‘Fair Share not only searchingly examines our recent economic experience but also brilliantly illuminates the path to sustain and enhance our prosperity.’ John Edwards ‘This is an excellent and highly readable book Grounded in Australia’s recent economic history, and using a global context, Bell and Keating have excelled in presenting a comprehensive economic and social agenda for sustained and inclusive economic growth.’ Meredith Edwards ‘For a clear and revealing account of where the Australian economy has come from, where we are now and the best way ahead from here, this book is hard to beat Bell and Keating offer a persuasive diagnosis of what ails the world economy and is increasingly affecting our corner of it They show how, compared with the others, we’ve got a lot right, but some things wrong They identify the problems we need to fix to keep us prospering and sharing the benefits more fairly Fair Share puts Australia’s economy into an international context, explaining the problems we have in common with other advanced economies, but also why we’re much better placed to overcome them.’ Ross Gittins ‘Stephen Bell and Mike Keating make a compelling case for a new way of thinking about government’s role in economic management—one which seeks to reconcile growing concerns about equity and inclusiveness with aspirations for ongoing improvements in living standards and the maintenance of an open, free and democratic society.’ Saul Eslake ‘At a time when the debate about inequality and the role of government has taken centre stage, Bell and Keating give us insights into Australia built on overseas experience and comparisons, and feed the economic story back into reflections on how our political institutions work and could work better.’ Laura Tingle ‘Stephen Bell and Michael Keating bring together definitive academic and governmental experience Between them, they offer here unsurpassed guidance on how to secure Australia’s future The book embraces inclusive growth as the way forward, explains why this is the required path, and gives clear guidance on how it can be attained Their strategic thinking will help mightily to fill the void at the centre of current national policy discourse and action.’ Glenn Withers Stephen Bell is Professor of Political Economy at the University of Queensland and a Fellow of the Academy of Social Sciences in Australia Highlights of his authored or co-authored books include: Masters of the Universe, Slaves of the Market, Harvard University Press (2015); The Rise of the People’s Bank of China: The Politics of Institutional Change, Harvard University Press (2013); Rethinking Governance, Cambridge University Press (2009); Australia’s Money Mandarins: The Reserve Bank and the Politics of Money, Cambridge University Press (2004); Ungoverning the Economy, Oxford University Press (1997); and Australian Manufacturing and the State, Cambridge University Press (1993) Michael Keating, AC, brings an unusual combination of operational and academic experience to Fair Share He is the former head of three Australian government departments: the departments of Employment and Industrial Relations (1983–86), Finance (1986–91), and Prime Minister and Cabinet (1991–96) He was a key participant in many of the economic reforms during the 1980s and 1990s Since then he has been on or chaired numerous government authorities and enquiries, as well as being a Visiting Fellow at the Australian National University and a Fellow of the Academy of Social Sciences in Australia Dr Keating has published over 100 articles in refereed journals, co-edited two books on government capacity, and is the co-author of Making Economic Policy in Australia, 1983– 1988, Longman Cheshire (1989) and Who Rules? How government retains control over a privatised economy, The Federation Press (2004) FAI R SH AR E FAIR SHARE COM PETING CLAIM S A N D A U S T R A L I A’ S ECONOMIC FUTURE STEPHEN BELL & MICHAEL KEATING MELBOURNE UNIVERSITY PRESS An imprint of Melbourne University Publishing Limited Level 1, 715 Swanston Street, Carlton, Victoria 3053, Australia mup-contact@unimelb.edu.au www.mup.com.au First published 2018 Text © Stephen Bell and Michael Keating, 2018 Design and typography © Melbourne University Publishing Limited, 2018 This book is copyright Apart from any use permitted under the Copyright Act 1968 and subsequent amendments, no part may be reproduced, stored in a retrieval system or transmitted by any means or process whatsoever without the prior written permission of the publishers Every attempt has been made to locate the copyright holders for material quoted in this book Any person or organisation that may have been overlooked or misattributed may contact the publisher Text design and typesetting by Cannon Typesetting Cover design by Design by Committee Printed in China by 1010 Printing International Ltd National Library of Australia Cataloguing-in-Publication entry Bell, Stephen, 1954– author Fair share: competing claims and Australia’s economic future/Stephen Bell, Mike Keating 9780522872279 (paperback) 9780522872286 (ebook) Includes bibliographical references and index Economic forecasting—Australia Equality—Economic aspects—Australia Australia—Politics and government—21st century Australia—Economic conditions—21st century Other Creators/Contributors: Keating, Michael, 1940– author Contents Acknowledgements Introduction