iscover
Amid rising concerns over Australia’s economic productivity, resilience and competitiveness and the flow-on risks for national security, questions are increasingly being raised about the long-term viability of neoliberal capitalism. If that model fails, what credible alternatives are left?
Since the end of the Second World War, Australia’s economy has undergone a profound transformation, shaped by shifting global realities, domestic policy choices and changing national ambitions.
What began as a relatively insular, commodity-based economy tied closely to Britain has evolved into one of the world’s most open and globally integrated advanced economies, deeply enmeshed in Asian growth and international capital flows.
In the decades after 1945, Australia pursued a deliberate strategy of nation-building and protection. High tariffs sheltered domestic manufacturing, large infrastructure projects underpinned growth, and a centralised wage system supported rising living standards.
Immigration, particularly from Europe, expanded the workforce and helped fuel urbanisation and industrial capacity. Prosperity rested on a combination of agricultural exports, mining and a protected manufacturing base, with the state playing an active role in shaping economic outcomes.
However, by the late 1970s and early 1980s, this model was showing strain.
Inflation, declining productivity and an uncompetitive manufacturing sector exposed the limits of protectionism. In response, the reforms of the Hawke and Keating governments marked a decisive break. Floating the dollar, deregulating the financial system, reducing tariffs and embracing competition policy reoriented Australia towards global markets.
These changes were politically contentious but laid the foundations for a more flexible, resilient economy, at least a resilient one entirely dependent upon the security guarantees of the United States in the global commons.
At the same time, Australia’s economic gaze shifted decisively from Britain and Europe to the Asia-Pacific. Japan’s post-war industrial boom, followed by the rise of South Korea and, later, China, transformed Australia’s export profile.
Iron ore, coal and liquefied natural gas became central to national income, while services such as education and tourism emerged as major export earners. China’s rapid industrialisation, in particular, underpinned two decades of strong growth and helped Australia avoid recession through the global financial crisis.
Today, Australia is a high-income, services-dominated economy with deep links to global trade, finance and supply chains. Yet this integration brings new challenges.
Slowing productivity growth, housing affordability pressures, climate transition risks and growing geopolitical uncertainty are testing the assumptions that have underpinned economic policy for a generation.
As Australia confronts a more fragmented global economy, the question is no longer whether it is integrated with the world, but how it can sustain prosperity and resilience in an era where economic openness and strategic vulnerability increasingly sit side by side.
Enter the concept of national capitalism, a structural rethink of the traditional, post-war neoliberal capitalist system until the mid-2000s that has been the bedrock upon which much of the Western world’s economic “prosperity” has been built.
An idea whose time has come?
Over the past five years, a discernible shift has taken place across advanced economies: a move away from the orthodoxies of hyper-globalised, market-fundamentalist capitalism towards what is increasingly described as national capitalism.
This is not a return to crude, clunky and blunt protectionism nor a wholesale rejection of markets. Rather it reflects a pragmatic reassertion of the nation-state as an active economic actor, shaping markets in pursuit of resilience, strategic autonomy and social legitimacy.
Australia, given its economic structure and strategic position, is both exposed to this trend and well placed to adapt it in a distinctively Australian form.
National capitalism has emerged in response to a confluence of shocks. The COVID-19 pandemic exposed the fragility of extended global supply chains.
Heightened US–China strategic competition politicised trade and technology flows. Russia’s invasion of Ukraine underscored the geopolitical risks embedded in energy and commodity markets.
At the same time, climate transition imperatives and domestic inequality have strained the social licence of laissez-faire economic models. Together, these pressures have driven governments to intervene more directly in shaping industrial outcomes.
Structurally, national capitalism differs from the neoliberal model that dominated from the 1980s to the late 2010s. Where neoliberalism prioritised efficiency, comparative advantage and minimal state intervention, national capitalism elevates resilience, sovereignty and strategic capability alongside growth.
The state acts less as a neutral rule-setter and more as a market shaper: coordinating investment, underwriting risk and steering capital towards nationally significant objectives.
This new system is characterised by several common mechanisms.
A fresh take on industry policy
First, industrial policy has returned not as blanket subsidies, but as targeted support for critical sectors such as semiconductors, energy systems, defence industries and advanced manufacturing.
Second, strategic trade and investment screening has expanded, reflecting concerns about technology leakage and foreign control of critical infrastructure.
