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Ask many average Aussies and they will undoubtedly tell you that the wheels of our “economic miracle” have well and truly fallen off. Now there is a growing recognition among the expert class that Australia’s economy is flailing, with dramatic implications for our national resilience.
For the better part of three-and-a-half decades, the Australian economy has been the envy of the world. Resilient, adaptive and growing in the face of global and regional headwinds, it was hard to disagree with the moniker the “Lucky Country”.
Today, however, the reality is vastly different. Where Australia and Australians once sailed through the turbulent economic headwinds of the 1990s, mid-2000s and into the 2010s, the national economy is in significantly more precarious position.
Highlighting this is simply asking your average Australian about the state of the Australian economy, to which you will invariably get some variation of “The economy is broken, it isn’t working”, and if you’re really lucky (sarcasm), “Capitalism isn’t working”.
This shift is largely the result of the post-Cold War era of globalisation and economic liberalisation, driven in large part by the never-ending pursuit of “comparative advantage” and ever-increasing quarterly profits which saw the Australian economy shift from a relatively balanced and complex economy into a first world banana republic.
While it was the intent of then Prime Minister Paul Keating to spur the nation into action, avoiding the collapse of the national economy into banana republic status by provoking the Australian public into action, the reality is we have ended up there, just at a much slower, more managed pace.
The most interesting part of asking Australians about the state of the economy is the growing use and framing of the national economy (and depending on who you ask, the nation writ large) as being firmly within the grasp of a period of “managed decline”.
In its truest sense, “managed decline” can be best defined as “the process of overseeing the planned, orderly end of something, like a business, industry or region, to minimise negative consequences such as social disruption, environmental damage and economic chaos. It involves accepting that a situation is no longer viable and strategically managing the reduction of resources, costs and operations rather than attempting to halt or reverse the decline, which is considered impossible or unsustainable”.
And while Australians have undoubtedly been aware of this steady “managed decline” by being at the coalface, the downward trend is beginning to be noticed more broadly and globally.
Highlighting this is executive director of the Centre for Independent Studies, Michael Stutchbury, writing for The Australian in a piece titled Tip from a friend: Australia’s economy is in a slow race to ruin, in which he said, “Sometimes it takes outsiders to say the obvious but unwelcome things: high spending, low growth and red tape are hurting us. Why does Labor fail to see it?”
After the rise, comes the fall, or does it?
Successive Australian governments have long sought to push a narrative of “Australian exceptionalism”, echoing the narrative of “American exceptionalism” as the driving force behind America’s ascension to the position of global hegemon in the aftermath of the Second World War.
For the most part over the past three and half decades, this myth of “Australian exceptionalism” held true and was visible to any who looked at the nation and its economy, however, as previously stated, it is now becoming harder to convince people, particularly global investors.
Stutchbury highlighted this reality, albeit glossing over the challenges (and some of the causes) we face today, saying, “Australia remains an affluent nation thanks to the neoliberal reforms of the 1980s and 90s and then the lucky country fortune of our made-in-China iron ore boom.”
As part of his analysis, Stutchbury drew on the expertise of ANZ’s new chief executive, Nuno Matos, who articulated that in order to shake-off our period of managed decline, we need to embrace and leverage our “rule-of-law and relatively stable government as a safe harbour for footloose capital in an unstable world”.
Or, as Stutchbury stated, drawing on the narrative of Matos, “Australia ought to be a high-income frontier economy that draws the best of global talent and attracts global capital to its above-average investment opportunities.”
But Matos isn’t the only one with an interesting take on the future of the country and seeking to arrest and reverse the “managed decline” of the Australia’s economy, with Stutchbury highlighting the thought process of the Reserve Bank’s deputy governor, Andrew Hauser, who reinforces the unique and enviable position Australia retains.
Stutchbury, paraphrasing Hauser, stated, “And, as he now says, we’re still blessed with extraordinary mineral resources, world-ranking universities, a plum geographical position in the Asia-Pacific, a huge retirement savings pool, relatively low public debt, a strong banking system, proven political and economic institutions, and a track record of openness to foreign capital and labour.”
However, at the core of this narrative is Hauser’s firm belief that Australians “don’t appreciate” how affluent we have become when compared to our global counterparts (I will come back to this very shortly).
With this in mind, it is pretty clear based on the learned and considered analysis of both Mato and Hauser that Australia’s economic trajectory should be one of explosive yet sustained and robust growth, but if that is the case, why do things seem to be getting harder?