The Political Economy of Competing Claims The Challenge of Stagflation and Subsequent Reforms Globalisation, Economic Growth and Restructuring Strategies for Australian Economic Restructuring and Development Investment and Economic Growth Labour Market and Employment Challenges Inequality and Redistribution Internationally Inequality and Redistribution in Australia Households, Debt and Real Estate Internationally 10 Households, Debt and Real Estate in Australia 11 The Quest for Macroeconomic Stabilisation 12 Fiscal Policy Challenges 13 Conclusions and the Governance Challenge Notes References Index Acknowledgements We would like to thank a number of people for their assistance in the writing of our book Saul Eslake, John Edwards and Glen Withers read all or much of the text and provided extremely valuable comments and suggestions We would like to acknowledge the invaluable research assistance provided by Daniel De Voss in gathering and assembling much of the economic data used in this book and in providing a range of useful insights We would also like to thank Jan Mairhoefer for help with the book’s reference list Thanks also to Sally Heath, our executive publisher at Melbourne University Press, for her belief in this project and for ongoing assistance Introduction We live in a troubled and uncertain world—politically and economically The Trump election, the Brexit vote and the rise of xenophobic populist parties in Europe, and to a lesser extent in Australia, show that the established political consensus is under greater challenge than has been experienced since World War II For most of the last half century the role of government in the capitalist democracies was largely agreed upon within the major political parties, while voters rarely challenged the fundamentals of economic strategy The discontent that did exist was articulated mainly by social movements outside the major parties, which have commonly been concerned with the environment, feminism and various rights issues The fear today, however, particularly in the advanced overseas economies, is that the nearest parallel to present times is the 1930s and the Great Depression, when the economic and political failures of Russia, Germany and Italy provided the basis for the rise of communism, Nazism and fascism respectively, and which saw millions out of work and falling living standards What saved the countries that persisted with a capitalist economy and a democratic government was the acceptance of the economic doctrines of John Maynard Keynes, the leading English economist whose analysis of the Great Depression revolutionised macroeconomic theory and policy Keynesian economic theory and policy suggested that government, for the first time, should accept responsibility for maintaining full employment as well as active macroeconomic management This policy approach was also buttressed by the further development of the welfare state immediately following World War II, when government responsibilities were expanded to ensure basic living standards These were settled policies aimed at greater equity Indeed, in Australia, it seemed to many that we had achieved the status of The Lucky Country, popularised in a 1960s book of that title by the Australian social commentator Donald Horne Horne’s message, however, was quite critical, pointing to the irony of Australia’s postwar success, despite what he saw as its complacency, lack of enterprise and mediocre leadership Some critics would say nothing much has changed today (for example, Garnaut 2013) Nevertheless, the postwar economic model worked quite well through the 1950s and 1960s, until the advent of stagflation in the 1970s: the then novel, simultaneous combination of high unemployment and high inflation It represented a challenge to the Keynesian presumption of a trade-off between the two—a presumption that had provided the theoretical underpinning for macroeconomic policy aiming to stabilise the economy and achieve full employment The outcome was that most capitalist governments moved to a new model driven by market-based structural reforms to improve market flexibility and efficiency, through a combination of increased competition and deregulation, with the monetary policy given the prime role in macroeconomic stabilisation policy, administered, eventually, by an independent central bank In effect, government intervention was reduced, as markets were given a greater role in allocating resources and assessing and managing risks Smaller government and a reluctance to raise taxation became a philosophical objective for those on the political Right and in capitalist circles Not surprisingly, governments generally have experienced an enduring shortage of revenue, even in the good years and especially recently.1 What the global financial crisis (GFC) in 2008 has shown, however, is that the trust in markets and business has been misplaced Even the International Monetary Fund (Ostry 2016) has wondered recently whether neo-liberalism was ‘oversold’, especially since the limits of markets were dramatically revealed in the financial sector during the GFC Equally important is the slow recovery of the world economy from the GFC, as well as the increase in inequality that has brought the effectiveness of the present economic model into question One response is a populist retreat from the open economy that encourages