Post-crisis economy: Rebuilding from the ground up

For successive generations of Australians, the economic success and seemingly limitless growth of the national economy on the back of resources, agriculture, the “knowledge economy” and, of course, real estate speculation have been the gifts that keep on giving.

This period of explosive wealth growth both at a macro and, to a significantly lesser extent, micro level in many ways seduced both the Australian public and perhaps, most dangerously, our political leaders into believing the “End of History” narrative that dominated in the immediate aftermath of the Cold War.

During this nearly half-century period, Australia, like many Western nations, effectively waved 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.

Now while there has been periods of economic turmoil, the past five decades have largely laid the foundation for the era of economic stagnation and decline that characterises many of the world’s “developed” economies, and Australia’s, in particular.

However, all good things come to an end and in this globalised world, the true mask slip moment particularly for Australia was the salvo of economic warfare waged on Australia during the COVID-19 pandemic by the world’s rising superpower, the People’s Republic of China.

Firmly in the crosshairs were parts of the Australian economy that were soft points of ours, like the seafood, wine and barley sectors, but areas where the vast Chinese market could substitute quickly through the growth of the Shanghai Cooperation Organisation and the BRICS multilateral economic blocs.

While ultimately, these attempts at economic coercion against Australia failed, they did have a dramatic impact on those parts of the Australian economy that are continuing to recover nearly five years on from the height of the pandemic.

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Bringing us to the economic fallout following a confrontation in the Indo-Pacific between the United States and People’s Republic of China that would have a truly apocalyptic impact on the Australian economy, completely separately to the broader global economic impact of such a conflict which is estimated to be worth at least US$10 trillion (AU$15.2 trillion).

For Australia’s economy, built upon China’s demand for resources, energy, agricultural produce, real estate speculation and “knowledge” through our universities, it would not be an understatement to be summarised as “the end is nigh” much to the shock of the Australian public and policymakers.

This impact would be further impacted by the effective end of unrestricted and “free” maritime trade guaranteed by the United States, as nations both in the Indo-Pacific and more broadly across the globe would rapidly seek to protect their maritime trading interests, once again devolving into armed camps, similar to the world of the late-19th and early-20th centuries.

These first and second order economic impacts would not only fundamentally reshape the global economic, political and strategic order, Australia’s economy would be devastated, for all intents and purposes, taking us back to (at least) the 19th century.

Luxury economics brought us here

Modern society has given rise to the concept of “luxury beliefs” often characterised by Yale University’s Rob Henderson, who describes it as an idea or opinion that confers status on members of the upper or upper-middle class at little cost, while inflicting costs on persons in lower or working class peoples.

The rise of “luxury beliefs” has also given rise to “luxury economics” which emphasises priorities like environmental, social and governance priorities, “ethical” investments and other “luxury beliefs” all encapsulated in the “End of History” theory of international relations, devoid of both historic context and reality in a rapidly deteriorating geopolitical situation.

As we have already established, in the aftermath of a confrontation between the United States and the People’s Republic of China, the Australian economy would be devastated, with core exports like iron ore, natural gas, coking coal and others stopped overnight (either by government mandate or as a result of shipping insurance companies refusing to cover ships travelling through “high-risk” areas).

Conversely, Australia’s imports of critical items like high-quality pharmaceuticals, fertilisers, plastics, microprocessors, high-technology components, consumer goods, refined oil and other energy forms, including battery, wind and solar generation technologies and materials would all be dramatically impacted effectively taking Australia back to an almost entirely pre-industrial era.

This doesn’t account for the vast quantity of capital outflow that Australia would experience as a result of Chinese investors selling their Australian real estate holdings (both residential and commercial) as well as from institutional and individual investors from across both the region and the globe seeking to limit their exposure to the world’s most “developed” banana republic.

The world’s devolution into and coalescing around a number of hubs competing for access to raw resources, industrial inputs, agricultural produce and consumer goods (albeit in a significantly reduced sense) doesn’t necessarily have to be a death sentence for Australia’s current standard of living and an expansion of our prosperity.

But if we continue on our current trajectory, it will become evidently clear, “luxury economics” will have been the primary driver behind Australia’s economic decimation.

Correcting course begins now

While the direct kinetic conflict between the world’s two pre-eminent superpowers is far from guaranteed, being prepared for the worst possible outcome becomes increasingly important and like home and contents insurance, it is better to have it, not need it, than need it and not have it.

So how do we set about to correct the course before Australia’s economic ship runs aground?

First and foremost, correcting the course begins with a commitment by both Australia’s policymakers and the Australian public to commit to becoming economically sovereign, secure, resilient and competitive both in the Indo-Pacific and the broader, multipolar world.

This will require a focus on building resilient and competitive Australian supply chains, a robust, motivated, competitive workforce and the foundational pillars across the economy that provide these capacities.

