On the 40th anniversary of his career, Ross Gittins nominates the 10 reforms that helped transform Australia from closeted financial backwater to one of the most prosperous countries in the world

Ten economic reforms that transformed Australia

February 7, 2014 – 12:27AM

Ross Gittins

The Sydney Morning Herald’s Economics Editor

On the 40th anniversary of his career as one of Australia’s most trusted economic commentators, Ross Gittins nominates the 10 reforms that helped transform Australia from closeted financial backwater to one of the most prosperous countries in the world.

Join Ross for an online forum between 12 noon and 1pm today to discuss his first-hand view of the rights and wrongs of the past four decades and how they helped Australia soar or sink.

And in tomorrow’s Herald, Ross reflects on a lifetime of covering the big economic changes that have swept Australia.

1. Floating the dollar

Letting the market set the value of the Aussie dollar after December 1983 allowed it to fluctuate between US48c and $US1.10 so far, making it an absorber of shocks from the rest of the world. This has made the economy more stable and stopped the resources boom causing an inflation blowout.

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2. Deregulating the banks

Introducing foreign banks and allowing banks to set their own interest rates made it much easier to get a loan and increased competition between banks and other lenders, but led to excessive lending to businesses and caused the deep recession of the early 1990s.

3. New taxes on capital gains and fringe benefits

In October 1985 Paul Keating announced new taxes but cut the top income-tax rate from 60 per cent to 49 per cent. He also abolished negative gearing, but reversed this under pressure from estate agents.

4. Removing import protection

In May 1988 Keating announced the virtual phasing out of the import duties and quotas imposed on most manufactured goods. Predicted demise of manufacturing industry did not materialise.

5. Privatising government businesses

Sale of the Commonwealth Bank began in 1991 and Qantas in 1992. The Howard government sold Telstra in three tranches from 1997. State governments sold their banks, insurance companies and some power producers and distributors.

6. Enterprise bargaining

In 1993 the Keating government ended centralised wage-fixing through a “national wage case” and introduced collective bargaining at the enterprise level. In 2005, Work Choices sought to promote individual contracts by reducing worker protections, further encumber unions and end reliance on industrial rewards. The Rudd government reversed the most extreme parts of Work Choices, but left much of it in force.

7. National competition policy

In 1995 Keating sought to encourage deregulation and privatisation by state governments and tighten the Trade Practices Act’s restrictions on anti-competitive behaviour. Premiers tended to drag their feet.

8. Central Bank independence

In 1996 Peter Costello allowed the Reserve Bank to make its decisions independent of the elected government, endorsing its target of holding inflation between 2 per cent and 3 per cent, on average. The Reserve has raised interest rates more than a politician would – including during the 2007 election campaign – but this has kept inflation under tighter control than when politicians were in charge.

9. Goods and services tax

The start of the GST in 2000 came 25 years after it had been proposed by a major inquiry. It replaced wholesale sales tax and various unconstitutional or inefficient state taxes. Much death and destruction were predicted; little eventuated. But now GST is showing signs of wear and needs renovation.

10. Taxes on mining and carbon

Wayne Swan planned to raise huge sums from taxing miners’ high profits and use the proceeds to give tax cuts and concessions to business and individual savers. He also used a tax to impose a price on carbon dioxide emissions. Both reforms were badly mishandled and Tony Abbott has pledged to reverse these reforms.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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