the free movement of goods and services, capital, people and ideas But this rejection of globalisation and an open-economy model is likely to imperil the very foundations of what has produced the greatest rise in living standards in human history This book examines how Australia has adapted to the challenges of a more dynamic, globalised and open economy, and what is now needed to respond to the challenges of the future While the book focuses on Australia, the analysis is largely based on a comparison of Australia’s performance and policies with those of other advanced economies The lessons learned should be of more general interest In recent decades, Australia has been remarkably successful economically, especially compared with other developed countries, such as the United States, Europe and Japan The economic reforms adopted in Australia in the 1980s and 1990s reshaped the economy and made it more open, flexible and productive Since the early 1990s, these reforms have helped Australia to achieve the longest sustained economic expansion in the history of the advanced market economies Compared with other member countries of the Organisation for Economic Co-operation and Development (OECD), Australia has also achieved superior performance in macroeconomic outcomes in relation to growth, unemployment, wages and inflation Australia has faced much the same challenges as other advanced economies It has gained from its association with the rise of East Asia, and although it experienced very favourable terms of trade during the commodities boom in the 2000s, Australia has nevertheless had to adapt to technological change and globalisation, the consequent pressures for structural economic adjustment, and their impact on employment and the distribution of incomes As a resource-based economy founded on large inflows of population and capital, Australia has always been especially dependent on developments in other countries Furthermore, the volatility of resource markets has meant that economic shocks transmitted from overseas tend to make the Australian economy more unstable and more vulnerable than many other advanced capitalist economies Accordingly, at the beginning of the twentieth century, Australia embarked on a policy of diversification, mainly through tariff protection and import replacement–based manufacturing industry to try to limit the impact of fluctuating resource demand on the economy By the 1960s, however, it was beginning to become clear that an inward focus on national protectionism was no longer working, and, as a result, Australia embarked on reforms to help the economy respond flexibly to global economic fluctuations This policy change has proven to be successful, demonstrating that well-managed economies that are highly exposed internationally can adapt to global challenges While Australia’s record is not perfect, we argue that it has handled these pressures and the protection, 18, 61, 63, 84, 86, 93, 96, 188, 352 inflation, 60, 65, 66, 67, 256; in booms, 90, 92, 299; low, 23, 90, 92, 142, 164, 256 as liberal-market economy, 7, 8, 38, 54, 98, 104, 111, 229, 347; and business–government relations, 107, 111–12; as development strategy, 96; tempered, 200 living standards, 69, 94, 163, 164, 166; and borrowing, 260; and housing, 211 losers, disaffected in, 16, 41, 270, 337, 339, 348, 350, 354 migration program, 349 national income: distribution, 156, 157, 348 public debt, 258, 299, 307; low, 4; reduced, 64 real estate, 22, 37, 223; and affordability, 23, 35, 70, 246, 258, 261, 266, 270; boom, 246, 259, 260, 267, 270, (in construction), 299; demand, 263, 267; home ownership, 35, 212–13, 225, 266–7, (and policy), 267–8; investors, 246, 263, 264, 267, 268, 269, (and subsidies), 224–5, 246, 267, 270, 329; policy responses to booms, 262–3, 264, 267, 268, 269; and rental market, 212–13, 225, 270; rise in prices, 23, 35, 223, 245, 246, 256, 258, 259, 261, 263, 264, 266, 299, 334, 335, (and supply shortage), 23, 246, 267, 268, 270; risks in market, 261–2, 264, 266, 271; and sprawl, 224, 267 recession of 1990/91, 17, 44, 65, 256 reforms of 1980s, 1990s, 3, 6, 17, 229, 298–9; conditions for, 7, 62, 350–1; financial deregulation, 61, 249, 336, 352; and fiscal policy, 63–4; floating exchange rate, 17, 61, 84, 249; labour and product markets, 8, 17, 61, 62, 63, 66, 84, 336, 351, 352; microeconomic, 61, 66, 84–5; Prices and Incomes Accord, 44, 58–60, 62–3, 64, 65, 66, 85, 208, 301, 345, 351 research and development, 109; expenditure, 99, 100; academic and business links, 100, 108–9 success, 3, 25–6, 352; and complacency, 2, 5, 25, 352; features of, 4, 14, 15, 95, 170, 209, 218, 229, 299; macroeconomic, 24, 299, 303; managing boom and downturn, 92 and supply side of economy: population, participation, productivity, 14, 35–6, 40, 96, 176, 352 terms of trade, 15, 88, 89, 271; and balance of payments, 62, 63, 92, 299; collapse in mid-1980s, 61, 62, 63; exports, 299, 304; shifts in, 94, 163, 217, 304 trade relationships, 4, 188; Asia, 88, 161 and vulnerability of, 271, 299, 303 see also financial system; fiscal policy; inequality; labour market; macroeconomic policy; stagflation; structural change Australian Prudential Regulation Authority (APRA), 252, 254, 263, 264 Azpitarte, F, 208, 209 Baccaro, Lucio, 36, 37 Bank for International Settlements, 122–3, 232, 242 Australia, 271 Battellino, Ric, 248, 255 Batterham, Robin, 