AUSTRALIA'S LONG‐RUN ECONOMIC STRATEGY, PERFORMANCE, AND POLICY: A NEW DYNAMIC PERSPECTIVE

This essay attempts to quantify and explain the economic performance of Australia from the first European settlement to the present, and beyond. A general dynamic theory—the ‘dynamic‐strategy’ theory—has been employed to provide a new interpretation of ‘dynamics Downunder’. It is shown, among other things, that the bold attempt from the 1910s to the 1960s to turn aside from the traditional development policy of exogenously driven natural‐resource exploitation in order to embark on an endogenously determined dynamic process, has broken down during the course of the present generation. This was mainly due to a failure of ‘strategic leadership’ on the part of recent Australian governments that have, quite rightly, dismantled the framework of protection but have failed to replace it with the infrastructure of strategically relevant technological ideas. Once again Australia's economic prosperity depends heavily on the fluctuating fortunes of the global economy. While in the nineteenth century this took the form of reliance on the prosperity of Britain, today it centres on the continuing growth of Japan and China. This critical problem has been exacerbated by the misconceived policy of inflation targeting, which is damaging the central endogenous dynamic mechanism. What then of the future? It all depends on whether strategic leadership can ever be rediscovered, and a new dynamic economic strategy be adopted.