Forty years after Paul Keating’s famous warning that Australia risked becoming a “banana republic”, this paper argues the country is once again drifting towards economic decline through rising government spending, protectionism and an abandonment of the reform spirit that transformed Australia in the 1980s. 

The paper contends that Australia is 'quietly dismantling' the policy framework that delivered decades of prosperity following the Hawke-Keating reforms. It argues that Australia is now facing many of the same structural pressures that prompted the original warning: weak productivity growth, persistent deficits, mounting public debt and an increasingly interventionist state. The paper is particularly critical of the growth in the National Disability Insurance Scheme.

Key points

• Commonwealth spending remains near historic highs outside the pandemic period.
• High taxes and regulations are reducing Australia’s global competitiveness.
• Genuine reform requires reducing government size and fostering market-driven growth.
• Increased regulation and government intervention raise business costs, deterring investment and innovation.
• Restoring competitiveness requires deregulation, reducing costs for businesses and limiting government intervention in the economy.

The paper calls for a renewed reform agenda focused on:

• reducing the size of government relative to the economy
• redesigning tax policy to support growth and investment
• ending industry 'preferment' and subsidies
• restoring a culture of economic reform grounded in productivity and competitiveness.