97 Bell, Stephen, 343 Bernanke, Ben, 73, 120, 283, 289 Bloom, Nicholas, 175 Borland, Jeff, 85, 161–2 Bullock, Michele, 269 Burns, Arthur, 53 Bush, George W administration of, 239 Business Council of Australia, 162 Buttiglione, L, 243 Byers, Wayne, 261 Calomiris, CW, 239 capitalism and democratic values, 32, 355 and full employment, 53 and inequality, 194, 195, 355 postwar decades, 49, 50 at risk, 9, 355–6 varieties of, 38, 39, 346–7 CEDA, 310, 318, 319 Chifley, Ben, 30–1 China and commodities boom, 18, 88, 124; winding down, 336 debt in, 13, 78 financial sector in, 78 growth in, 73–4; model of, 12, 18, 37, 71, 198; domestic consumption/demand, 26, 37; slowing, 13 investment, 78 state role, 71 and structural change, 78 Clinton administration, 29 Cold War, 49 competing claims over resources: advanced economies agents propelling claims, 28, 31; and power, 28–9, 30 capital and labour, 7, 17, 32, 36; with stagflation, 43, 52–3 and distribution, 9, 32, 74, 197, 342; conflict, tensions, 7, 9, 10, 11, 12, 13, 16, 17, 27, 29, 38, 40, 51, 232, 239, 269, 334, 335; dynamics of, 34; international dimension, 198; trickle down, 30 and economic growth: nature and composition, 34–8, 42; and pressure on employment, wages, 35; rate of, 40, 42 factors in shaping and mediating claims, 28, 43; ideas, social consensus, 28, 29–31, 49, 56, 200; power and institutions, 31–6, 43, 56 government roles, demands on, 6, 7, 9, 10, 22, 32, 243, (reduced with strong growth), 199; expectations of, 33; mediation, 10; and state resources, (tax) policies, 33–4, 42, 43, 49, 128, 200, 201; temporary fixes, 12, 13–14; and the ‘virtuous circle’, 13 impact on economy, 26, 27, 29; adjustments, 31, 78 and inequality, 7, 9, 11, 13, 22, 29, 40; increased, 27, 36, 37, 41; and state amelioration of, 34, 201; tolerance of, 30 intensity since 1970s, 9, 11, 27, 52; with slowing growth, 11, 13 and relative versus absolute incomes, 21 and risks for inclusive institutions, 13 strategies for resolution of, 232, 235; austerity, 242–3; debt, 230, 232, 233, 236, 237, 244; inflation, 43, 51, 232, 233 competing claims over resources: Australia agents propelling claims, 28, 239, 335; and power, 28–9, 30 capital and labour, 17, 142, 155, 165 and distribution, 7, 14, 16, 34, 304, 334, 347; of incomes, 18; politics of, 16; targeting, 344; tensions, 12, 16, 81, 334, 335, 336 and economic growth: nature and composition, 34–8; rate of, 41 factors in shaping and mediating claims, 28, 40, 68; ideas, social consensus, 28, 29–31, 41, 59, 64, 67; power and institutions, 31–4, 41 and fairness criterion, 7–8, 60, 64, 349 government roles, demands on, 6, 7, 9, 10, 22, 32, 41, 101; expectations of, 33; intervention, 29; mediation, 10, 59–60; and state resources, policies, 33–4, 58, 61, 219, 338, (defeat), 92, (Prices and Incomes Accord), 58–60, 61, 62, 64, 65, 66, 85, 208, 301, 345, 351 among industry sectors, 83–4, 90, 101, 103–4 and real estate booms, debt-fuelled, 244, 245, 246, 256, 264, 266, 267, 269, 270 and resolution, 91, 92, 224, 336, 349; and fair sharing of gains, 7, 349–50; into future, 7, 40 in stagflation period, 58–60; and distributional challenge, 43, 44, 52, 58, 295, 335 Costello, Peter, 254 Cottarelli, Carlo, 279 Crouch, C, 238 Davidson, Kenneth, 251 developing countries, 5, 18 challenges, export-led growth, 71–2; current account surpluses, 72, 73 and globalisation, 187 and structural change, 78 and technology, 112 see also Asia; China DeLong, B, 292 Dodgson, M, 105 Draghi, Mario, 287 Dwyer, John, 323 Economic Planning and Advisory Council, 62 Economist, The, 226, 287 Edwards, John, 24, 129, 130, 337 Eslake, Saul, 121, 130, 255 Europe and demand, 76, 296 and distributional claims, 34, 75, 77, 336 economic performance, 3, 203, 281; competitiveness, 74, 75–6; and current account balances, 73; pre-GFC, 37; problems, 74, 77, 196–7; response to GFC, 12, 23, 274–5, 276–7 eurozone, 74, 274–5, 338; fiscal policies: (austerity measures), 13, 23, 76, 124, 197, 202, 242, 278, 279–80, 288, 344, (stimulus), 277–8; credit flows in, 242; debt crises in, 12, 37, 76, 197, 203, 232, 242, 278, 279–80, 334, 338; future policy options, 292–3; imbalances, 231, 287–8, 293; and monetary policy, 75, 76, 276, 288; outlook, 281 growth of political Right, 5, 336 household debt in, 232 and inequality, 30, 48, 76, 197 Nordic countries: egalitarian tradition in, 38; labour market policies, 202, 347; tax transfers, 201, 202 property bubbles, 22, 232, 242 recessions, 76, 275–9, 281, 303 unemployment, 197, 288 see also advanced economies; macroeconomic policy European Central Bank, 276, 278, 288, 292, 293 financial system, markets: advanced economies banks, 4, 76, 96; and the GFC, 253, 254; lending practices, 241–2, 252–3; leveraged trading, 241, 245, 253, 254; post-GFC, 275, 277; shadow banks, 252 and competing claims, 231, 235, 236, 237, 242, 244, 254, 288 and credit 231; debt to GDP ratio, 256, 257; credit flows, 232, 237, 240, 242; and exchange rates, 237; growth in, 232, 235, 236, 237, 238–9, 244, 265, (and low interest rates), 237, (and risky markets), 239; private credit and money creation, 237, 240; and real estate, 236, 238, 239 and crises, 230, 231, 236, 244, 252 financialisation, 26, 231, 232, 235; described, 6, 22, 190, 230; growth of, 32, 36, 119, 124, 184, 236; and inequality, 21, 35, 335, 337, 355; and investment, 19, 117, 119 and the GFC, 2, 12, 22, 73, 77, 123, 145, 230, 230, 236, 