Australian Economy

Kick the tires, light the fires: Australia urgently needs economic reform to thrive

It is no secret Australia is now facing a period of protracted, stubborn economic turmoil directly impacted by events both at home and abroad. Responding to these challenges will prove the difference between surviving and thriving in the era of multipolarity, so why do we continue to drag our feet?

Among successive generations of Australians, there is a growing sense that the Australian economy is increasingly fragile, “unfair”, and vulnerable to a myriad of domestic and global factors that could serve to lay the Lucky Country” low.

For the average Australian, depending on who you ask, the Australian economy can be described as “steady and sturdy”, defined by an underlying “position of relative strength” largely kept afloat by skyrocketing resource and real estate prices.

Meanwhile, for others, particularly younger Australians, simply put, the economy, as it has developed since the 1980s, doesn’t work and has failed to deliver on the central promise many of us were told, that is go to school, work hard and you can get ahead”.

This difference in both opinion and lived reality has served as a key battleground between Australia’s generations and our policymakers as they seek to secure political success.

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But what does all of this have to do with Australia’s national security and capacity to defend itself? Well, more than most Australians would seemingly grasp or understand.

The world we now live in is vastly different to that of just a decade ago.

We now face an increasingly multipolar, highly competitive world no longer solely dominated by the United States as had been the case since the end of the Cold War, presenting a significantly different set of challenges to face.

Against this backdrop, in the Australian context, we have seen the transformation, although some would strongly argue devolution of the national economy from a diverse, manufacturing focused, “industrialised” economy to a mining, resources, services and agriculture-dominated economy, with an ever-declining level of complexity.

However, some parts of the Australian public have recognised the inherent vulnerability that now characterises the national economy, with this uncomfortable reality only reinforced in recent years following the domestic and global impact of the COVID-19 pandemic or more recently following the Russian invasion of Ukraine, Hamas’ attack on Israel, and the ongoing molestation of maritime trade in the Red Sea and increased Chinese antagonism towards Taiwan.

Now entering or perhaps re-entering the public discourse is the need for serious economic reform to help Australia not only survive but thrive in this era of renewed multipolarity and great power competition.

Economic reform now a necessity

For Dimitri Burshtein, principal at Eminence Advisory, Australia requires an intense period of economic reform in order to avoid, as he believes, “Canberra [is] driving us down the long, slow road to economic ruin.”

Burshtein warned that this is not a new phenomenon, with much of the current policy malaise and ensuing impact on the nation’s prosperity, individual wealth, and productivity comes as a result of successive failed economic policies that have ever slowly lurched towards tighter control and central planning.

Like boiling a frog, the cumulative effects of ever-increasing taxes, government spending, and regulations will eventually lead to economic atrophy. Shortly after the turn of the millennium, Australian governments commenced steering the national economy away from prosperity and towards penury through ever-increasing planning and control,” Burshtein stated.

Strengthening the claims of this economic atrophy is Dr Kevin You, Senior Research Fellow at the Melbourne-based Institute of Public Affairs, in a parliamentary research brief titled, “Australia’s economic competitiveness in continuing to decline, articulated the declining competitiveness and its impacts on our long-term national security.

Unpacking the impact, Dr You stated, our economy has plummeted in key economic measures compared with the rest of the world. Analysis of key indicators, as measured by the Institute for Management Development, reveals Australia’s economic competitiveness ranking has plummeted 15 places from first in 2004”.

Yet despite this, Treasurer Jim Chalmers, at a press conference on 6 September, told reporters, “The Australian economy remains steady and sturdy in the face of unrelenting pressure. Economic growth held up relatively well despite the inevitable toll of higher interest rates, high but moderating inflation and continuing global uncertainty, particularly as it relates to China. We know that there are challenges ahead but we face them from a position of relative strength.”

Yet over the immediate term, it is clear this “position of relative strength” is readily overstated, as the national economy is significantly exposed to relationship, demand, and whims of our major trading partner and major strategic threat, the People’s Republic of China.

Significantly hindering the nation’s capacity to thrive and compete in this era of great power competition and multipolarity is our regulatory and legislative burden which actively limits the capacity of both the individual and business (at least those who can’t afford to buy their way into the inner circle of power) to serve as a key driving force for the nation’s economic and strategic resilience and security.

Dr You explained the impact of this, stating, On energy, again Australia used to be a powerhouse, boasting among the lowest electricity prices in the world. Now we are ranked 52nd, the result of a failing transition to net zero emissions. On tax and red tape, Australian policymakers are engaging in economic self-harm. We are one of the highest taxed people in the developed world.

On corporate tax and personal income tax we are ranked 56th and 57th of 64. And on the key metric of ‘bureaucracy not hindering economic activity’, Australia has plunged 14 places since our peak in 2004. This means there are more bureaucrats, permits, forms and red tape getting in the way of businesses which want to invest and employ Australians in secure jobs,” Dr You explained.

