Lucky? This lucky country's economy is on a record-breaking 14-year roll. The big question: Will it continue? Just imagine: From a few convicts dropped ashore in 1788, Australia has developed into a first-class global economy. The reforms enacted by former Prime Minister Bob Hawke and Treasurer Paul Keating during the 1980s set the stage for a remarkable run of prosperity. Specifically, they slashed import tariffs, floated the currency and reduced the power of big labor. The current prime minister, John Howard, who has been elected four times, has continued and expanded these reforms riding a wave of economic growth - 14 years of uninterrupted 4% to 5% growth. The national debt has been virtually eliminated, the currency is strong, the government has recently signed a free-trade pact with America, and it is starting to negotiate a pact with China. Australia received $42 billion in foreign direct investment in 2004. This is all great news, and our portfolio allocation in the Australia iShare (AMEX: EWA) has done very well, with a 105% gain over the past two years. The Australian iShare is up 15% so far this year and provides investors with exposure to about 60% of the total stock market. Some Warning Signs The question is of course, what should we do now. When things are going this well for so long, investors need to be skeptical and weigh the potential upside with the downside risk. - A shortage of skilled and semi-skilled workers and relatively high labor costs (minimum $400 a week).