241, 245, 274; and collapse of Lehman Brothers, 241–2, 253, 274, 299; consequences, 22, 23, 236, 242, 253, 274; origin of, 252, 253–4; policy responses, 23, 73, 242, 273, 274–6 globalisation and growth of, 22, 35, 36, 252 and instability, 230–1, 244, 249–50, 286 and international financial/macroeconomic imbalances, 6, 18, 26, 38, 39, 72, 73, 76, 124, 203, 231, 235, 236, 240, 293, 295; in 1970s, 52; and resolution, 304 liberalisation/deregulation of, 22, 36, 71, 188, 190, 230, 231, 232, 235, 236, 238, 242, 249; and boom and bust episodes, 249–50; and market-liberalism, 237, 242–3 and monetary policy, 23, 75, 76, 114, 119, 122, 240; and GFC, 23, 242; ‘helicopter money’, 23; and inequality, 123, 242; quantitative easing, 23, 113, 119, 242, 246, (as stimulus), 285, 286, 287 regulation of, 49–50, 237, 247; Bretton Woods arrangements, 34, 49, 50, 51–2; controls ineffective, 55; and debt, 238; and ‘macroprudential’ regulation, 246, 285, 288, 289 and real economy: trade, production, jobs, 12, 22, 119, 190 financial system, Australia banks, building societies, 22–3, 245; bankruptcies, damage, 65, 251; and competition, 65, 250, 252, 254–5, 266; exposure to household debt, 23, 246, 264, 269; exposure to inflated property prices, 23, 246; and the GFC, 253, 254–5, 256, 299; lending policies, 65, 264, 265, 269; and risk-taking, 254, 255, 256; shadow banking sector, 248, 254 and competing claims, 256 credit: debt to GDP ratios, 256, 257, 258; growth of, 249, 250, 251, 256, 257, 264, 269; and the market, 246–7 deregulation, 61, 65, 247–9, 250, 336; and asset price boom–bust cycles, 22, 65, 245, 249, 250–1; risks in, 65; and trust in markets, 252 financial crash of 1990s: and banks, 251; lessons, 22, 254 financialisation, 246, 335 financial system inquiries, 249, 266 floating exchange rate, 17, 61, 66, 84, 90; and fluctuations, 88, 89, 91–2 and the GFC, 22–3, 245, 253, 254; policy response, 24, 299 HIH collapse, 254 monetary policy, 44, 64–5, 66; and inflation target, 66; and interest rates, 25, 251, 256, 261, 262–3, 299 and regulation of: postwar, 247, 248, (inefficiencies), 248; recent, 22, 245, 246, 251–2, 254–5, 262–3, 264, 266 stability in, 22, 245; risks, 246–7, 270, 300, 352 fiscal policy, Australia, 24, 63–4 and aggregate demand, 59 and fiscal capacity, 16, 25, 77; and raising taxes, 24, 305; restrained since GFC, 208 government: expenditure, 24–5, 310, 315, 316, 318, (education, health, infrastructure, defence), 215, 321–4, (fall in), 320, (tax concessions, exemptions), 327–8, (welfare), 201, 208, 210, 320–1, 324; political priorities, values, 318; and resource allocation, 24; revenue, 15, 209, 310, 317 housing, owner occupied, 211 and income redistribution issues, 25, 63, 209 as low-tax country, 25, 305, 326, 333; and budget deficits, 77, 307–10, 332 as politicised arena, 24 response to GFC, 24, 277, 299 taxation: cuts, 24, 133, 134, 312, 356, (and revenue), 356; company tax rate, 314, 315, (and dividend imputation), 133, 314; increases, 25, 262; low rates of expenditure and taxation, 315; and progressivity, 209; reforms, 63–4, 207, 209, 316, 320, 326, 327–8; and tax mix, 316 Flint, Lawrence, 118 Fraser, Bernie, 58, 353 Fraser government, 58, 249 Galbraith, John Kenneth, 57 Gann, D, 105 Garnaut, Ross, 2, 5, 25, 85, 351, 352 Germany, 73 competitiveness of, 75, 288; and eurozone imbalances, 293; and exports, 197, 238 growth model, 12, 18, 19, 37 Gillard government, 162, 219, 326 Gittins, Ross, 175 globalisation advanced economies, 3, 6, 29, 187, 355 and capital markets, 93 features of, 2, 355; international economic integration, 18, 83, 93; restructuring, 18, 83, 93, 187; technological transfers, 189 governance structures: and financial imbalances, 76–7; weakness of, 77 and populist backlash, 2, 5; as threat, and rising living standards, and trading imbalances, 69, 72 Glyn, Andrew, 51 Goes, C, 195 Goldscheid, Rudolf, 306 Goldthorpe, John, 52–3 Gonski Review, 21, 219, 220, 322 Goode, Charles, 255 Gordon, Robert, 120, 128–9 Grattan Institute, 125, 135, 138, 167–8, 218, 225, 310 and budget repair, 33; savings, 319–20, 322 Greenspan, Alan, 120, 191, 262, 288 Gregory, Bob, 88, 214 Grenville, S, 247 Gruber, J, 115 Haber, SH, 239 Haldane, Andrew, 118 Hancock, Keith, 206 Harper, Ian, 248 Harrison, John, 51 Hawke–Keating governments reforms of 1980s, 1990s, 3, 6, 17, 229, 298–9; conditions for, 7, 62, 350–1; financial deregulation, 61, 249, 336, 352; and fiscal policy, 63–4; floating exchange rate, 17, 61, 84, 249; labour and product markets, 8, 17, 61, 62, 63, 66, 84, 336, 351; microeconomic, 61, 66, 84–5; Prices and Incomes Accord, 44, 58–60, 62–3, 64, 65, 66, 85, 208, 301, 345, 351 and social wage, 208 Henry, Ken, 353 Herault, N, 208, 209 Hindmoor, A, 343 Hirsch, F, 30, 31 Holmes, Oliver Wendell, 309 Horne, Donald The Lucky Country, Howard, John, 318, 320 Howard government, 228, 310, 330, 356 Hunter, B, 214 IMF, 16, 74, 113, 114, 221, 279, 282 and Australia, 266 and fiscal policy, 289–90 inequality, 193–4, 199, 203; and inclusiveness, 217, 297 and neo-liberalism, role of, 50 Industrial Revolution, 82 inequality: advanced economies and capital: income, 178, 182, 185, 191, 194–5, 338; wealth, 184 drivers of, 20–1, 184–5, 196; changes in labour earnings distribution, 185, 194, 195; financialisation, 21, 35, 57, 119, 124, 184, 190–1, 192, 193, 216, 337; globalisation, 185, 187–9, 216; regulatory changes, 190, (taxation), 188, 