[Theme music]

ELIZABETH:

From Schwartz Media. I’m Elizabeth Kulas. This is 7am.

As the first two decades of the 21st century come to an end, Australia is going to be forced to confront its place as a middle power and embrace an electorate that is markedly different to the parliament. George Megalogenis on what’s likely to happen in the 2020s.

GEORGE:

What do I do? I put these on?

ELIZABETH:

Yeah, yeah.

GEORGE:

I’ve got to remember what I'm doing.

ELIZABETH:

What did you eat for breakfast George?

GEORGE:

A coffee and a croissant… very Higgins.

ELIZABETH:

George, You've written this piece considering Australia's place in the world from the perspective of these first two decades of the 21st century. How would you describe the difference between those two decades?

GEORGE:

The first decade of the 21st century, I think we all agree, was party time for Australia. We were moving into what was then, the second decade of record growth run. The Howard government was in charge then we remember, and it didn't know what to do with its surpluses. So it just kept writing checks to the electorate. So every voter that complained would get a top up from Howard to sort of keep them on the coalition side. I think the ‘do not disturb’ sign was up for Australia as a political system and a culture and a society.

ELIZABETH:

George Megalogenis is an author and journalist. He contributed to the latest issue of The Monthly.

GEORGE:

The second decade of the 21st century, which is technically our third decade of uninterrupted growth as an economy... Very disruptive. And where you draw the line of where the first decade end and the second decade began is the GFC. And the GFC triggered a number of things. The first one being a heroic escape, but they got no political credit for it as we know. There'll be economic students for the next 50 years still studying globally, this case study. And what happened after that? Labor lost the plot on climate change. Rudd and Gillard, that circus begins. Tony Abbott becomes opposition leader by a single vote. So we've had a pretty chaotic period in our public life and also in our culture since about 2008/9.

But the other big thing that changed is the great power rivalry between America and China. And that first decade, when we think about it being party time for us. That was the last decade where both America and Challenger arrive, were both going to work on our behalf. And the disruption they're causing in the second decade of the 21st century is affecting us in ways I think we still haven't figured out.

ELIZABETH:

Before we get to those bigger geo-political questions, what about other domestic issues that we’ve faced as we’ve moved through those first two decades of this century?

GEORGE:

This is a very, very micro observation, but it's the big structural weakness in the domestic economy. The run up in household debt in the first decade of the 21st century was concerning economists because whilst the budget was in surplus in the first... okay people thought, you know, we could we could sort of bluff our way out of any state. And obviously we did with the GFC. And this is one of the prices we had to pay to stay out of that global recession is that the housing market continued to be ramped up. So the housing market was stoked, restocked and then stoked a third time just to keep people's heads above water.

The thing that sets us apart as you go into a third decade of uninterrupted growth is we're running up huge household debts and all the traditional tools of economic management, the budget, fiscal policy, monetary policy, and also the way the exchange rate works. Most of those things are now corrupted. They’re corrupted because the global economy itself is unbalanced and we don't have many tools left in the event of another downturn. Households are carrying a lot more debt into this cycle than they did in all previous cycles. And it's going to be very difficult to put a floor under the economy if there's a downturn when people are already indebted to the eyeballs and you can't stimulate them, you can't stimulate consumption by traditional means, you can't protect them in the way governments used to be able to protect them anymore. I think we've been asleep at the wheel for so long now that the things that we could have conceivably worried about in the first decade are gonna really hurt us at the end of the second going into the third.

ELIZABETH:

OK. Let’s move back to the big geo-political question: China and the US. Where does Australia fit?

GEORGE:

Strangely, Australia has probably been the first of the developed nations that's caught up to the nature of the challenge. And it's a dual challenge. One, America no longer wants to be a moral citizen in the global order, setting the rules for international trade and diplomacy and pretty much behaving on evidence base. Now, of course, we know that they've gone bonkers since the election of Trump. But Trump is an effect, he's not the cause. Their system has been convulsing for quite a while now. Their political system and their sense of security in the world is is threatened. And traditionally, Americans, when they do feel threatened, they withdraw. And that's more dangerous. As we know, from international relations history, when America withdraws, the globe becomes much more unstable. That vacuum gets filled by countries not as big as them, countries not as dynamic as them and by leaders who are crazier. The first primary problem Australia has is..I think United States is the primary problem. The primary problem for Australia is to keep America engaged in Asia. China isn’t the primary problem.]

Now I think this is where it's been obviously much more complicated because we are the only Western nation and have a sizable trade balance with them and we've got a near perfect economic exchange, which is we dig for them, send them our rocks and we get their people in return. A sort of dirt for brains exchange is the way I tend to describe it, in that first decade of the 21st century, it was easy to be, you know, super optimistic about Australia's future because we were getting the cream of Chinese immigrants. And all we have to do in return for them is dig stuff for them, which they pay a premium for because they've elevated the price of minerals globally. So as I say, near perfect situation to be in the bigger challenges, the structural shift in China's attitude to the rest of the world in the Chinese room about 2012/2013 began to press more aggressively to become number one...

ELIZABETH:

Ambition.