Next in line is the development of a truly reliable, cost-effective, long-term focused national energy market devoid of ideology but balancing our environmental ambitions by increasing and expanding the industrial base of the nation through access to cheap, long-term reliable baseload electricity supply.

Take from that what you will.

Following this, we will need to emphasise competitive tax rates (both individual and corporate) as opposed to direct incentives which will only serve to build unproductive, uncompetitive industries as was the case with Australia’s failed auto industry.

This approaches flies counter to the longstanding status quo of policy making in this country, particularly as it relates to industry policy which defers, in many cases, to the heavy hand of the state as opposed to the state simply providing the environment and then getting out of the way to let industry do what it does best.

Such reform is highlighted by Dimitri Burshtein, principal at Eminence Advisory, that 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 detailed the importance of considered, thorough economic reform, explaining, “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.”

This position has been extensively reinforced by Dr Kevin You, Senior Research Fellow at the Institute of Public Affairs, who explained, “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,” You said.

Where we need to really turn the ship around, however, is the way in which much of the debate surrounding Australia’s economic and industrial redevelopment – perhaps development is more apt – is centred around Australia doing it all and competing in industries that we would be considered uncompetitive in (sorry Albo, but solar panels are one of them).

Or simply put, the argument centres around Australia competing for low-cost, low-return “K-mart goods” or in areas of ideological convenience (think renewables), rather than emphasising the high-value add products and scale Australia needs to in order to expand our economic, political and strategic resilience in a hotly contested post-crisis world.

Critically, we have achieved such industrialisation before, with similar geostrategic and geopolitical headwinds serving as both an incentive and rallying call to highlight the urgency to both the nation’s policymakers and public.

Luckily enough, by 1939, Australia had completed its period of industrialisation, which began in 1919 and kicked into overdrive during the impact of the Great Depression following the Wall Street Collapse in 1929 and the ensuing economic turmoil which swept the globe.

Highlighting this, Andrew Ross, author of Armed and ready: The industrial development and defence of Australia, 1900–1945, stated, “Australia had just completed its industrialisation in 1939. From 1919, Australian governments had fought off the determined efforts of the great economic powers to prevent that happening. But by combining with industrial companies such as BHP, and Collins House, and using its own technical organisations such as the Munitions Supply Board of the Department of Defence, Australia created the key industries required.”

For important comparison it could be argued that Australia is now, like it’s former incarnation in the 1930s, living in a “pre-war era”, although we are starting from a comparatively low base now, with Ross explaining, “By December 1941, the nation had been in a full war economy for 18 months, and by March 1942 had created enough armaments to fully equip six infantry divisions ... Australian scientists, technocrats and industrialists had created so much equipment that Japan could not supply the volumes of its own materiel to overcome it.”

Reinforcing these key points, former Australian Defence Department analyst Dr Ross Babbage, now of US think tank Center for Strategic and Budgetary Assessments, said, “I think what we’ve got to show what’s the vision for Australia, you know, what can we achieve and what you know if we go on the trajectory we are on at the moment. I’ll tell you what, you know, a lot of people, a lot more people in a decade’s time are likely to be either in really dumb jobs or maybe not have jobs at all, and in the society be a lot weaker and will be a lot less prosperous.

“So what we want to say is, look, there’s plenty of scope for doing more and smarter things, encouraging investment to do that, and then there will be some very, very interesting additional jobs and opportunities, a lot of high tech, and so on, I can tell you that, you know, talking to foreign investors, they’re quite keen on principle to work here, and do a lot more here and provide a lot more good jobs for Australians,” he explained.

Final thoughts

For generations of Australians in the early to middle stages of their careers, at the time that they should be settling down and starting families, our system is unavoidably stacked against them.

Is it any wonder alternative methods of political engagement, policy making, and economics are attractive to people when they are promised the world for little to no effort?

At the same time, we have seen a corresponding rise of social, cultural dislocation and disconnection coupled with individual aimlessness and the resulting impact on personal identity and mental health among younger Australians.

By helping to provide a rallying call – creating a compelling narrative full of excitement, opportunity, and purpose – policymakers can help reverse the trend of stagnation and decline, allowing Australians to turn the tide and build a resilient and competitive nation for this era of renewed competition between autarchy and democracy.

Equally, we must be focused on expanding and enhancing the opportunities available to Australians while building critical economic resilience, and as a result, deterrence to economic coercion, should be the core focus of the government because only when our economy is strong can we ensure that we can deter aggression towards the nation or our interests.

If we are going to emerge as a prosperous, secure, and free nation in the new era of great power competition, it is clear we will need to break the shackles of short-termism and begin to think far more long term, to the benefit of current and future generations of Australians.

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..