189, 194; technological change, 11, 20, 185–6, 188, 189, 192, 193–4, 195, 216, 337, (and manufacturing), 186–7, 199 government responses to, 185, 202, 204; and redistribution, 9, 13, 21, 178, (tax transfers), 200, 201, 202 in household disposable incomes, 179, 181–2, 183–4, 185, 190, 191, 238; and lack of wages growth, 182, 183 in household wealth, 184 impacts of rising inequality, 11, 39; debt, 197, 203, 238; on demand, 124, 126, 182, 203, 217, 238, 338; on economic growth, 12, 13, 48, 178, 199, 203, 217, 338; on economic strategy, 196–9; on educational opportunity, 217; and secular stagnation, 182, 217 increase in inequality, 2, 4, 5, 8, 9, 11, 12, 20, 29, 32, 38, 48, 77, 93, 123, 231, 334, 337; dimensions of, 179, 182, 192, 193; income and wealth, 6, 7, 11, 20, 21, 36, 122, 178, 183, 238, 287, 337, 355; and social norms, 193, 194, 204; and structural change, 76, 199 and market liberalism, 57, 184, 187, 196, 200–1, 287 outlook for inequality, 194–6 in postwar Golden Age, 48, 178 and resistance to present system, 9, 200, 337 top income earners: increasing share of income, 11, 57, 180, 182, 337–8, 355; and rent-seeking, 189, 194, 201; top per cent, 182, 191–3 and trickle-down theory, 338 varies across economies, 203–4 wage incomes and productivity growth: gap, 5, 8–9, 180, 182, 183, 334, 338 inequality: Australia in access to jobs, education, 5, 21, 151–3, 215, 335, 355–6; and skill levels, 154, 186, 229; see also spatial inequality in comparison, 21, 178, 179, 205, 207, 229, 334; welfare system, 210 decrease in, 60, 126 drivers of: changes in labour earnings distribution, 205, 206, 207; changes in market forces, 216; globalisation, 189, 335 and government policy, 20, 26; choice, 216; pensions, 227; rental assistance, 213; response to GFC, 205; social infrastructure, 215; and social wage, 208; taxation policies, 209, 210, 227; transfer system, 207, 208–9, 210, 227, 229; unemployment benefit, 228 in housing affordability, 5, 21, 210–12, 213, 215, 246, 264, 266; and housing tenure, 212–13, 225, 266–7, 270 impact on economy, 26 increase in, 4, 14, 70, 165, 215, 334; in income growth, 182; incomes, 5, 21, 60, 330, 335; and inherited inequality, 215; moderate, 21, 205, 300; in wealth/capital, 21, 35, 216, 246, 266, 314, 330, 334, 355 intergenerational, 246, 270 in postwar Golden Age, 48 and redistribution system, 4, 59–60, 178, 208–10, 229; tightened, 209 spatial inequality, 21, 210, 213–15, 219, 341, 355–6 and the super-rich, 207; rent-seeking, 189–90, 313; top 1–2 per cent, 189, 192, 314, 330, 335 wage incomes: increase in inequality, 205–6; and productivity growth: gap, 183, 302, 334 see also inequality: advanced economies Infrastructure Australia, 137–8, 139 investment, advanced economies and capital formation, 19, 113 and development, 115; innovation, 113, 120; new industries, 113 and effect of financialisation, 19, 117, 119, 124 since GFC, 19, 113–14; subdued, 114–15, 120–1, 123, 126, (reasons), 115–19, 120, 122, 124, (and savings glut), 73, 119–20 and incentive, 19, 124 in infrastructure, 114 investment in Australia in advanced manufacturing, 134 business, 44, 54, 124–5, 130, 133, 272; and aggregate demand, 134, 140; non-mining, 125, 126 and capacity utilisation, 125, 126 capital formation, 90; policy requirements, 19 foreign, 44, 79, 100, 133, 134, 315 and gross value added, 90 and incentives, 133, 140 infrastructure investment (public), 19, 113, 114, 294, 318; and funding, 136–7; maintenance, 139; misdirected, 138, 323–4; overinvestment in transport and irrigation, 136, 137, 224 and Innovation Investment Fund Program, 134 mining: surge in, 89, 90, 92, 124 and shareholder distributions, 126, 127 and supply potential, 113 Iversen, T, 199, 345, 346 Japan, 37 recent economic performance, 3, 24, 197, 284, 304; financial crises, 26, 252; and policy options, 291–2; stagnation, 12 Jayadev, A, 188 Johnson, D, 208 Johnson Administration, 10–11 Johnstone, Robert, 58 Kalechi, Michal, 53 Kamin, S, 115 Keating, Michael, 309, 315, 343 Keating, Paul, 67 ‘banana republic’ comment, 61, 351 Kelly, Paul, 357 Kelton, S, 283 Kenworthy, L, 200, 345, 346 Keynes, John Maynard, 1, 50, 230, 243 Keynesian policies postwar Golden Age, 9, 49, 50, 53; and collapse, 54–5, 231 Kohn, Donald, 240 Krippner, Greta, 234, 235, 236, 248 Krugman, Paul, 278 labour market, advanced economies changes in, 6, 231; and challenges, 15; and gender, 168; regulatory, 190; structural, 11, 20, 35, 93, 123, 186, 186, 194, 199, 314, (and collectivism), 199–200 employment insecurity, 6, 20 flexibility in, 2, 160, 196, 239, 347 and growth in, 120, 121, 145, 190; and population of working age, 145 and income, 74, 76, 238, 295; minimum wages, 190; share, 191 labour’s declining share of national income, 20, 35, 193–4 labour market programs, 223, 347 market power: loss of, 35 participation rate, 8, 142 and productivity, 9, 11, 114, 120, 128, 186, 217, 295, 312; slow growth, 143 technology: impact on, 186 unemployment, under-employment, 197, 198, 281; fall in, 73, 76; and stagflation, 53, 54, 57; structural, 20, 54 wages: claims, 54; fall in, 217; and growth in, 124, 142, 217; wage costs, 74, 75 labour market, Australia, changes in nature and structure of: and gender ratios, 145–6, 151, 168, 212; in industrial and occupational structure, 148–53, 188, 214, 215; participation rate, 14, 20, 142, 145, 146, 151–3, 166, 168–9, 177, 206, (older workers), 169; part-time