Here’s a good start to a political parlour game. Who said this? “Few predicted the extent of the present world recession. For a period we in Australia were fortunate not to feel its full effect.”
And a bit more: “Our economic policies and relative energy endowments created a more favourable investment climate in Australia than in most other countries. This sustained our economic growth beyond that of others.”
So who said it? A grateful treasurer Wayne Swan some time after the global financial crisis? Nope. It was treasurer John Howard delivering the 1982–83 Budget.
The Australian Moment by George Megalogenis is a wonderful source for such quizzes. It shows how often our top politicians were caught within the same economic cycles over the past 40 years and were condemned to repeat mistakes.
But Megalogenis has not set out to aid and abet parlour games.
He has charted the past 40 years of economic debate, of how national economic management has evolved since the early 1970s when the first, heavily contested steps towards exposing Australia to the swirl and dominance of global markets were taken.
After years of simply being occasions to see if beer and cigarette taxes would rise, federal budgets suddenly became important more broadly for an electorate that was swiftly teaching itself more sophisticated economic theory.
The world outside Australia was intruding on our economy more vigorously. Bob Menzies had to deal with a wool boom after the Korean War, Britain’s Common Market entry and the importance of growth in Japan’s output.
But his successors had to handle unprecedented problems, from contrived energy emergencies after politically motivated oil crunches imposed by OPEC, to the movement of the economic centre to Asia, to the worldwide contagion of banking collapses as seen in the GFC.
Plodding boldly through all this – the changes were daring but they did take a while – was a succession of governments which dropped tariffs, floated the currency, handed interest rate settings to the central bank, and de-fanged the union movement’s wage-setting traditions.
The collective result has been a nation positioned more confidently than any other to exploit the reshaped international economy of the 21st century.
George Megalogenis is a proud broadsheet pointy head who has been blessed by tabloid training. He wallows in statistics and theory but tells his story cleanly so it is readily digested.
In The Australian Moment he charts the flubs and hesitancies of opening up the economy. One definition of madness is doing the same thing several times in hope of a different outcome. By that definition there were times when management of Australia’s economy was in the bonkers bananas category.
Megalogenis highlights one episode which involves that type of mental frailty but also anchors the story of economy’s progress until today.
One of the most poignant images of post-war politics is that of a crumpled, unshaven Rex Connor, Whitlam’s minerals minister, waiting in his office through the Canberra nights for a telex message confirming that a British-based spiv named Khemlani had negotiated with Middle Eastern oil tsars a massive loan to pay for the modernisation of Australia’s resources industry.
Connor’s young friend Paul Keating told him, “For God’s sake Rex, this is no way for a minister to behave.”
Megalogenis marks the importance of the sad, failed vigil.
“The loans affair was a dummy run for the global financial crisis 34 years later,” he writes.
“The two fiascos are connected by the same flawed assumption: that borrowing carries no risk if the purpose is nation building. The oil shock delivered windfall surpluses to the Mid East that the West assumed would be better off back in the hands of the original consumer.”
Two political generations later it wasn’t oil money the West was attempting to repatriate. It was manufacturing trade money held by China. Both pursuits led to disaster.
Writing of our immediate past history, Megalogenis outlines the big US borrowing to fund home ownership and notes: “The biggest banks in America, Europe and Japan had thought they had unlocked the secret to perpetual profit.
“They were to economic rationalism what the politicians of the 1970s had been to Keynesianism – the zealots who took the theory too far.”
And Megalogenis explains why Australia didn’t fall for the same trick a second time. First, our banks were regulated more than those overseas and prevented from granting housing loans to people a payday away from bankruptcy.
And the Reserve Bank increased interest rates between 2004 and 2006, blocking a housing bubble here as a massive housing decompression was about to hit US banks.
Megalogenis addresses some myths in his book. He stands up for Gough Whitlam’s economic management, something you don’t read every day.
He points out the global pressure the Australian economy was bashed by between 1972 and 1975, not to mention the destructive, pigheaded chase for wage rises through the ACTU led by Bob Hawke.
When Liberal Malcolm Fraser departed the prime minister’s office in 1983 he left behind twice the unemployment rate Whitlam produced in 1975 and an inflation rate only slightly lower.
The Australian Moment: How we were made for these times by George Megalogenis, published by Pengui (Viking imprint), RRP $32.95.
Malcolm Farr is Canberra-based national political editor for news.com.au and regular contributor to thepunch.com.au