Sydney Institute Address Transcript
.svg)
ACKNOWLEDGEMENTS
To the Sydney Institute, and especially Anne and Gerard Henderson, thank you for the invitation to speak.
The Sydney Institute has an abiding belief in the free contest of ideas and the encouragement of respectful debate and discussion.
Its commitment to these values, which underpin a free and liberal society, make it both a cherished and critical national institution.
OUR GOLDEN ERA IS OVER
It’s almost impossible to imagine today, but 25 years ago—in the year of the Sydney Olympics—the world was coming to Australia to learn the secrets of our economic success.
I know, because as a young graduate in 2000, I spent a week escorting a notable South Korean economist who was here to study the ‘Australian model’.
Back then, we were the comeback kids of the global economy.
After decades at the back of the pack, a wave of bold, structural reforms had turbocharged our productivity and put us at the front.
Australia’s economy, which had performed worse than other developed nations in the 1960s, 70s and 80s, had strongly outperformed the OECD in the 1990s.1
We cut taxes and reformed the tax system.
We liberalised and deregulated the financial sector2.
We gave the central bank independence in setting monetary policy.
We privatised assets.
We initiated the National Competition Policy.
We had an economic speed limit that was the envy of the world.
Other nations wanted to know how we did it. Tony Blair came here to learn before he became Prime Minister.
I tell you this story because today, the situation is completely reversed.
No one comes to Australia to learn about economic success anymore.
Once again, we are falling to the back of the pack. And the numbers don't lie.
On living standards, we are the worst-performing country in the developed world.
While living standards across the OECD have grown by 5% on average since 2022, in Australia ours have shrunk by 7%3.
Our economy per person has gone backwards in 9 of the last 12 quarters4.
And on productivity—the very engine of our past success—we are now ranked second-last among developed countries. Only Mexico is doing worse5.
Let me be blunt: the productivity surge that created the economic miracle of the 90s and 2000s is over. Today, we are in a productivity slump… and it is costing every single Australian.
OUR GENERATIONAL COMPACT IS BROKEN
For generations, the Australian promise was simple, but profound: your children would be materially better off than you were.
Living standards doubled every 35 years in the post-war era. This was the generational compact at work.
Each generation enjoyed higher incomes, better health and education, and more opportunity.
They lived longer and healthier lives, had more satisfying and varied professional careers, enjoyed more leisure, and in turn gave their children greater opportunities than they had.
To achieve this doubling of living standards every generation, Australia’s long-term annual growth rate, when measured in real GDP per person, has been 2%.
But that promise is now broken.
Our long-term growth rate is now more like 1% per person.
And in the past three years – going back to mid-2022 – real GDP per person has not just flatlined, it has actually gone backwards – declining by 1.3%.
So our economy per person is going backwards. The only thing keeping our headline GDP in positive territory is high migration.
We are confusing population growth with prosperity. They are not the same thing. Our national pie is getting slightly bigger, but everyone's slice is getting smaller.
The Reserve Bank just downgraded its long-range productivity forecast for Australia to 0.7%.6 Even this would be a big improvement on our current performance. In the last year, productivity has not grown at all. Since March 2022, it has fallen by 5%.7
But even on the RBA’s optimistic forecast, it will now take roughly one hundred years — three generations — for living standards to double.
Think about that. The Australian dream of getting ahead is being deferred to our great-grandchildren. This isn't a statistical blip: it is a profound threat to our national life.
OUR ECONOMIC SLUMP
So how did we get here? How did we go from being a model to a cautionary tale? The Reserve Bank points to several causes8, but they can be boiled down to three critical failures.
First, our economy has lost its pulse. Schumpeter called it ‘creative destruction’. Others call it economic dynamism. It's the essential process where new ideas challenge the old. But look at our top 20 companies on the ASX. Two-thirds of them were there 25 years ago. In the US, it’s only one-quarter. While they got Amazon, Google and Nvidia, we got… the same familiar faces. Our corporate sector looks less like a dynamic marketplace and more like a closed shop.
