It will be on his epitaph. It's already the stuff of fridge magnets, postcards and dish towels. And, to paraphrase him, walk into any saloon bar and every punter will quote that line whenever his name is mentioned. The line? No, not "Well may we say" but "This is the recession we had to have". Paul Keating immortalised that line 25 years ago on November 29, 1990.
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While the Christmas decorations were going up and Australia on the cusp of summer, Keating had to tell us that bad times were here and that a necessary economic adjustment had to be endured. It was to be some adjustment but it changed the nature of the Australian economy.
It was Keating's response to the release of the national accounts which showed that for the September quarter of 1990 there had been a 1.8 per cent fall in gross domestic product. Keating canvassed the line with Bob Hawke before going public with it. It was memorable but way over the top. Every figure on the economic scorecard showed the Australian economy was in deep trouble.
There were business failures, bankruptcies, negative equity, falling investment and mounting unemployed. All the debt-financed business carpetbaggers like Russell Goward, Christopher Skase, Abe Goldberg etc were put out of commission. Australia was as Keating put it "de-spivved". Inflation was exorcised out of the Australian economy. It was a policy-induced recession though it was not meant to be; the econocrats were aiming for a soft landing but it all went terribly wrong.
The double-digit interest rates that were intended to give us that transition went awry, with the economy sent crashing. Keating wanted interest rates brought down far quicker but the Reserve Bank was too cautious. Even now Keating believes he had a greater instinct of where the economy was heading than the people who were advising him.
When asked about it by Kerry O'Brien in the interviews, now published, whether Keating had any remorse about landing the economy into recession, he responds that he will take the blame for it so long as he also gets the credit for the subsequent flowering of the Australian economy where real incomes for middle Australia have grown more than for those in most of our trading partners.
Keating masterminded the recovery using a modest Keynesian stimulus but he was never to really see a full recovery. Unemployment remained stubbornly high at one point hitting 11.25 per cent of the workforce; they called it "the jobless recovery".
Twenty-five years on we are a different country, more trade exposed but more resilient. It's largely because of the architecture Keating put in place, to wit, the floating dollar, enterprise bargaining, fiscal restraint and an awareness that we were no longer a closed economy and a law unto ourselves. Of course, a good proportion of the electorate have no knowledge of either the recession or even Keating. They can just vaguely recall John Howard. One would wager that there are very few in the Treasury of the Reserve Bank who can recall the recession.
What saved us when the global financial crisis was coming our way was that the Treasury had the personnel to match it. The Treasury, under Ken Henry, had prepared itself by doing policy simulations or war games about how to respond to a recession scenario. It came in handy in 2008. We could engineer a huge fiscal stimulus or firewall against external influences because the budget was well in the black; we would be hard-pressed to mount the same effort today without endangering our triple A credit rating.
Not one newspaper or business journalist made reference to the anniversary. That is remarkable when you consider our below-trend growth economy, falling export prices, sagging business investment and house prices way out of kilter with their true value. Just how vulnerable are we? Well, other major commodity-exporting countries like Canada and Brazil are already in recession and New Zealand might be on the brink. The June quarter national accounts figures showed economic activity barely grew.
Wednesday's September quarter figures will tell us whether we are on the precipice or have just backed away from it. Two contrasting politicians, Bill Shorten and the new Treasurer, Scott Morrison might this morning hum that old Dusty Springfield song, Wishin' and hopin'' A near-zero figure would arrest Shorten's falling appeal and give Morrison another new headache.
Alex Millmow teaches economics at Federation University, Ballarat.
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