/How Hawkes actions in 1983 saved Australias economy in 2008

How Hawkes actions in 1983 saved Australias economy in 2008

Updated

May 17, 2019 14:19:58

Occasionally, there’s a curious intersection between the affairs of state and events far more personal, when history is forever seared into the memory banks.

If ever asked when the Australian dollar was floated, I can instantly reel off the date and the sequence of events that led to it.

Monday, December 12, 1983.

It had been suspended the previous Friday in a dramatic and bewildering turn of events, even by the standards of a finance reporter then covering global markets, following months of pressure from speculators punting on an official devaluation.

For anyone out of the country, that left three days of monetary limbo.

As it turned out, my wife and I had our wedding that weekend and, midway across the Pacific, couldn’t exchange Australian dollars for local currency, much to our alarm and embarrassment.

Luckily, we had understanding hosts and the inconvenience was brief.

For the fledgling Labor government, however, it was a masterstroke that would forever change the nation. No longer would government be hostage to the power of currency speculators, who now would be forced to punt against each other.

For the nation, it was a defining moment. It opened the economy to the rapidly shifting tectonic forces reshaping the globe and it signalled a new era when a confident Australia could face the world and compete with the best.

Hawke and Keating delivered Australia into the modern era

Bob Hawke, who passed away on Thursday, may be best known as a man of the people, an advocate for the working class, a champion beer drinker and a great leader. But among his impressive array of academic credentials in law, philosophy and politics as a Rhodes Scholar was a stint at Oxford studying economics. It wasn’t, however, a primary focus.

Bob Hawke was a moderniser; of the union movement, his party and his country.

Ultimately, however, it was his partnership with Paul Keating, his equally driven and largely self-educated Treasurer, that took on the economic challenges facing the nation and embarked on a series of reforms that, upon reflection, were astounding, and delivered Australia into the modern era.

Between them, they deregulated the financial system, injected competition into banking by granting 23 new licences, largely to foreign operators. They slashed tariffs, a process started by the Whitlam government, quelled union discontent and labour disruption, rebuilt the wage fixing system, introduced compulsory superannuation and overhauled the tax system with the introduction of capital gains tax and dividend imputation.

The effects have been profound, if not always immediately beneficial and not always welcomed.

The debt binge that followed deregulation and the resulting stock market boom detonated in spectacular fashion in October four years later in 1987.

Looking back on Bob Hawke:

That greater exposure to the global economy allowed the chill winds of developed-world recession to blow through in the early 90s. So, when interest rates soared on global markets as newly independent central banks decided to kill inflation, ours did too.

Dismantling the fences that cosseted Australian industry from global competitors was equally horrific for workers and big business. Manufacturing went into decline. Industries, like clothing and footwear, mostly decamped offshore. That left workers, many of whom had spent a lifetime in the same job, suddenly on the scrapheap.

But through it all, the overarching benefits of the reforms were undeniable. It allowed for a sustained lift in productivity that delivered higher living standards.

Consumers, no longer held to ransom by local companies that could charge what they liked for sub-standard product, could purchase better quality goods at much cheaper prices.

The producers that survived did so by turning out world-class goods at competitive prices. New industries began to replace the old.

Better quality education and a more highly motivated labour force began delivering services in finance, law and education to a global market.

Currency’s float has kept Australia’s economy afloat

But if you had to look for the masterstroke, the moment of genius that overshadowed it all, it would have to be that fateful Friday, December 9, 1983, when Hawke and Keating suspended currency exchanges after a full-day meeting on the Thursday.

For an economy that relies so much on global trade, the floating exchange rate has been a godsend, the ultimate shock absorber.

In 2008, as western capitalism teetered on the brink of catastrophe, our dollar dived from near-parity to 60 cents against the greenback in just over three months. That helped boost exports and breathed new life into our domestic industries.

That December weekend 35 years ago reshaped all our lives, but mine in particular for very different reasons.

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Topics:

economic-trends,

federal-government,

government-and-politics,

history,

currency,

australia

First posted

May 17, 2019 13:56:40