The ’80s: the pivotal decade for Australia’s prosperity

The resounding lesson of the 1980s is that, with enough ambition and resolve, Australia can remain one of the world’s most prosperous and successful nations.

In the 1970s, a richly endowed country squandered its luck. But then the 1980s tore down the Fortress Australia edifice that had protected an over-regulated economy for the first seven decades of nationhood.

It was the pivotal decade in Australia’s transformation from its protected wool-based economy to becoming a prosperous supplier of resources to east Asia.

The critical political actors were John Howard (the Liberal treasurer who started key reforms and then mostly supported them from opposition), Bob Hawke (the union leader turned prime minister who established a consensus base for the agenda) and, most of all, Paul Keating, the Labor treasurer whose irresistible political will smashed opposition both from within Labor and across the political aisle.

The result amounted to a psychological watershed for the nation, as The Australian Financial Review suggested at the end of the decade. Reforms such as the dismantling of the import tariff wall had been pushed by the Financial Review since its launch as Australia’s first national newspaper in 1951.

The Financial Review welcomed the Howard-commissioned Campbell review, which laid out the case for financial deregulation. It enthusiastically supported Labor’s late-1983 floating of the dollar. It sympathised with Mr Keating when the ACTU vetoed his consumption tax, but hailed his ending of the double taxation of shareholder profits as applying “Labor philosophy to the encouragement of capitalist enterprise”.

Financial deregulation promoted greater access to credit and foreign capital markets. That allowed outsider corporate raiders, or “entrepreneurs”, such as John Elliott, Robert Holmes a Court, Alan Bond, Ron Brierley and John Spalvins to reshape Australia’s previously closeted and over-regulated business economy, from beer markets to TV broadcasting.

Enduring legacies

The risk of becoming a takeover target prompted many companies to gear up and launch their own takeover bids. For a few months, Holmes a Court was even set to make the Financial Review the “flagship” of his budding media empire.

Yet, amid all the debt-fuelled creative destruction, enduring legacies were established. A modest farmers’ co-operative listed on the stock exchange as Wesfarmers. The offshoot of a UK merchant bank turned itself into Australia’s global finance house, Macquarie. And the massive North West Shelf LNG project was mostly built.

That and more came in a decade that began with a coal-based resources boom in NSW and Queensland. The OPEC-inspired energy boom provided a way out for the Fraser government’s policy failure. Now, Australia would not have to wait for the rest of the developed world to recover from the oil shock. 

But as the unions pillaged the boom, it collapsed into Australia’s deepest recession for 50 years (as forecast by Financial Review editor-in-chief P.P. McGuinness).

The Hawke-Keating solution was an incomes policy “accord” with a rationalist ACTU to control wages and inflation while setting the economy’s sails for growth. The trade-off planted the seed of today’s union-influenced industry superannuation gorilla.

But by the middle of the decade, a slump in commodity prices and the dollar generated pessimism over the long-run prospects for the economy’s Asia-based terms of trade. Prompted by a shock balance-of-payments deficit, Mr Keating sensationally rang radio broadcaster John Laws to warn that the only alternative to bold reform was to “close the economy down”. Laws: “And then you have really induced a recession.” Keating: “Then you have gone. You are a banana republic.”

Just over a year later, Keating’s reform imperative was sharpened further when the global sharemarket crash of October 1987 punctured the corporate raiders’ debt-inflated assets, spelling trouble for their bankers.

After the economy surprisingly boomed, the Reserve Bank’s 17 per cent cash rate delivered the recession of the early 1990s. But that broke Australia’s inflation stick and set up the reformed economy for three decades of growth and prosperity, including its massive China-fuelled resources boom, until interrupted by a global pandemic.

The resounding lesson of the 1980s is that, with enough ambition and resolve, Australia can remain one of the world’s most prosperous and successful nations. The question for today is whether the national debate and the nation’s political leaders are up to the task of doing so.

comente esta matéria »