Treasurer calls for national economy to become ‘anti-fragile’ amid rising regional, global tensions

For successive generations of Australians, the economic success and growth of the national economy over the past three decades has been the gift that keeps on giving.

Skyrocketing resources and agricultural prices, backed by our “services” economy and the robust, voracious appetite for Australian real estate, has seen an explosion in the individual or per capita wealth of Australians, or at least that is what was thought and what we were told.

During this period, Australia, like many Western nations, effectively waived goodbye to their economic and industrial complexity, depth and diversity, in a wave of unbridled economic liberalisation that gave rise to the era of free trade and hyper globalisation.

Not even the Asian Financial Crisis of the mid-1990s, or the Global Financial Crisis of 2008, which laid the United States and Europe low, could slow the inevitable march of growth that had come to characterise the Australian economy.

Off the back of this, everything seemed to be tracking well for Australia; the conditions of the post-Second World War and post-Cold War world had made generations of Australians wealthy, safe and, in many ways, the envy of the world.

However, in many ways, this paved the way for the perfect storm, as no nation could escape the economic turmoil and, importantly, lessons of the COVID-19 pandemic, coupled with unrestricted quantitative easing unleashed by governments around the world, our own included revealed the pillars of sand upon which our castle is built.

This perfect storm of global events also coincided with the concerns of younger generations of Australians about cost of living, housing affordability, and future employment opportunities directly in conflict with the “conservative” approach of older Australians seeking to maximise their own prosperity and stability.

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As a result, we have borne witness to just how fragile, vulnerable, and weak Australia’s economy actually is, despite repeated reassurances from our political leaders that all is largely well.

Recognising this, Federal Treasurer Dr Jim Chalmers has issued a challenge to Australia: the nation and national economy need to become “anti-fragile”.

Speaking to The Australian, the Treasurer established his reasoning for why Australia and its economy need to become “anti-fragile”, stating, “We are putting in place new foundations for growth in a world that is very different to what we saw between the end of the Cold War and the start of the global financial crisis.”

Investment critical to building economic ’anti-fragility’

Australia’s economic fragility, so thoroughly demonstrated throughout the COVID-19 pandemic and its immediate aftermath, coupled with the trade war with our primary economic partner, the People’s Republic of China and the rising superpower’s increased antagonism in our region, has spurred policymakers from a long and comfortable slumber.

These challenges are compounded by domestic labour market challenges as identified by the Albanese government’s Intergenerational Report 2023: Australia’s future to 2063, which details some of the major headwinds coming our away, namely: “Major forces will shape the economy in coming years, including population ageing; rising demand for care and support services; climate change and the net zero transformation; technology and digital adaptation; and geopolitical risk and fragmentation. These forces will change the structure of our economy and how Australians live, work and engage with the world.”

In responding to these challenges, the Treasurer stated, “We have to decide as a country whether the long-term moderate growth set out in the IGR is acceptable to us. It’s not acceptable to me or to the government that Anthony Albanese leads.”

A central focus of the Treasurer’s response is the need to attract greater investment into the Australian economy, its individual sectors and the workforce to help build economic and industrial diversity in accordance with the government’s broader objectives like the National Reconstruction Fund.

Highlighting this, Chalmers explained to business leaders at a Business Council of Australia event in Canberra last week, “I want to foreshadow with you tonight that how we attract, absorb and deploy investment will be the big question the budget will seek to answer exactly eight weeks from now. It’s the policy area we spend most time on.”

Explaining this ambition further, the Treasurer detailed to Paul Kelly of The Australian, “As the global economic deck gets reshuffled, we are developing a new growth model based on ­energy, industry, resources, supply chains and investment...

“We see no useful separation between economic and national security in a churning and changing world. We don’t just think we can protect Australians from change. We believe we will prosper from it. That’s our calling and our focus in the budget,” Chalmers added further.

This approach, particularly the influence of national security on economic policy, reflects broader global and national trends towards “homeland economics” as a mechanism for building or as is the case, across the West, rebuilding economic and industrial sovereignty.

We are still a long way from seeing the outcomes of this approach and we’re still a long way off a coherent, long-term plan and set of objectives for the nation in this era of multipolarity and great power competition; the sooner we get that, the sooner the nation can respond more effectively and powerfully.

Final thoughts

Australians are going to be asked to accept a number of uncomfortable realities in coming years. First and foremost, we will 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.

This has been 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.

Second, both the Australian public and our policymakers will have to accept that without a period of considered effort, investment and reform, or as I like to colloquially refer to it, our rocky montage moment, current and future generations of Australians will be increasingly impoverished, living in a nation pushed around by the region’s now rising powers.

Recognising this array of challenges and opportunities, both the Australian public and its policymakers need to look beyond the myopic lens of short-termism 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 question now becomes, 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?