I want to take you back to the early 1990s to the kind of nation we were then - insecure, uncertain about our economic prospects, battered by recession, suffering high unemployment and job insecurity, and scarred by the recent experience of 17 per cent mortgage interest rates.
On a visit to Australia in 1994 the former Prime Minister of Singapore Lee Kuan Yew reiterated a previous warning that Australia could become the “poor white trash of Asia”. This was partly a reflection on Australia’s economic state. It was also a reflection on the rise of the “Asian Tigers”.
The dynamic growth of East Asia was in stark contrast to the economic malaise of Australia. When the government appealed for “enmeshment” in Asia it was making an economic appeal. The thinking was that if we could join a region that was successful we could overcome our own weakness.
The rise of the Asian Tigers through the ’80s and the comparative decline of Australia through the recession of the early ’90s sapped our confidence as a nation. And what is more, it sapped the respect for Australia among our neighbours and the wider international community.
The Coalition Government was elected in March 1996. We laid down an economic program setting out medium-term targets on fiscal policy, monetary policy and debt management. By July 1997 we were on track to balance the budget for the first time in seven years. It was a close run.
Beginning with mass capital outflow from Thailand in June-July 1997, financial contagion began spreading around the region. Those in Australia who had marvelled at the growth rates and saving rates of Asian Tigers saw these countries stagger and reel. They could only shudder to think what would happen to Australia - considered by many to have a weaker economy.
But Australia did not succumb to the Asian financial and economic collapse. In 1997-98 our growth rate was 4.5 per cent. We produced the first balanced budget in seven years. Paul Krugman writing in Fortune Magazine in December 1998 dubbed Australia “the miracle economy”.
In March 1996 the APEC Finance Ministers met in Japan. It was the first APEC meeting I attended. We were given a polite welcome but we were not respected. Australia was tolerated much as a fading uncle is tolerated at Christmas dinner - there out of politeness and past association rather than present or future expectation.
But we proved strong and resilient through the Asian economic crisis. We survived and we offered financial assistance to badly affected economies in the region.
In May 1999 APEC Finance Ministers met at Langkawi in Malaysia. We were not the fading relation at this meeting. Australia had won a great deal of respect. The region knew Australia was a success story and they wanted to learn from its experience. Now we had people talking of the “Australian model”.
Since 1996 Australia has had continuous growth averaging 3.5 per cent per annum. During that period Singapore has had three recessions, Hong Kong has had three recessions, Korea has had one recession, Taiwan has had two recessions, Japan has had four recessions, and the United States went into a recession in 2001.
Over the last 10 years Australia has earned a great deal of respect amongst its neighbours and the other economies of the world. Australia’s achievements have given its people a lot more self respect. The nation feels more secure about itself. This is the Australian revival.
This is an edited version of the Treasurer’s address to the National Press Club on March 1, 2006. Read the full speech here.
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