Supply and demand and the nominal v per capita debate
True to form, the central enemy of the nation’s economic growth for Stutchbury is one of economics’ universal and inescapable laws: supply and demand and the wide-sweeping impacts this has on cost of living, economic opportunity and national resilience that presents significant challenges in the era of great power competition.
This, in turn presents, significant challenges to our productivity, a major challenge which is now well and truly “baked in” to the national economy and frequently identified by economists and policymakers.
Stutchbury detailed this combination of challenges, saying, “That, in turn, has rekindled the cost-of-living squeeze politics that federal Labor assumed the economy’s soft landing had dealt with. Yes, inflation has decelerated from its post-pandemic peak of over 7 per cent without a sharp increase in joblessness. But prices have not fallen back to where they were and are still increasing faster than the Reserve Bank can tolerate.”
At the micro level, Stutchbury went further, saying, “The purchasing power of wages remains lower than before the pandemic. Stagnant productivity means the cost of producing each unit of GDP is growing too rapidly to return inflation to target.
But it raises an important question and brings me back to the point I mentioned previously.
How can Australia be facing a “supply” issue when it comes to labour, particularly productive labour when we have effectively hollowed out our productive industries in favour of “holes and houses” and vaguely defined “services” and, of course, experienced an explosion in the labour market since the early 2000s?
Stutchbury said, “The problem is supply, stupid. More specifically, the economy’s productivity is stuck at 2016 levels. That has forced the Reserve Bank to cut its assumption for near-term annual productivity growth to less than half the performance of the 1990s and 2000s.
"And that has cut the central bank’s estimate of how fast the Australian economy can grow to just 2 per cent for each of the next two years, propped up by immigration. The inconvenient truth is that, after 20 years of unprecedented growth in living standards, Australia has let its envied prosperity slip during the past decade. Rather than an acclaimed standout, we’ve become a ‘laggard’, according to The Economist.”
But the uncomfortable reality is (and it is one few seem willing to actively and aggressively prosecute) that at a per capita level, Australians, particularly young Australians, are seeing real declines in their wealth and earnings, an inability to build a career and life, through a combination of structural policies like extensive quantitative easing, artificially hyperinflated assets, mounting costs of servicing public and private debt and global labour competition.
Each of these factors, at the micro level, have dramatic and inescapable impacts on the national economy at the macro level, that are only further exacerbated by costs of energy, industrial relations, planning and regulation and a host of other policy settings that are serving to accelerate Australia’s “managed decline”.
With that in mind, is it any wonder generations of young Australians are reluctant to defend the nation and its interests when they are effectively locked out of its future?
Final thoughts
Both government and everyday Australians need to confront some uncomfortable realities if we’re genuinely serious about securing the nation’s future.
The Indo-Pacific is no longer a region we simply observe from afar; it’s now the world’s most contested strategic and economic arena. China, India, Pakistan, Thailand and Vietnam are flexing newfound economic, political and military weight, while Japan and South Korea are reasserting themselves with renewed purpose.
Competition isn’t creeping towards us; it has already arrived, and it won’t ease off. Our national approach must be overhauled to reflect this sharper, more demanding environment.
At the heart of this reality is a fundamental truth: Australia cannot afford to keep relying on the same narrow economic base and outdated assumptions.
Without a sustained surge in innovation, diversification and genuinely out-of-the-box national planning, we don’t just risk slipping behind, we risk watching our neighbours power ahead while we stagnate. If we fail to act, future generations could inherit a country overshadowed by more dynamic, productive and influential regional economies.
For decades, both sides of politics have opted for the quick fix over the long game. Successive governments have prioritised short-term wins and reactive policymaking instead of building the resilient, future-ready economy we require.
But the strategic landscape is shifting under our feet, and business-as-usual won’t get Australia where it needs to be. We need to break old habits, boost productivity, broaden our industrial base and deliberately cultivate new, globally competitive sectors that strengthen national resilience.
The challenge isn’t hypothetical, it’s already here.
The pressing question is when Canberra will finally produce a bold, detailed economic and strategic plan that galvanises industry, communities and the broader public around a clear vision for a stronger, more competitive Australia.
When will we see a strategy that genuinely prioritises economic resilience as a pillar of national security in an age of accelerating great-power competition?
With China and other great powers expanding their influence and our region becoming more contested, Australia faces a stark decision: remain a passive observer of change or step up as an active shaper of the Indo-Pacific’s future.
The choices we make now, especially about how we innovate, invest and transform our economy, will determine whether Australia thrives in this new era or gets pushed to the margins by it.
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
Stephen Kuper
Steve has an extensive career across government, defence industry and advocacy, having previously worked for cabinet ministers at both Federal and State levels.
