian economy grew by 0.4 per cent, reversing the 0.5 per cent contraction that it recorded in the final quarter of 2008. Year-on-year industrial production was down by barely one per cent during the spring, compared with 12 per cent in Britain and America, 20 per cent in the eurozone and 30 per cent in Japan. Strewth.

What’s more, the same bullishness is happening in the stock market. In the 23 weeks to early June, the Australian All-Ordinaries Index put on an impressive ten per cent gain – which translated into an astonishing 24 per cent in US dollar terms – and that is getting on for 20 per cent for a sterling investor. Compare that with the big fat zero that you would have had from the Footsie during the same period, and you can see why they call it the lucky country.

Precious commodities
So what’s it all about? Commodities, commodities and commodities, of course. It won’t have escaped your notice that the global markets for oil, gas, coal, iron ore and gold have been picking up rather handsomely in the past six months, as emerging markets such as China have reasserted themselves. Australia’s largest mining company, BHP Billiton, saw its share price practically double in the six months to May, although it has dropped back a bit since then because of some other little worries about the state of play with Beijing. We’ll look at these in a moment.

But not all of this prosperity Down Under is a result of that unusual fluke of geological fate. Like many other governments, Mr Rudd’s administration has been pumping money into the Australian economy in an effort to keep things moving along – big new infrastructure projects, corporate concessions and cash handouts for poorer Australian households. Yes, we know, there’s nothing particularly new about that: America, Germany, Japan and countless others have tried it. But the signs are that, in Australia’s case, the stimulus is actually working.

Consumer spending is proving robust, unemployment levels are only about five per cent and inflation (now, there’s a word you don’t hear much these days) is pretty much in the sweet spot, around two per cent – neither too high to endanger the currency nor too low to make manufacturers worry that smug consumers will simply postpone buying that sofa because it will cost the same, or less, next year. So the central bank has been able to hold the base interest rate at three per cent, whereas ours is down to 0.5 per cent, and everyone is still happy.

High and dry
Well, almost everyone. The country has been suffering the worst spate of droughts in many decades, and the landscape has been ravaged by wildfires. You can figure out for yourself what that has been doing to the tourism industry. And farming has been clobbered by the climate at the exact moment when China, Australia’s largest trading partner, has been gearing up to buy more imported food.

Worse, perhaps, is the fact that Mr Rudd has been getting wrong-footed in his dealings with China itself. As we went to press it was announced that China’s state-owned Chinalco mining group had failed to get approval for a A$20 billion (£9.9 billion) takeover of Australia’s Rio Tinto group – ostensibly ‘for commercial reasons’ but also undoubtedly because of widely expressed government reservations about Chinese political interference and oppression. (Australia is home to many expatriate Chinese opposition figures.)

Only a month earlier, Mr Rudd’s parliament had raised eyebrows by demanding an expansion of Australia’s defence forces, in the light of what a government white paper had described as a newly modernised and potentially disruptive Chinese presence in the Pacific region.

Trouble at home
Not, then, the happiest of backgrounds against which to start annoying your own people as well. But that’s exactly what Mr Rudd has done by watering down the government’s targets on climate change, right at the moment when those droughts are making ordinary Australians more sensitive to environmental issues. Over 77 per cent say that climate change is a major worry.

And can you blame them?
When the premier came to power, back in November 2007, he pledged to cut greenhouse emissions by at least five per cent of their 2000 levels by 2020, with a legislative programme due to start in 2011. But suddenly that starting date has been put back to 2012 and, at the same time, Mr Rudd is offering various new cash sops to the mining industry, apparently in response to industry claims that the new measures will cost 24,000 mining jobs. The change of plan has angered an awful lot of Australians, and at the time of writing it seemed very possible that the matter might go to a vote of no confidence and even an early general election. But Mr Rudd is sticking to his guns.

Before we write off the premier’s shortcomings, however, perhaps we should remember that he still enjoys a wide groundswell of support, if only because his predecessor, the right-winger John Howard, had become so unpopular during his own tenure. He had, for instance, refused to have any truck with the Kyoto environmental accords, and worse, he had sent Australia into the Iraq war. Then we can remind ourselves that Mr Rudd has just launched a A$43 billion government-run programme to get 100 megabit fibre-optic broadband into nine out of every ten Australian homes by 2018. Eat your hearts out, BT. That’s how you win over the public.

Investment horizons
And so to our usual question: what’s Australia like as a place to invest? Fine, is the short answer. The stock exchange is large, liquid and well organised. You’ll pay a price-to-earnings ratio of about 14 on a typical basket of Aussie stocks, compared with about nine for Britain in early June.

There’s plenty of mileage left in commodity stocks like BHP Billiton and Rio Tinto, or in banks like Westpac and Commonwealth Bank, most of which have come out of the credit crunch relatively unscathed. More food for thought – it has recently been claimed that Westpac, Commonwealth, National Australia Bank and ANZ now all rank within the world’s top 12 banks by size.

Can it last? There is general agreement at the moment that the only way is up. The continuing strength in China is going to keep up the demand for Australia’s exports in the coming years, and only the most ham-fisted political management would put all that in jeopardy. If you’re looking for an intermediate-risk sort of place to invest – somewhere with the qualities of both a growth market and an established mainstream market – then Australia may well be worth a look.