As Australians contemplate the lessons of boom and gloom and consider vulnerabilities it is worth thinking about why policy-makers thought we were doomed in the 1980s, according to this paper, because many of the problems of the 1980s remain.
While the economy has been more productive, more efficient and, perhaps most important, less inflation-prone, the trade balance, current account deficit, foreign debt and inequality remain as markers of vulnerability.
This paper argues that Australians should be aware of the lessons of Australia’s economic history, that booms are often followed by periods of gloom. Booms do not solve the fundamental recurring problem of Australian economic history: vulnerability to changes in international demand and international financial sentiment. An over-reliance on resource wealth is still a precarious path for Australia’s future, just as it has been throughout Australian economic history.
This is especially the case if growth is supported through high levels of unproductive debt. Australia is more indebted than it has ever been in its history. Australia will remain vulnerable even if China continues to grow into the indefinite future. And it continues to be vulnerable in a world where financial markets continue to be unsettled. With rising concern about global warming it is perhaps more urgent than ever to increase the diversity of Australia’s productive capacity and export profile. If the more dire consequences of warming occur, Australia needs to be prepared to adapt.
To these well-known vulnerabilities we can add a third, vulnerability to rising inequality. Australia cannot control what happens in the rest of the world – we are a minor player in the global economy – but we can control the way we adapt to global events and developments. A fairer society is more likely to continue down the path of economic dynamism and continuous adaptation and less likely to see globalisation as a byword for rising inequality and a process that needs to be resisted.