Second, we’ve become slow to seize the future. The RBA calls this ‘slower technological diffusion’. It means we're too slow to adopt game-changing tools. And now, as we stare at the greatest productivity opportunity in a generation — Artificial Intelligence — what is the government's response? To suggest that unions should have a veto over its use. This is like giving the horse and buggy lobby a veto over the motor car. It’s a retrograde mindset that treats AI as a threat to be combatted, not an opportunity to be seized.
The 2025 Nobel Prize in Economics was awarded this week to trio of economists — Joel Mokyr, Philippe Aghion, and Peter Howitt — for their research proving the importance of both these factors for economic growth.
Aghion and Howitt explained how new technologies and innovations displace older ones, leading to a dynamic process of economic growth where new industries emerge and outdated ones decline. Creative destruction at work.
Mokyr’s work highlights the importance of a culture open to new ideas for economies to thrive.
Australia needs to take both these lessons to heart.
Third, we are being strangled by our own rules and rulers.
Red Tape: The Corporations Act is now longer than War and Peace. The Fair Work Act has had 561 new pages added by this government. We are burying our businesses in paperwork and compliance costs, and the only ones who benefit are the established players who can afford the lawyers.
Runaway Government Spending: Government spending is growing four times faster than the economy. It's acting like a giant vacuum cleaner, sucking up capital, skills, and resources that our private sector desperately needs to invest and grow.
Government spending as a share of the economy is the highest it has been outside of the pandemic in 40 years.
Government debt is set to hit $1 trillion this year, and interest payments on this debt – running at $50,000 per minute – are one of the fastest growing items in the
Budget.
In the past two years, 80% of new employment has been in the so-called non-market sector – the part of the economy funded by government.
Self-Inflicted Energy Costs: Twenty years ago, we had some of the cheapest energy in the world. It was a core competitive advantage. Today, thanks to a flawed energy transition, it’s a comparative disadvantage. We’ve turned our cheapest weapon into our heaviest anchor.
Two decades ago, our electricity prices were lower than that of Canada and one-quarter that of Japan. Two decades later, our electricity prices are now twice as high as Canada and higher than Japan.9
The evidence for this economic malaise is all around Private sector investment is at a near 33-year low, and spending on research and development is at a decade low. Both indicate a profound lack of confidence in Australia’s future.
THE RISK OF ZERO-SUM POLITICS
If this continues, the pain will be felt everywhere. We won’t be able to afford the defence forces we need, the infrastructure we require, or the social services we cherish.
But the most dangerous consequence is what it will do to our politics.
Economic growth is the glue that holds an optimistic society together. It allows for win-win outcomes. But in a stagnant economy, politics becomes a zero-sum game.
If the pie isn't growing, the only way to get a bigger slice is to take it from someone else.
It becomes young versus old. Worker versus business. Asset-owners versus income-earners. We are already seeing this toxic, populist language creep into our discourse.
This is how we get a Tale of Two Nations.
One, the confident, growing, outward-looking Australia of our past. And the other, a stagnant, resentful, inwardly-focused Australia, where politics is about redistributing a shrinking pie.
That is the future we must choose to reject.
This might sound like a Game of Thrones-style dystopia, but we are already seeing elements of such zero-sum discourse creep into Australia.
Older Australians, with their high levels of home ownership, are increasingly being blamed by parties such as the Greens for current housing unaffordability.
Treasurer Jim Chalmers wrapped up Labor’s economic summit by promising to fix ‘intergenerational equity’ – coded speak for hitting the elderly with more taxes.
People with self-managed super funds – seen as wealthy – have only narrowly avoided being hit by the Labor Government with a novel and new tax on unrealised gains.
Corporate Australia is having any number of novel new taxes and regulations proposed on it.
This is increasingly the language of political discourse in Australia: zero-sum economics, where the task of government is basically one of redistributing burdens and benefits.
Stagnant economies provide the breeding ground for populism, with its identification of villains and simplistic solutions.
If you look around the world, it is the economically most stagnant nations of Europe where populist political parties are gaining the largest foothold.
If Australia’s economy remains stagnant, we too will fall victim to populism, to this toxic form of politics.
