This is an edited extract from Hearts & Minds: A Blueprint for Modern Labor by Chris Bowen (MUP), available now at mup.com.au and other book retailers.
Labor has always been a party of economic growth and we should always remain one. From its earliest days, Labor believed in nation building and growing our economy, through the building of railways, the establishment of the Commonwealth Bank and other measures to build a national economy almost from scratch.
It is true that Labor tore itself apart during the Great Depression, but James Scullin was searching for a path to economic growth in the most difficult of circumstances. Curtin and Chifley had a vision about economic growth post war. While focused on winning the war, they were pre- paring measures to ‘win the peace’ with a visionary (and controversial) high migration program and the establishment of the huge Snowy Mountains Hydro-Electric Scheme.
And, of course, the Hawke-Keating Government unleashed twenty-one years (so far) of uninterrupted economic growth by implementing a bold program of micro-economic reform including financial deregulation, the floating of the dollar, tariff reform and competition policy. Floating the dollar meant that the economy would better respond to international shocks like the Asian financial crisis, the dot-com bubble and the GFC. Tariff reform was painful but, over time, made our industrial sector more competitive and benefited consumers. And, importantly, national competition policy provided an appropriate level of regulation to ensure that consumers benefited from rigorous competition for their business.
The Grattan Institute has identified ten big economic- policy reforms which have improved the economic efficiency of the nation and led to our record economic growth (I’ve noted the party which, in my view, can claim credit for each reform):
- Medicare: Labor
- Floating the dollar: Labor
- Tariff reduction: Labor
- Government enterprise privatisation: Labor (continued by the Coalition)
- Setting interest rates independently through the Reserve Bank: Labor (formalised by the Coalition)
- National competition policy: Labor (supported by some Liberal states)
- Superannuation: Labor
- Broadening the income tax base: Labor
- The goods and services tax (GST): the Coalition
- Changes to the structure and funding of the higher education sector: Labor
Labor can claim complete ownership of six of the ten major reforms of the last forty years. Labor and the Coalition can claim shared credit for three of them. Complete ownership of just one can be claimed by the conservatives.
When Paul Keating was recalibrating Australian foreign policy towards greater engagement in the Asian region, he was engaging in an economic as well as geo-political play, foreseeing the importance of the growth in Asia for our trade and economic performance.
It’s easy to forget how anaemic Australia’s employment performance was before the economic reforms of the 1980s and 1990s.
When the history of the Rudd and Gillard years comes to be written, maintenance of that uninterrupted growth against the odds and in the most difficult of circumstances will be up there with our greatest achievements. While the rest of the world contracted and then flatlined, Australia kept growing. At the time of writing, the Australian economy is 13 per cent bigger than it was during the global financial crisis. By way of comparison, the economies of the United Kingdom, Japan, Italy and France are still smaller than they were before the global financial crisis and many countries have barely grown economically since the financial crisis. During the time of the Rudd and Gillard Governments, Australia has overtaken three other countries (Mexico, Spain and South Korea) in terms of the size of our econ- omy. Australia, which has the fifty-first-largest population in the world, now has the twelfth-largest economy. During the Howard years, despite the mining boom, Australia went backwards by three places in the world economic rankings.
This period of uninterrupted growth is an extraordinary achievement. Never before has Australia experienced such a period. The previous longest period of growth was the post–Korean War boom, which lasted thirteen years, from 1961 to 1974, and even this period was broken by two consecutive quarters of negative growth, in December 1971 and March 1972. And while the Howard Government can rightly claim some credit for maintaining economic growth between 1996 and 2007 (against the backdrop of a huge mining boom), it is Labor which unleashed the forces of growth with the Hawke-Keating reforms, and Labor which maintained the growth against the odds during the global financial crisis.
Of course, the resources boom and the growth of the Asian economies have been important in the economic growth of the last two decades. But it is the economic reforms of the Hawke and Keating years which put Australia in a good position to capitalise on these opportunities. Without those liberalising reforms, Australia would have been much more likely to go into recession during the fallout from the Asian financial crisis of the last years of the 1990s and the dot-com bubble of the early 2000s.
And this commitment to growth is not about growth for growth’s sake. Growth means jobs, security and opportunities for millions of people. The economic-growth story of Australia has translated into Australia being a low-unemployment economy. It’s easy to forget how anaemic Australia’s employment performance was before the economic reforms of the 1980s and 1990s. In 1983, Australia’s unemployment rate averaged 10 per cent. In the late 1970s and early 1980s, unemployment hovered between 8.5 per cent and 10.3 per cent.
This is an edited abstract. To purchase the full book, visit the Melbourne University Press website.