Tue, Sep 09, 2025 page7

• Can Australia achieve a third golden age?

  • By Daniel Moss / Bloomberg Opinion
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  Australian economics has come a long way since John Maynard Keynes trashed the arguments of former Australian prime minister Billy Hughes, who led the country during World War I. Hughes pushed the victors to squeeze Germany hard, a stance that Keynes, part of the UK team at the Paris peace talks in 1919, vigorously opposed.

  Reserve Bank of Australia Deputy Governor Andrew Hauser felt moved to laud two golden ages in local history in a recent speech. They owed much to fine economic thought, translated into sound policy. He highlighted work done in the 1930s, when ministers wrestled with ways to alleviate the hardships of the Great Depression. He also hailed the 1980s and 1990s, decades that saw monumental reforms lay the ground for a record-breaking expansion. The Economist declared that boom, ended by the COVID-19 pandemic, “a feat that defied most other rich nations.”

  However, more importantly, Hauser, a former Bank of England executive, wondered whether Australia could come up with a third golden age. Policymakers and academics have been grappling with this challenge — the need to not just accelerate growth, but equip the nation for a more contested world, one in which trade and capital flows are constrained. Hauser called it “the killer question.”

  The country is engaged in some serious soul-searching. For several days last month, business luminaries, union bosses and think tanks descended on the capital, Canberra. The mission was to find a way to boost languishing productivity, in a way that recalled summits of the 1980s that devised a formula for combating inflation and strived to overhaul the tax system. Nothing quite so bold emerged. Australian Productivity Commission chairwoman Danielle Wood called for a new mindset. Growth had fallen down the list of priorities, she said.

  However, is the bull market in nostalgia overbought? Certainly, the changes four decades ago were far-reaching: The currency was freed from controls, foreign banks were allowed in, and taxes were reworked to make Australia more competitive and reduce avoidance. An accord with unions kept a lid on industrial unrest. The central bank took the first steps toward independence. Then-Australian treasurer and former prime minister Paul Keating was named Euromoney magazine’s Finance Minister of the Year in 1984.

  For all the achievements, it was also a time of division. The Australian dollar fluctuated significantly in the decade after the float and was sometimes referred to as the “South Pacific peso.” Interest rates were ratcheted up dramatically. Sections of the business community opposed efforts to tax perks like long — and liquid — lunches. Restaurant windows featured signs that read: “Don’t let Keating stop you eating.”

  Other ambitious reforms foundered due to a lack of support from then-Australian prime minister Bob Hawke, a popular, but more cautious politician. A proposed levy on consumption would have to wait for the conservative bloc to take power in 1996 under former Australian prime minister John Howard.

  The accomplishments reflected tough realities. Letting investors decide the currency’s value was going to happen sooner or later. Officials had grown weary of trying to regulate huge capital flows by tweaking the dollar every morning. Keating, to his credit, recognized that the days of government suppressing markets were over.

  There was also tactical motivation: Traders would now be speculating against themselves, rather than the government. Being accountable to the world would force a whole raft of changes previously considered too hard, such as dismantling tariffs. The move “was an exercise in political entrepreneurship, as well as the opening of the economy,” Keating told the Australian Financial Review on the 40th anniversary of the decision.

  “You had to take the risk. You get these jobs, and you might have them three years. If you are lucky, you might have them six. There’s no point in being a mouse,” he said.

  Was the overhaul a product of its time, one that required a unique convergence of financial pressures and a galvanizing personality? If the answer is yes, then the rumination and conferences about the country’s future will lead only to disappointment, but giving up and surrendering to mediocrity would not do either.

  The best way forward is not to mourn the 1980s, but learn from them. Shifts do not have to be massive, they just have to move the ball forward. Australian Treasurer Jim Chalmers, who did his doctoral thesis on Keating, makes all the right noises. Chalmers said last month’s conclave came up with “good will and good ideas.” They just need to become policy — and be sold to the wary electorate.

  Hawke and Keating also had a global wind at their back. It was the heyday of former British prime minister Margaret Thatcher and former US president Ronald Reagan. Deregulation was all the rage beyond Australia’s shores. As the Hawke government settled into office, Billy Joel released his multi-platinum album An Innocent Man. One of the hits reminded us that “the good ole days weren’t always good, and tomorrow ain’t as bad as it seems.”

  Well said then, and a timely lesson now. Perspective matters. Keynes, who believed that, in the long run, almost anything is possible, would not disapprove. Keep at it, Australia.

  Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously, he was executive editor for economics at Bloomberg News. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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