Margaret Thatcher's influence on Australia's economic performance

With the death of Margaret Thatcher this week, it is timely to reflect on her influence on Australia’s economic performance.

When I joined the Liberal Party in the early eighties, it was the end of the Fraser years. 

Australia’s economic performance was poor; we were sheltered behind tariff walls; and much of the economy was government owned or controlled. 

But there was a revolution in economic thought beginning to make its way through the Western world, and it was a revolution which began with Margaret Thatcher.

She became Prime Minister of a diminished and struggling Britain in 1979 – and through a combination of necessity and conviction she led the country back towards a greater belief in itself.

One of her signature policies was allowing tenants in council houses to buy their homes, recognising that pride of ownership leads to many desirable consequences including a stronger sense of engagement, responsibility and self-worth by owners; and a reduction in vandalism and maintenance expenses.  Even more important, though, was the chance for working class Britons to build up their personal asset balance over time. 

She similarly applied the notion of self-reliance, self-determination and economic self-sufficiency as she privatised a range of government business enterprises like British Telecom.  In industry after industry, privatised companies improved their economic performance and delivered better customer service, as they made their own decisions in the interests of serving customers - rather than conducting themselves as arms of the state.

In macroeconomics, Mrs Thatcher instinctively rejected the Keynesian notion that governments in depressed economies can spend their way to recovery.  Instead, her emphasis was on monetary policy  - getting inflation under control through strong central bank policies. 

Many of the changes made in Australia in the quarter century to 2007 owe a great deal to Margaret Thatcher’s intellectual legacy: opening up our economy and reducing tariff barriers; moving the power to set interest rates from politicians to the RBA; privatisations of Qantas, Commonwealth Bank, Telstra and many others; and the microeconomic reform process with its emphasis on competition policy.

Britain is a better place thanks to Margaret Thatcher’s courage and determination; but the economic reforms in Australia which have so improved our competitiveness and prosperity are also due in no small measure to Margaret Thatcher’s example.