This has been the root source of every job, every opportunity and every new government benefit since. It’s also been one of the sources of Australia’s modern exceptionalism.
The chairman of the America’s central bank, Jay Powell of the US Federal Reserve, acknowledges Australia’s unique accomplishment. He said in November: “Business cycles don’t last forever, I guess, unless you’re Australia.”
But the laws of economics haven’t been repealed. Even in Australia. After nearly 30 years, the Hawke-Keating creation needs work. The Reserve Bank’s decision to cut the cost of money this week was a klaxon call, like a submarine’s siren before it sinks beneath the waves.
The economy is in trouble and about to sink. The cost of official money in Australia is now 1.25 per cent. Core inflation is 1.4 per cent. Meaning? The central bank has made money not only free,
after adjusting for inflation, but cheaper than free. It is now pumping subsidised money into any bank that wants to borrow it.
Australia fared better than any other developed economy in the global financial crisis and the great recession that followed. Only two – Australia and Canada – escaped recession. But after a decade we see that Australia is not surging but succumbing.
The Reserve Bank governor, Philip Lowe, in the understated way of central bankers everywhere, made a highly unusual appeal to the federal government for action. In a speech last month he said there was a range of actions available to generate more jobs: “These include: further monetary easing; additional fiscal support, including through spending on infrastructure; and structural policies that support firms expanding, investing and employing people.”
Of these, the Reserve Bank controls only the first, monetary policy. And Lowe has now delivered a
monetary easing, otherwise known as an interest rate cut.
The rest is up to Morrison and his Treasurer, Josh Frydenberg. The Reserve Bank has implicitly declared that the economy – and its policy tool of interest rates – are exhausted. This is an invitation, an appeal for government action.
And, as Frydenberg acknowledged this week, the world is more fraught than at any time since the Cold War, thanks to the US trade war with China and global political turmoil.
The opportunity is there. Not the opportunity for another increment of tax cuts. That’s fine, but it’s just tinkering at the margins. The economy needs a restructuring to strip away the ossifying forces of oligopoly, of inflexibility, of risk aversion. Australian productivity growth, the ultimate source of better living standards, is stuck in a rut.
What will Morrison and Frydenberg do? What Hawke and Keating did and take the problem head-on? It’s hard to do and it will make the government wildly unpopular – real reform upsets a lot of fat and happy economic rentiers who like things just as they are.
Separately, Morrison and Frydenberg have already shown that they are highly capable policy managers and innovators. Regardless of what you may think of the policy, Morrison was tasked with “stopping the boats”. He had no existing mechanism to work with, so he created one, a whole-of-
government apparatus that Australia had not attempted. And he made it work.
Frydenberg’s achievement was to take the most horrendously divisive policy poison of the last decade – energy and climate change – and turn it into a workable tonic that all sides of politics were prepared to drink. This was the National Energy Guarantee. Frydenberg managed to get it through a divided cabinet and a polarised Liberal party room. He managed to win acceptance from Labor and industry and the electricity industry. It failed at the very last moment only because Tony Abbott and a clique of conservatives decided to use it as their pretext for the destruction of Malcolm Turnbull.
A broad economic rejuvenation to unlock Australia’s potential for another 30 years is an enterprise of vastly grander scale than either man has ever attempted. But Hawke and Keating showed it could be done. If not for this, Hawke would be fondly remembered as a character but not a great leader.
And without economic rejuvenation, the country could not have afforded his other initiatives, such as Medibank. Morrison has a Hawke moment right there in front of him if he chooses to grasp it.
Like Hawke, John Howard was a leader who, in his earliest phase as prime minister, rose to the challenge of his time. He could have given solemn-sounding speeches and consoled the families of the dead and walked away when a gunman opened fire at a tourist attraction in 1996.
But when the Port Arthur massacre struck, Howard proved himself a true leader. He took on the hard task of policy change, confronted the gun lobby, imposed gun control and made the country a safer and better place. Once again, real leadership gave modern Australia a proud claim to exceptionalism. Australia’s tough gun laws were a model.
Jacinda Ardern followed Howard’s lead, acknowledging Australia’s example, when the Christchurch shooting struck in March. Barack Obama held Australia up as the ideal. “When Australia had a mass killing – I think it was in Tasmania – about 25 years ago, it was just so shocking the entire country said, ‘Well we’re going to completely change our gun laws’, and they did,” the then US president
observed in 2015. And Australia hadn’t had a gun massacre since.
But now it has happened again. The shocking shooting rampage in Darwin this week left four men dead and a woman in hospital with gunshot wounds. The Turnbull government saw the rising number of illegal guns in Australia and announced an amnesty, under which weapons could be handed in to police without penalty. More then 50,000 guns were handed over, but an estimated 260,000 illegal weapons remain in the community. The number of illegal guns is back to where it was before the Port Arthur massacre.
Other countries are now asking: What is the Morrison government going to do about it? The Darwin shooting, thankfully, was not on the scale of Port Arthur. But complacency means that there will be more gun crime, more mass shootings, where the only beneficiaries are crime gangs and thugs and the very worst people. Unless Morrison shows leadership. Morrison has a Howard moment right there in front of him if he chooses to grasp it.
Kevin Rudd is celebrated on all sides for his apology to the stolen generation, Indigenous families torn apart by a racist policy. It moved Indigenous Australia, it awakened the rest of Australia, and it helped to at least begin to reconcile parts of our society that remain, to this day, unreconciled.
The people of Australia’s first nations are humanity’s longest continuing civilisation and confer a unique status on our country, and also a unique responsibility. Yet we are in a failing effort to “close the gap” between Australia’s First World living standards and the Third World deprivation of our Indigenous peoples. It’s time to take the next step.
Indigenous Australia needs the empowering respect that constitutional recognition can help bestow. And, if it’s done by creating a “Voice to Parliament”, an Indigenous advisory body to inform the Parliament on matters relating to Aboriginal circumstances, mainstream Australia will be better guided in how to close the gap.
Morrison has a Rudd moment right there in front of him if he chooses to grasp it.
Will Morrison choose to be a prime minister of real consequence, or just another time-server? Will he rise to the challenges of his time, renewing the sources of modern Australia’s exceptionalism?
Does he have the capacity to renew and advance the Hawke economic rejuvenation, Howard’s success in making the country safe from gun crime, Rudd’s work towards healing history’s scar? And perhaps adding his own unique policy innovations as well? Greatness beckons. Only the Prime
Minister can decide whether he will respond.
Peter Hartcher is political editor and international editor of The Sydney Morning Herald.