THE WAY FORWARD
I want to say this very clearly.
Economic growth is a good thing. And the single most powerful driver of growth is competition.
Competition is what keeps businesses honest. It drives innovation and lifts wages. It builds homes cheaper and quicker and keeps prices lower. It is the well-spring of productivity. It’s what stops our economy from becoming lazy and complacent.
But right now, Australia has a competition deficit. And the current government's answer is always the same: more regulation, more intervention, more government.
They are obsessed with policing the size of Tim Tam packets – their so-called war on ‘shrinkflation’ – while ignoring the structural rot.
Our answer as Liberals is the opposite. More competition, not more regulation.
We need a new wave of bold, structural reform, just like in the 90s and 2000s. We need a Hilmer 2.0 and a Wallis 2.0.
Our plan must be built on three core principles.
First, unleash enterprise.
We must cut the regulatory dead weight that is holding business back. We must rein in out-of-control government spending that is starving the private sector of resources. And we must deliver affordable, reliable energy, because you cannot be a competitive nation with globally uncompetitive energy prices.
Second, ignite competition.
We must roll out the red carpet for investors, not the red tape. We want more global players entering our market to challenge the incumbents, and more home-grown upstarts doing the same, whether it’s in banking, supermarkets, financial services or airlines.
Competition, rather than regulation, should be the default setting for our entire economy.
Third, embrace the future.
We must champion new technology like AI, not shun it. We must make it easier for businesses to hire workers and for startups to find capital. We must choose to be a nation that builds the future, not one that hides from it.
Under the Labor Government, though, what we have is a creeping regulatory state, a transition to a managed economy.
Let’s look at Labor’s record here.
They have introduced a new raft of mergers reforms, the complexity of which threaten to have a chilling effect on commercial transactions.
They are all over the shop when it comes to artificial intelligence, a technology that could help massively lower barriers to entry in established industries.
They have added massively to the regulatory burden in Australia, as my colleague Senator Bragg pointed out here a few weeks ago.
They are threatening to introduce ex ante competition laws, a European import that would wrap some of the most innovative companies in a regulatory straitjacket.
They have massively complicated our industrial relations regime, making it riskier and more expensive for new businesses to take on workers.
They – up until two days ago – were pursuing a new tax on ‘unrealised gains’ – a measure that would starve Australia’s private companies and start-ups of early-stage, risk-oriented capital.
They have a $900m National Competition Fund. Sounds good …. but none of it has been spent.
CONCLUSION
In 1976, when the Australian Olympic team of 184 athletes set out for the Montreal Olympics, the hopes of the nation were high.
But our athletes returned home without a single gold medal.
Our worst ever ranking at an Olympics.
The first time since 1936 that Australia had not won a gold medal.
But that shock became the catalyst for a ruthless overhaul.
We centralised a fragmented, state-based system. We established the Australian Institute of Sports. We took a ramshackle cottage-industry of amateurs and grounded it in science and infused it with expertise and professionalism.
A quarter of a century later, Australia’s transformation in sport was complete.
The Sydney Olympics in 2000 saw us capture the largest-ever number of medals for Australia and finish fourth on the medal table.
Today, in economic terms, we are having our Montreal moment.
In 2004, we were ranked the 4th most competitive economy in the world. This year, we were 18th.10
If this were the Olympics, that would put us somewhere between Iran and Ukraine on the medal tally.
This is our wake-up call.
The same Australian attitude that demands excellence in sports must demand it of our economy.
It is our duty to future generations of Australians to restore the generational compact.
The consequences of stagnation, or worse – continued decline, are not just dented national pride. They are significant and they are profound.
The good news is we have time and the national will to act. But it must be action, not just talk of future Abundance, and endless government-sponsored round-tables.
My proposition is simple. Competition leads to better productivity and lower prices. Productivity leads to economic growth. And economic growth delivers a better Australia today and a better future for our children.
The role of government is not to preside over a managed national decline.
It is to instead to chart a path that will make our economy, once more, one the world can envy and learn from.
Thank you.