This is only reinforced by Burshtein, who stated, “A large contributor to Australia’s economic problems comes from the long-perpetuated myth that government is a benevolent actor pursuing the public good. In 1986, James Buchanan won the Nobel Prize in economics for his public choice theory. Buchanan’s theory challenged the notion of governmental benevolence and emphasised that all individuals, whether in the public or private sector, act in their own self-interest and are driven by personal motives and incentives to maximise their own personal positions…

“Government and the groups that feed off it have an interest in maximising the size and scope of activities, and in creating and not solving social problems. Solving problems means fewer jobs and resources within the bureaucratic and political industrial complex. The paradox is that, in government, failure rather than success is rewarded. With increased budgets, headcounts and powers,” Burshtein detailed.

We also bear some blame

However, Burshtein stresses that government isn’t solely to blame, as the Australian public equally has some responsibility to bear, saying, “While it may be easy, it is not entirely fair to blame our elected and bureaucratic class for this accelerating malaise. On this, Australians are volunteers and not victims, continually electing and rewarding public policy irresponsibility and economic vandalism.”

Where successive governments of both persuasion have repeatedly told Australians a variation of Treasurer Jim Chalmers’ 6 September comments about the national economy being characterised by resilience and a position of relative strength”, the reality seems to be further from the truth.

Even more concerning is that in areas of our traditional strength” particularly in our resources, services, and agriculture sectors, the key driving forces of the national economy, weakness now is the norm.

Dr You’s report articulated this, stating, Despite the overall decline, Australia has demonstrated strength and resilience in a number of important criteria. Australia ranks first in the world in terms of trade, namely the ratio between the prices of exports and the prices of imports. Australia has consistently topped the ranking for this criterion over the course of the last five years.”

Going further, Dr You stated, “Australia’s exemplary terms-of-trade ranking is attributable to the strength and resilience of our resources and agricultural sectors … Over the last decade, Australia’s has consistently ranked in the top 10 worldwide for agricultural productivity, and is ranked fourth in 2023. But overregulation of farmers and graziers puts productivity in the sector further at risk.”

At the same time, the government, in Treasurer Jim Chalmers, continues to stress the major achievement that is our otherwise sluggish economic growth and performance in the year to June, which saw our gross domestic product drop from 2.3 per cent annually in March to 2.1 per cent, this is coupled with a fall in productivity by 3.6 per cent, according to data from the Australian Bureau of Statistics.

This reflects the very real reality identified in the government’s intergenerational report which stated, “The Australian economy, like other advanced economies, is projected to grow at a slower pace over the next 40 years than in the past 40 years. Real GDP is projected to grow at an average annual pace of 2.2 per cent – 0.9 percentage points lower than the average of the past.”

Yet despite this, we see declining wealth per capita, declining living standards for the average Australian, as the powers that be seek to paper over the very real and glaring structural weaknesses and vulnerabilities in the Australian economy as it has been shaped over the last three decades.

Ultimately, Australia and Australians face these two concurrent yet interconnected challenges which stand as the greatest challenges of our age. So which way Australia? Do we want to be competitive, consequential and thriving, or do we want to be “steady and sturdy” in our managed decline?

Overcoming this slow stagnation and degradation of our economic prosperity isn’t rocket science either, in fact we have the “secret sauce” for success from our own not-so-distance past.

Burshtein details this secret sauce, stating, “Modern economic history has repeatedly shown that competitive tax rates, limited regulation, and restrained government spending are preconditions for prosperity. Yet, based on the flawed logic that any problem can be resolved through a tax, subsidy, law, or regulation, governments have continued to throw sand into Australia’s economic engine. And when the engine starts to sputter, delivering inflation and a slowing economy, the electoral incentive is for even more sand to be thrown.”

Final thoughts

We have to accept that while the world is increasingly becoming “multipolar”, the Indo-Pacific, in particular, is rapidly becoming the most hotly contested region in the world. Underpinned by the emerging economic, political, and strategic might of powers like China, India, Pakistan, Thailand, Vietnam, and the established and re-emerging capability of both South Korea and Japan, in particular, are serving to create a hotbed of competition on our doorstep.

Recognising this array of challenges and opportunities, both the Australian public and its policymakers need to look beyond the myopic lens that has traditionally dominated our diplomatic, strategic, and economic policy making since Federation.

Ultimately, we need to see Australia begin to play the long game to fully capitalise on the opportunities transforming the Indo-Pacific. The most important questions now become, when will we see a more detailed analysis and response to the challenges and opportunities facing Australia and when will we see both a narrative and strategy that better helps industry and the Australian public understand the challenges faced and opportunities we have presented before us?

As events continue to unfold throughout the region and China continues to throw its economic, political, and strategic weight around, can Australia afford to remain a secondary power, or does it need to embrace a larger, more independent role in an era of increasing great power competition?

Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific region and what you would like to see from Australia’s political leaders in terms of partisan and bipartisan agenda setting in the comments section below, or get in touch at This email address is being protected from spambots. You need JavaScript enabled to view it. or at This email address is being protected from spambots. You need JavaScript enabled to view it..

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