Australia is sick

Our political economy is eating itself

Decline can take many shapes.

In 1850, Cincinnati was the sixth-largest city in America and the roaring boomtown of the interior. It was never sacked, never burned, never went bankrupt. It simply grew a little slower than Chicago, decade after decade. Today it is a pleasant regional city nobody thinks about. Decline via drift.

Argentina ran the accelerated version. In 1913 it was one of the richest countries on earth per capita — richer than France. The great magnet of the southern hemisphere. A century of telenovela politics stacked on a broken economic base turned it into the world’s byword for squandered inheritance. Nobody in Buenos Aires in 1913 would have believed you.

Australians were the richest people on earth for large parts of the late nineteenth century. We should be again. We sit on half the world’s seaborne iron ore, a third of its uranium reserves, produce more lithium than any other country, have gas fields among the largest on the planet, the sunniest habitable continent, and 27 million educated people under common law on Asia’s doorstep. We have never had slavery or suffered savage civil wars. No nation has ever been dealt better cards.

Yet we are failing. GDP per capita has been negative or sclerotic since 2023. The steepest fall in real household disposable income in the OECD and highest inflation in the Anglosphere. Fertility at a record low. Capital-city houses at ten-plus times incomes. The list goes on. We are on track for the grind into obscurity. We will have no one to blame but ourselves and we will not be able to say we did not know. Something is rotten in the state of Australia.

Given our resource, security, and human capital abundance, this is a political failure. Our political economy has always been heavily contested by snouts in the trough — from the days of Macarthur strong-arming a nascent government, to the land-hungry squattocracy, to countless groups today as compellingly detailed by Cameron Murray in his book Rigged. Like all nations we have our own Bootleggers and Baptists. All Bootleggers are definitionally petty, looking to line their pockets. But our Baptists seem particularly stupid.

Netflix adaptation of Australia’s eSafety Commissioner

From the brazen government shake down of global tech to pay off a few legacy media companies to banning under-16s from social media in a sop to those same companies to win some meagre advertising dollars back from the global platforms. All under the auspices of a dystopian-titled eSafety Commissioner. God forbid our media tycoons make things people want. It’s crazy we only got age-verification for online porn sites by accident in an attempt to shore up legacy media ad dollars. They’re confessing they could have had porn sites verify age for the last 20 years but didn’t.

We can’t trust our government to regulate AI because we know it will just be another jobs-for-the-boys program or an excuse to funnel cash to some interest group.

Our political class is stuck in the narratives of the past. Each wing lives in its own delusions.

Labor remains anchored to a union base that now covers barely one in twelve private-sector workers and is, increasingly, a concentration of criminal activity. (Public sector unions are their own strange paradox). Its flagship, the CFMEU, had to be placed into administration after bikies and organised crime were found clipping the ticket on government projects. They siphon taxpayer contracts on one side and hold the country to ransom on the other. The rest of Labor’s base, the inner-city professional and public sector cardigan wearer, are fixated on ideological crusades. Climate. Israel. The Voice.

The Liberals talk about free markets and enterprise, which in practice is capture by the Business Council. It believes in one thing: cheap-labour-maxxing. The Liberals’ own pearl-clutchers split off into the Teals.

Both sides are complicit in two decades of bungling.

Howard-era apparatchiks are still drinking the Kool-Aid on their catastrophic decision to abdicate immigration policy to the universities. Philip Ruddock, Howard’s immigration minister, has announced a new book Nation Building: How Immigration Made Australia — with a foreword by Abul Rizvi, the mandarin who designed the student-visa-to-residency pipeline. Why are they confessing? They’re bragging. The scheme was meant to build university capacity and mint skilled migrants. Instead it disfigured our universities into visa mills and rebranded the tuition fees of aspiring permanent residents as our “fourth-largest export.” Ironically, in the process the Liberals fed Labor’s natural voter base — university jihadists.

The entire Kevin ‘07 campaign was insane on its own terms. Australia produces about one per cent of global emissions. There was no mechanism, even in theory, by which the “great moral challenge of our generation” could be answered from Canberra. There were, however, serious and successful attempts to hobble our energy system. Which was the point. This was obvious at the time. No comeuppance will ever come to these self-righteous economic terrorists.