employment, 146–7, 154; and self-employed contractors, 147–8 and the disadvantaged: lack of support, 143 employment level, historical, 144 flexibility of, 20, 92–3, 143, 144, 160, 347; and changing demands, 158–9, 165, 177; and mobility, 161; and prices of labour, 154, 156 growth in employment, 144–5, 149, 150, 166, 177, 209; and population of working age, 145 and job security, 143, 147, 148; casual work, 147 non-unionised sector: growth, 66 and policy, 20 productivity, 62, 127, 128, 129, 130, 144, 162; and erosion of wages, 156; growth, 143, 148, 156, 163, 164, 217, 300, 301, 302; and management quality, 175 reforms, 62, 66; labour costs, 60; work practices, 62 and structural change, 81, 93, 143, 145, 154, 161, 188, 335; adjustment support, 85, 161, 347, 350; services industry, 146–7; and unemployment, 63, 147, 177 technological change: impact, 11, 17, 20, 66, 148–9, 161, 166, 167, 174, 186, (on less skilled mature workers), 151, 152–4, 169; and productivity, 128, 148, 149; and unemployment, 147 training, skill formation, 62, 63, 129, 143, 171, 175, 176, (recent performance), 172–3, 219, 229, (tertiary), 170–1, 173, 186; and employment opportunities, 151–3, 154; government funding, 176; and productivity, 169; upskilling, 149, 151, 166; and use of skills, 174–5; and wages, 169 unemployment, 5, 20, 146, 154, 165, 198; under Accord, 59; and inflation trade-off, 159; loss of skills, 5; and stagflation, 58, 145; structural, 153–4, 218, 222; under-employment, 153, 154, 165, 177, 218, 222 wages, 4, 5, 14, 143–4, 156, 217; claims, 66; determination: (centralised), 30, 32, 45, 62, 65, 67, 158, 207, (enterprise bargaining), 62, 63, 66, 158, 206, (market forces), 206; dual role of, 154; and egalitarianism, 155, 158, 350; growth, 69, 142, 159, 164, 205–6, 207, 217, 300, 301, 302, (weak), 261; as income support, 155; minimum wage/low-paid, 156, 157, 158, 206–7, 350; and penalty rates, 156; restrained, 20, 93, 156, 299, 302 workplace relations, 17, 62, 161–2; and award system, 158; and conflict, 155, 161; employer position, 143, 155–6, 158, 162–3; regulation of, 154–5, 162–3 Laker, John, 253, 254 Lavoie, M, 296, 297 Lazonick, William, 119 Lin, H, 191 Lowe, Philip, 224, 269 Macfarlane, Ian, 248, 255 macroeconomic policy, advanced economies, 119 and demand management, 290, 294, 297–8, 300 and focus on supply side of economy: population, participation, productivity, 272 and national growth models, possible, 294–5; wage-led, 296–7, 298, (and intervention), 298 options for future: fiscal policy, 274, 288, (and distribution), 298, (as stimulus), 287, 289, 290–91, 292, 294; ‘macroprudential’ regulation, 246, 285, 288, 289; monetary policy, 291, (‘helicopter money’), 285, 287, (limitations), 289, 290 post-stagflation: policy paradigm, 272–3 responses to GFC, 273; and financial system, 275; fiscal policy, 275, 283, (austerity measures), 278, 279–80, 289, (and cyclically adjusted budget deficits), 276–8, 279, 284, 289, (tightening), 281–2, 285; and monetary policy, 273–4, 275–6, 281, 283, 284, (ineffectiveness), 285–7; rethink on austerity, 280 and stabilisation, 23, 24, 289 and structural reform, 284 see also financial system macroeconomic policy, Australia, 42, 55, 64, 133 and combination of inequality and low wages growth, 182 constrained, 305 and fiscal policy: budget repair, 302; stimulus, 302, 303 framework since 1980s, 1990s, 298–9; success of, 303 postwar, 234 responses to GFC: monetary policy, 276, 299 and sustained, inclusive growth, 303 see also Australian economy: challenges Mann, Michael, 345 Manne, Robert, 354 Mavromarus, C, 174 McLean, Ian, 25, 49, 79, 80, 348 Megalogenis, George, 357 Menadue, John, 322, 323 Minsky, Hyman, 230, 249, 250 Morrison, Scott, 314 Naastepad, CWM, 296, 297 Nielsen, F, 188 Nixon, Richard, 51 Obama, Barack, 283 OECD, 16, 27, 114, 221, 282 and Australia, 3, 4; growth, 302; property market, 262 and fiscal policy, 289–90, 291, 293 and inequality, 179, 190, 193, 194, 199, 203; and inclusiveness, 217, 297 and monetary policy, 291 Offe, Claus, 57 Olsen, M, 59 OPEC, 11, 52, 58 Phillips, John, 250 Piketty, Thomas, 192, 193, 194, 195 politics, in Australia: and fairness, 7–8, 348–9; and infrastructure projects, 139; political culture, 347–9; and political leadership, 2, 5, 103, 351; and priorities, values, 318 business, finance sector activity in, 56–7 capitalist democracies, 1, 2, 5; failure to build consensus, inclusiveness, 16; rights systems in, 31–2 and governments: loss of trust in, 13, 353, 355; pressure on, 6, 56, 57; search for growth models, 12, 13 political Right, 53, 234; philosophy of lower taxes, reduced government role, 2, 8, 53, 56 and power: and constraints, 31; distribution of, 31, 57; influence of the rich, 202, 216 Pontussen, Jonas, 36, 37, 200, 345, 346 Posen, A, 262 Quiggin, John, 50–1 Rajan, Raghuram, 31–2, 239, 240 Rattigan, Alf, 83 Reagan, Ronald, 56 administration of, 57 Rehn, Oli, 278 Reinhart, C, 230, 278, 279 Reserve Bank of Australia (RBA), 113, 133, 221, 253 and exchange rate, 299 monetary policy of, 17, 44, 58, 65, 66; and GFC, 276, 299; and housing boom, 262–3, 264, 268, 269; and inflation target range, 66, 92 as regulator, 252 Ralph Review, 330 Roach, S, 286 Robinson, James, 13, 31 Rodrick, D, 102 Rogoff, K, 230, 278, 279 Roubini, Nouriel, Rudd government, 326 Ruggie, John, 50 Ryan, Paul, 278 Singapore, 19 Skocpol, T, 344 Smith, Adam Wealth Of Nations, 28 Solow, R, 194, 