Economic challenges in the modern world
Former Prime Minister John Howard delivered the Warren Hogan Memorial Lecture at UTS Business School where he discussed Australia's current and past economic challenges and the public policy response.
“The economic world that Warren Hogan and I were surrounded by when first met in the 1970s was really a world away from the economic world that now surrounds us in 2019,” said former Prime Minister John Howard, delivering the Warren Hogan Memorial Lecture.
“The economic paradigms of just a few years ago are no longer as relevant to the economic considerations that we face,” said Mr Howard, who also served as treasurer in the Fraser Government from 1978-1983.
Mr Howard delivered his address on the topic of Australia’s key economic challenges, both past and present, to a packed auditorium at UTS Business School.
The Warren Hogan Memorial Lecture commemorates Professor Warren Pat Hogan (1929–2009), an eminent Australian economist who worked across a range of fields including economic policy, capital theory and prudential bank regulation.
In the early 1970s, when Mr Howard first entered parliament, rising inflation was a major concern, as was rapid wage growth and rising unemployment. From 1970 to 1974 inflation increased from 3.5% to 15.3% and in 1983 unemployment reached 10%.
By contrast, in 2019 wages are falling in real terms, unemployment is at historically low levels and inflation is also very low, lingering around 1.8% despite efforts by the Reserve Bank to keep it within the target range of 2-3%.
“I think one of the things, if we are to seriously and intelligently address contemporary economic challenges, is to understand how much the economic environment has changed,” Mr Howard said.
I think one of the things, if we are to seriously and intelligently address contemporary economic challenges, is to understand how much the economic environment has changed.
Former Prime Minister of Australia
“What has surprised me greatly over the last 10 years is that contrary to what so many people predicted in 2008 and 2009, we have not experienced a sharp rise in unemployment in this country that we experienced in both the recessions of the early 80s and early 90s.
“It seems to me that we are living in a new paradigm, but a new paradigm where we have in fact secured a trade-off between subdued wage growth, in many cases completely stagnant wage movements, and remarkably lower levels of unemployment.
“But if you live in a fairly stable employment environment, to be told 'well don’t worry you have a job and therefore you shouldn’t want to have any kind of wage adjustment or wage increase' becomes a very hollow response after a fairly short period of time.”
Mr Howard discussed fundamental reforms to the Australian economy brought in over the last 40 years including the floating of the Australian dollar, moves away from centralised wage fixing and tariff protection, and the introduction of the GST.
He also highlighted that Australia has a very large middle class by world standards, confirmed by the recent Credit Suisse Global Wealth Report, which revealed Australia has the highest median wealth in the world.
The report notes that 6% of Australians have a net wealth below US$10,000 compared with 18% in the United Kingdom and 28% in the United States.
“Why does that matter. I suppose it is for the simple reason the greater the middle class, the less inequality you have, and the greater the sense of fairness, involvement and sharing that the community has. Therefore it is for reasons of social fairness and unity that it is a very desirable goal.”
“It is not an answer to those in the community who are doing it tough. It’s not an answer to the genuinely disadvantaged, but it is an answer to the generality of the community when it begins to debate issues of fairness and wealth distribution in the Australian community.”