Third, governments are increasingly using public balance sheets through loan guarantees, equity stakes and long-term offtake agreements to crowd in private capital. Finally, national capitalism is explicitly political: economic policy is now openly linked to national security, social cohesion and democratic stability.
Importantly, this differs from earlier forms of state capitalism. Post-war developmental states often relied on protectionism, state-owned enterprises and inward-looking growth.
Contemporary national capitalism operates within open economies, leveraging global markets while selectively insulating or reinforcing key nodes. It is not anti-globalisation, but conditional globalisation.
For Australia, the rise of national capitalism presents both a challenge and an opportunity. The country’s economy remains heavily exposed to global commodity cycles, offshore manufacturing and foreign capital.
Yet Australia also possesses significant strategic advantages: world-class resource endowments, a sophisticated financial system, strong institutions and trusted alliances.
An Australian model of national capitalism would need to be disciplined, transparent and fiscally credible, avoiding the pitfalls of special interests, rent-seeking or politically motivated industry capture. Several mechanisms stand out.
First, Australia can anchor national capitalism around strategic resource stewardship. Rather than merely exporting raw materials, policy can prioritise downstream processing in areas such as critical minerals, green metals and energy carriers.
This does not require blanket protection, but long-term policy certainty, infrastructure co-investment and strategic partnerships with allies.
Second, national development finance can be expanded in a targeted way. Institutions such as the Clean Energy Finance Corporation and the Northern Australia Infrastructure Facility provide a template: commercially disciplined but willing to absorb risks the private sector will not.
A modest expansion of this model into advanced manufacturing, sovereign defence supply chains and enabling technologies would align capital with national priorities.
Third, Australia’s national capitalism should leverage superannuation as a strategic asset. With over $3.7 trillion under management, super funds are natural long-term investors.
Government can facilitate, rather than compel, domestic investment through co-investment vehicles, regulatory clarity and pipeline certainty particularly in infrastructure, energy and housing.
Finally, Australian national capitalism must remain socially grounded. Productivity growth and resilience will not be sustained without public consent.
That requires visible links between economic strategy and living standards: secure employment, skills development and regional growth. Unlike more dirigiste models, Australia’s version should emphasise partnership rather than command, using incentives and institutions rather than mandates.
National capitalism is not a temporary aberration; it is a structural response to a more contested, uncertain world. For Australia, the task is not to resist this shift, but to shape it – crafting a model that strengthens sovereignty and resilience without sacrificing openness, competition or fiscal discipline.
Done well, it offers a pathway to renewed economic legitimacy in an era where markets alone are no longer enough.
Final thoughts
Building Australia into an independent power with the economic heft, diplomatic reach and military strength of a major regional player is no longer just an aspiration. It is an increasingly necessary expression of national sovereignty.
It speaks to an Australia prepared to take full responsibility for its own security and to play a leading role in shaping a stable, prosperous Indo-Pacific, rather than relying on others to do so on our behalf.
For too long, Australia has been constrained by structural dependence economically tied to China’s markets while strategically anchored to the United States alliance, leaving us exposed to the dynamics of a contest not of our own making. That need not be our future.
In a world increasingly divided between democratic and authoritarian systems, Australians deserve a frank and open conversation about where we stand, what we value and the direction we intend to take.
That conversation cannot be confined to Canberra. It must involve the Australian people, those who will carry the costs, bear the risks and ultimately defend the decisions taken in their name.
Enduring success will depend on transparency, collaboration and trust between government, industry and the broader community. It requires a renewed sense of national purpose: a shared project focused on strengthening the economy, securing critical industries and building resilience against economic coercion, wherever it may come from.
A strong, diverse and self-reliant economy is the bedrock of national power and the most effective shield against external pressure. Without it, strategic autonomy is an illusion.
At the same time, Australia must be honest about its ambitions. Are we prepared to accept a gradual slide into “middle power” irrelevance, or are we willing to step up as a genuine regional leader, a country that helps shape events rather than merely responding to them?
As historian and author Arthur Herman has observed of the United States, whether we call it industrial policy or something else, a new paradigm is required because advances in technology can rapidly reshape economies of scale and determine the trajectory of future innovation.
The same logic applies to Australia.
Without deliberate, sustained investment in capability, innovation and national self-reliance, we risk stagnation and an acceleration of what has often been described as “managed decline”.
The cost of inaction would be the gradual erosion of our power, prosperity and independence – a price far higher than the effort required to change course now.
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.
