THE PACIFIC: SPOTLIGHT ON HIGH-GROWTH COMPANIES : Down Under Emerges Out From Under Recession Woes : Economy: Consumer spending, more than trade or investment, is driving Australia’s recovery.

Australia is recovering from its worst recession since World War II and though it’s not out of the woods yet, the pickup in economic activity has meant good news for several Australian companies.

In a survey for The Times of public companies in the Asia-Pacific, several Australia-based companies ranked high among companies with the fastest average growth in profits and revenue.

Australia production has quickened, unemployment lines have contracted and inflation and interest rates are still low.

But there’s this one big problem nobody can do much about: the weather.

This vast island continent of only 17 million people is in the grip of a drought that threatens a vital industry--farming, which brings in about a quarter of Australia’s income from exports. Australia is the world’s leading producer of wool and the largest beef exporter.

Rising world food prices are expected to offset some of the lost income. But there’s an ominous forecast from the national Bureau of Meteorology: no rain for several months.

In much of central and eastern Australia, where there’s been little or no rain in the past four years, the drought is the worst on record.

“We’ve already lost close to $1 billion (Australian) in exports this season,” says Rob Morton of the Australian Wheat Board.

With the exception of agriculture--a key sector hurt by a persistent drought--the economy seems to be chugging along quite nicely. For the year through June, the economy grew a tidy 4.3%, faster than the United States, Japan and Germany. And so far, all that growth hasn’t revved up inflation too much.

Consumers in this country feel better about the economy than they have since the late 1980s, before the recession.

Those were the days when a handful of Australian companies roared up from Down Under to become players on the international stage, buying companies in bold strokes in Europe and the United States. Too bold, it now turns out.

Several of these companies have since gone belly up, rendering Australian stocks poisonous to foreign investors for a while.

They included Bond Corp., which got overextended by purchasing a slew of companies around the world in the booming 1980s. Alan Bond turned a one-man painting company into an international media, brewing and real estate conglomerate and achieved hero status in Australia in 1983 after wresting yachting’s biggest price, the America’s Cup, from the United States.

But his reputation got a going over recently when the former tycoon told a bankruptcy trustee he couldn’t remember where many of his assets went.

Also taking a dive was Qintex, a splashy Australian TV network and resort operator that tried its hand at making TV movies in Hollywood and building an exotic seaside resort in Southern California. It filed for bankruptcy in 1989.

These days, though, consumer confidence is hitting record highs, according to Westpac Bank’s influential surveys. And with good reason: Wages are increasing about 3% a year, faster than inflation, which is running about 2%.

“People’s pay packets are increasing,” says Nigel Stapledon, an economist at Westpac, “and that’s fairly positive for consumption.”

In fact, the Australian recovery--much like Japan’s--is driven more by consumer spending these days than by the exports or business investment that the Labor government had predicted. Australia’s population has doubled in the past 40 years and is still the fastest-growing of any industrialized nation’s. That’s a lot of new consumers.

“There’s certainly a lot more optimism,” says Keith Sullivan, a manager at Boral Ltd., which sells building supplies.

Boral should know. Australians are borrowing so much money to buy or build houses that the nation’s central bank--the Australian version of the U.S. Federal Reserve--recently asked commercial banks to cool mortgage lending. The Reserve Bank of Australia is concerned the rush to buy real estate will lead to inflation.

The bank says it wants to avert a repeat of the 1980s, when soaring real estate prices propelled inflation and interest rates to double digits. The boom turned into a spectacular bust in 1990 that Australia emerged from just last year.

Corporate Australia, indeed, is looking more robust these days. Earnings are way up, although one reason is because they’re being compared to results in the economic downturn that just ended.

And these profits weren’t achieved without pain. A lot of these companies have laid off people over the last few years, lowering their costs and boosting profits. Right now 800,000 Australians are out of work. Still, the 9.5% unemployment rate in August is a lot better than the 11.3% peak in late 1992.

A cut in the corporate tax rate to 33% from 39% also helped swell last year’s profits, said Nestor Hinzack, a director at investment bank Bain & Co.

“Fiscal 1994 was a recovery year,” he says. (Most Australian companies follow a financial year that ends on June 30.)

It’s helped Australian exports that the U.S. economy has already come out of its downturn and is busily buying Australian goods again. The United States is Australia’s second-largest trade partner.

And Japan, Australia’s largest trading partner, is just now emerging from its worst recession since the war. Demand in Japan for Australian beef, wool, coal and iron ore is expected to keep Australia’s economy whistling along.

In fact, one reason Australia’s economy has grown so quickly is the rise of Asian nations such as South Korea and Taiwan as economic powers hungry for the food, metals and finished products Australia can supply.

Australian schools, in fact, are concentrating on teaching Korean, Mandarin, Japanese and Bahasa Indonesian to schoolchildren as the most likely languages they’ll need for doing business in the next century.

This year, though, higher interest rates will crimp profits, says Hinzack, the bank economist.

The Reserve Bank of Australia has already raised the benchmark interest rate to 5.5% from 4.75%, the first increase in five years, as a preemptive move to hold inflation in check.

And rates are thought to be going even higher in the next year. But this time economists aren’t expecting them to put the economy on a roller coaster.

Says Hinzack: “One doesn’t see the huge distortion on the horizon.”