195 Soskice, D, 199, 345, 346 South Korea, 19, 37 Spence, Michael, 71, 72, 77, 78–9, 119, 192, 194, 196 stagflation of 1970s, 1980s, 2, 9, 11, 36, 51 competing claims, 51, 234; and distribution, 43, 56, 66 GDP growth, 10, 40, 53, 231; and productivity, 53–4 inflation, 11, 12, 17, 43–4, 51, 53 and macroeconomic policy: basis of, 55–6; effectiveness, 42–3; goals of, 42; and inflation, 56, 57, 66 onset of, 51–3 and postwar growth model, 43, 51–2 responses to, 43–4, 53, 231, 272; doctrine, 294; liberal market approach, 54–7, 67 stagflation of 1970s, 1980s: Australia, and government expenditure, 54 impact of, 52, 54, 58, 66–7; GDP growth, 54 and inflation, 58, 60, 65, 66, 67 institutional, government responses, 17, 35, 44, 58; shortcomings of, 58 reforms of 1980s, 1990s, 3, 6, 17, 229, 298–9; conditions for, 7, 62, 350–1; financial deregulation, 61, 249, 336, 352; and fiscal policy, 63–4; floating exchange rate, 17, 61, 84, 249; labour and product markets, 8, 17, 61, 62, 63, 66, 84, 336, 351; microeconomic, 61, 66, 84–5; Prices and Incomes Accord, 44, 58–60, 62–3, 64, 65, 66, 85, 208, 301, 345, 351 Stevens, Glenn, 290 Stockhammer, Engelburt, 37, 238, 296, 297 Storm, S, 296, 297 Streeck, W, 232–3, 244, 342 structural change, Australia and adjustment process, 80, 85, 90, 91, 92, 93, 336; and climate change, 103; disruptive, 88, 91; ‘Gregory effect’, 88, 89 change and political economy, 85, 86, 103 changing structure of industry, 17, 18, 214; agriculture, 80, 81, 83; construction, 80, 81; manufacturing, 69, 79, 80, 82, 83, 86, 87, 89, 91, 94; mining, 79, 80, 81, 86, 94, (boom), 88–90, 91; services, 80, 81, 83, 91, 129–30, (high value), 95; and tariff protection, 61, 63, 83–4, 86 and competing claims, 70, 85, 92, 93; over industry protection, 83–4 drivers of structural change, 81; consumer demand, 81, 82, 83, 88, 93, 95; external shocks, 81, 82; globalisation, 81, 82, 83, 93, (and competitiveness), 84, 89, 90, 91, 93; government policies, 81, 84–5; (resource) discoveries, 81, 82, 83 and globalised economy, 83, 307; and economic growth, 18, 70, 93; nineteenth century, 69, 79 technological change, 17, 79, 81, 82, 88, 307; and income increases, 83, 93, 166; and manufacturing, 82; and productivity, 82, 93, 128; and services, 83, 166 Suich, Max, 252 Summers, Larry, 77, 121, 122, 124, 188, 292 Thatcher, Margaret, 56 government of, 57 Thelen, K, 347 Tomaskovic-Devey, D, 191 Trichet, Claude, 279 Trump, Donald, 354, 356 economic policies, 283 election of, 1, 5, 336 Turnbull, Malcolm, 107 Turnbull government, 220, 318, 326, 327, 333, 339, 357 Turner, A, 236, 241 Turner, Lord, 230 Tyson, L, 192, 194, 196 United Kingdom Brexit, 1, 5, 336; and uncertainty, 284, 303 consumption: and debt, 37–8 growth model, 18, 37 inequality in, 38, 181–2, 202 and stagflation: monetary tightening, 56, 57, 67 United States and competing claims, 10–11, 34, 53, 232, 234, 269, 297; and conflict, 235, 239 economic growth in, 73, 140, 283; and demand, 126, 160, 295; and ‘full employment’, 140, 283, 303; outlook for, 283–4, 298; share of capital in, 181 and financial sector, 191, 234, 267; banks, 275; credit, 234–5, 246, 270 fiscal policy: and state taxation, 315; tax cuts, 312 and GFC, 23, 73, 184, 203, 233, 241, 252, 275, 295; policy responses, 283 governance, political culture in, 8, 215, 345, 349 growth model in, 12, 18; debt-based, 21, 26, 37, 197, 295 households: consumption, 123, 260; debt, 123, 232, 233, 260, 266; incomes, 73 industry, 101, 105, 106; and innovation, 107; management, 175; manufacturing, 160 inequality: and distribution of income growth, 180, 181, 205, 295; and falls in income, 21, 123, 181, 217, 270; and government policy, 202, 232, 239; in household income, 11, 40, 178, 180, (and education), 180, 186; in household wealth, 184; increase, 20, 37, 48, 123, 182, 240, 246, 295; and the low-paid, 155; tolerated, 30, 345; and top per cent, 191–2 inflation, 233, 234, 235 interest rates, 123–4, 234, 237 investment, 105, 116, 117, 118, 191; foreign, 72 labour market: education, skill formation, 143, 151, 180, 186; and flexibility, 160–1, 177; participation rate, 140, 142, 160; productivity, 180, 181, 283, 297, 304; trade-induced job losses, 160, 188; under-employment, 140; unemployment, 20, 160; wages, 297 living standards, 197 populism in, 1, 5, 354 property market, 21, 22, 37, 73, 123, 239, 269; and debt, 236, 240; housing market, 236, 252, 241; and policy, 239–41 public debt, 233 and stagflation: monetary tightening, 56, 57, 67 trade, 160, 188; policy, 304 US Federal Reserve Bank, 235, 239, 240, 283 Van Reenan, John, 175 Warsh, K, 119 Weidmann, Jens, 279 Weiss, L, 33, 345 Werner, Richard, 119, 286 Wheelahan, L, 173 Whiteford, P, 207 Whitlam government, 54 Wilkins, Roger, 147, 208 Wooden, Mark, 147 World Bank, 50 Wren, A, 346 ... author Fair share: competing claims and Australia’s economic future/ Stephen Bell, Mike Keating 9780522872279 (paperback) 9780522872286 (ebook) Includes bibliographical references and index Economic. .. attention to competing claims and distributional issues The backlash against globalisation and economic restructuring is real and growing, and poses a threat to economic development and to liberal-democratic... Economy of Competing Claims What are the factors that drive and mediate competing claims in the economy and politics? It has long been recognised that distributional tensions and the associated competing