With the Morrison government's federal budget just weeks away, what are the lessons policymakers can learn from Paul Keating's approach?
to pull Australia out of recession in 1992, there was no holding back about how grave the economic situation had become.
"You've got to be quite ruthless in your thinking and the starting point has got to be that we've really got a problem," he says. This requires policymakers to have courage and be willing to deviate from previous promises and plans, which he believes both the Morrison and Keating government have managed to do."It was really only Keating who could ring the bell and say, look ... the current circumstances require a different approach," Russell says.
As households, particularly those with less income, tend to spend quickly when given extra cash, this is a fast way to get money moving around the economy. But in 2020 this lesson might be much harder to apply and even Henry says the government should tread with caution, as the national accounts show households are more likely to save the money and less able to spend their cash due to COVID-19 restrictions and lockdowns.
Grattan Institute household finances program director Brendan Coates believes the jobless rate could have come down much more quickly in the '90s than it did if the government had spent more quickly. On this particular point there is widespread agreement. Russell says the government faced issues in the 1990s to get clear projects lined up and this was, in part, due to issues with planning systems.
"There is a 100 per cent probability you'll either do too much or too little. The right mistake to make is to do too much or at least to say you'll do too much," he says.
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