Self-congratulatory tears were shed when the Gillard government launched the NDIS, costed by the Productivity Commission at $13.5 billion a year at maturity, serving roughly 400,000 of the most profoundly disabled Australians. It now runs past $50 billion a year — more than Medicare (!) — with 740,000 participants and counting. We could hand every one of the originally intended recipients $125,000 a year in cash and come out ahead. But that wouldn’t feed an entire industry of parasites. Just try clawing those sweet dollars from their hands now. It’s over.

Turnbull promised Snowy 2.0 for $2 billion. The official budget is $12 billion and already conceded broken; the Auditor-General’s latest report rates the final bill unknowable, while outside estimates run to $40 billion. The greatest white elephant in Australian infrastructure history, and it isn’t even finished. He still rolls with a #withhydropower banner on his LinkedIn profile. No shame. These are our best!

Meanwhile the standing absurdities accumulate. We banned drilling over some of the largest gas fields on the planet, and one of the largest LNG exporters on earth is now building terminals to import gas. (To their credit, the Victorian Libs now want to drill.) We hold a third of the world’s uranium reserves, and it is illegal to do anything with it here. Our premier think tank, the Grattan Institute, surveyed the national predicament and recommended switching off your gas stove (grim, grim, grim). Our best and brightest have the vision and national will of a toadstool. We have one of the most licensed workforces in the world, rivaled only by basket-case employment markets like India and South Africa. Our privatised pension scheme is a conspiracy of union and private sector interests, each getting their vig. Our government is threatening to dip its fingers into it. It’s inevitable. Why wouldn’t they. It’s the shape of our political economy.

This excellent chart shows the relative stagnation of the last decade. It looks harsher than it is: the Albanese government cannot be blamed for the economic conditions it inherited (although it hasn’t helped), and the Howard government timed its regime well with the China boom.

The rot runs deeper than any one government. Labor’s political economy points one way: immigration-maxxing. Half a million net arrivals a year flatters headline GDP, launders per-capita stagnation through population growth, keeps Treasury’s projections respectable, pays off the union base with megaproject pipelines, and imports voters (according to the ABC). The Liberals’ political economy is dominated by Business Council capture, which wants the same migrants at lower wages, and which has left the party impotent with actual voters.

Those voters have now, incredibly and predictably, absconded to One Nation, a party of nincompoops but one that actually cares about the one thing both major parties have been giving voters good and hard and against their will for a long time: immigration. The bar is so low that all it takes to win is opposing infinite immigration, self-flagellation, and the paganisation of everything (are you enjoying the renaming of your cities and smoking ceremonies anon?).

Are you enjoying your immigration-maxxing anon

An ageing population shifts an ever-greater burden onto a shrinking cohort of young workers who cannot buy homes and have stopped having children. We are structurally hobbled.

The Voice — a proposal to write ancestry into the machinery of government — lost the referendum. Badly. Sixty–forty, every state. Victoria and South Australia, where it also lost, went ahead and built their own versions anyway (imagine this on a federal level). What is that if not contempt for voters?

Not once in a generation has our federal political class offered a pro-growth vision: a wealthier Australia, one where people want more children and can assume a better life for them. We have instead been ravaged by an inward-facing political class, each faction eking out a greater slice for its own interest group. We tinker with tax policy at the edges while the country is hollowed out. The state is eating the country:

Demographically, we may be past the point of no return, where too many mouths are now dependent on government mismanagement. We’ve always had interest groups vying for their cut. But now the misalignment between the good of the country and the good of particular groups may be too high.

Australia is not alone. Similar demographic, political, economic, and institutional challenges seem to grip most countries. But that is not an adequate excuse. Australia has prided itself on its economic exceptionalism, soaring with the help of China’s rise through the 90’s and 00’s. I was there when the AUD > USD. I felt like a king travelling through the US. Today an Australian feels like a third worlder paying with pacific pesos overseas. We have immiserated ourselves over the last ~15 years. Our decline has been self-inflicted.

It’s easy to talk about agency and only needing the will to change, but it’s not clear at all that our political and intellectual institutions, the incentives in our political economy, and Australia’s structural demographic realities are up for turning.