GEORGE:

And it is ambition. And I think this is one of the reasons why America is having its brain snap. They don't feel that they have the sort of institutional patience and confidence to be able to beat China in the long run.

The Chinese, as we know, have been pressing their influence onto our soil and they've been contesting the loyalty of their immigrants. So Chinese Australians are sort of pawns in a loyalty contest. We’re the host obviously we assume that somebody comes to Australia they want to become Australian. The Chinese Communist Party views every expat Chinese as their person. There's a second level. And that's the strategic level, which the Chinese are investing: ports, infrastructure, telecommunications. So they're looking at hard and soft infrastructure, tapping into a nation states, critical infrastructure. And they look at the way the Americans have been behaving over the last 60 or 70 years and wondering why everyone's having a whinge about them pressing. But of course, from our perspective, the Americans never took ports off us. The Americans never go on campus trying to micromanage history courses to present their country in the best possible light. So that's the test. And Australia, weirdly, is one of the first, you know, high income nations that is beginning to think again about the transaction.

ELIZABETH:

We'll be right back.

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ELIZABETH:

George, in your piece for The Monthly, about politics and the past two decades, you write about a series of “domestic shocks”. What are you talking about there?

GEORGE:

A domestic shock is something that your system imposes on itself or there's something that's occurring domestically which hasn't been addressed. And the combination of those two things is absence of leadership in Australia for the last 10 years. So when we move from Howard to Rudd in 2007, there was that seemed to be an understanding that we were turning a page and that even though Kevin had pitched himself as a younger version of John Howard, we were still looking at becoming a more open, more engaged nation in the region. And we were looking at fixing some of the foundational problems, indigenous recognition for example. Kevin Rudd apologised. We look to be reengaging on climate change. He signs the Kyoto Protocol. You know, we dodged the GFC. We weren’t in a bad position to be able to step up to what it means to be a middle power in the 21st century.

You sort of look around the world, there are only two other countries that are ethnically cut the way we are. Canada and New Zealand and both those countries seem a lot more comfortable expressing their uniqueness. Neither Canada nor New Zealand seem to be looking back to the old country and wanting to do their Brexit. Whereas we're sort of umming and ahhing going, do we want to go more Trump? Do we want to go Brexit? Do we want to pretend this isn't happening? Do we want to yell at that person? That seems to be what's been happening in our culture.

There's been a massive stepped down interest in both government and the institution of democracy since 2010. Since the Rudd Gillard rivalry, we've seen trust stepped down each election to lows not seen since the constitutional crisis of the mid 70s. Now, the thing about the mid 70s. The public started to act out as well. We're not at that second point yet, but we're certainly at that first point. And the precondition for a breakdown in basically the way people relate to one another. The 70s style episode will probably come if there is a recession. Whatever happens at this next downturn, we start off from a position of weakness, not strength. We went into the last one from a position of strength and were able to think our way out of it. We go into the next one with a political system that's been in denial about too many things. Denial of the very reason for existing is a government which is long term strategic thinking and planning. We haven't been doing any of that for a long time. It's going to be very difficult to see the day that a government needs to address the nation and say something terrible is underway and here's how we're going to fix it. Do you listen to them? Can you imagine whether it was Morrison or Shorten or Josh Frydenberg or Chris Bowen? Could you imagine any of them having the electorate's confidence to be able to nurse them through a downturn? Back in the old days, of course, Bob Hawke would address the nation, Paul Keating could address the nation. John Howard could explain and explain and explain with Tim Fischer at his side, why you had to take guns off people after Port Arthur. The operating environment, doesn't permit that sort of international crisis and counseling from the government.

ELIZABETH:

So what happens? What about the next decade? What does that look like?

GEORGE:

The clash between China and the United States is forcing us to think a little more independently, and in fact, I'm weirdly more confident that the politicians are sufficiently overwhelmed and humbled by the nature of their challenge as they may start to think a little more pragmatically and coherently.

The decade coming, the 2020s, is is the first decade we can see clearly in our demography is not a white decade. when you look at where demography is moving across the Western world, everyone is sort of moving towards a version of our ethnicity. Which is Eurasian. Predominant new arrivals from the two big rising nations in the world, China and India. There's not a white century anyway. It's an Asian century. And that's the big identity shock. I still have major problems with the cohort that both sides attract to parliamentary politics, but the parliament itself is going to reflect this ethnic face sooner or later. There might be a bit of a lag to it. But elections are more likely than not. Towards the end of the coming decade to be decided in the south, east, not the north. And that in itself is going to force some correction.

Scott Morrison, he may be the elected representative of the country, but he is not representative of the country. And weirdly, it doesn't mean that you need a Chinese Australian. Really, you just need somebody who can talk to both old and new in Australia and that person, whether it's man or woman, can go to an international forum and say: “Have a look at my people, because they're all your people, too. And we're running the greatest social experiment on the planet at the moment. And we're still a role model for openness.”
But that sort of presentation is a presentation, I think intuitively Australians would like to see because it would make them feel safer. It also won't embarrass them on a national stage. And we've got a better chance of not being that country if the parliament looks like the people.

ELIZABETH:

Fantastic. George, thank you so much for being here.

GEORGE:

Thank you.

ELIZABETH:

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