Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 181

Keating: is technology capitalism's creator or destroyer?

The Hon. Paul Keating

Paul Keating served as Australia’s 24th Prime Minister, from 1991 to 1996, having been Treasurer between 1983 and 1991. His political legacy includes the deregulation of the financial, product and labour markets and the establishment of compulsory superannuation. Since leaving the Prime Ministership in 1996, Paul Keating has continued his interest in geo-political and economic affairs.

Paul Keating noted it was the largest group of fund managers he had ever spoken to, and they should be charging lower fees on the $2.3 trillion in his superannuation system.

He focussed on the global macro picture. The shattering of US prestige came in 2008 with the GFC. Before then, the world believed Americans had the black box on how to manage the world economy, but China is now bigger than the US if you include the unofficial economy.

Population and GDP will grow together due to technology and capital mobility. The Chinese have about 20% of US income per capita, and we should expect it to reach 50% over next 20 years. Four times as many people earning half as much will give China a GDP size of double the US. Demographics will drive future domination.

The Chinese are now building their own institutions and the IMF has no influence, and the renminbi will become a reserve currency. We are seeing a break from a world previously managed out of Washington.

It matters how the world is managed. Keating thought Trump was weak during his campaign, but he tapped into the “We will not take it anymore” of millions of Americans. Maybe he will be better than we expect, and he’s already said three encouraging things: we need a better relationship with Russia, we need to reach out to China (“Although Trump is slightly wild, the Chinese do not do wild well.”) and he wants to spend on infrastructure.

We are heading into a different world of great power rivalries, not multinationals. It might even work better than pretending we like each other.

The tools used for inflation do not work in a low growth, deflationary world. We used to think markets knew how to allocate funds, and we have lost the great dynamic growth engines of the past such as road building, railways, plastics, etc.

Main reason interest rates are low is because there is no use for savings in the west, not QE. Companies already have too much capacity and excess capital and central banks cannot stimulate activity in such a market. We have capital-light industries like Facebook which don’t need many staff or equipment, unlike the great car companies or manufacturers of the past. It has been a mistake to impose budget restrictions in US which has led to crumbling infrastructure.

But networks and the interconnected economy are the major changes in our lifetime. The entire world is connected, but information erodes value in many companies, and most information is now free. End result? The world’s population will become a big global factory and the price of goods and services will continue to fall.

Can capitalism cope with this change?

Intuitive technologies and artificial intelligence will be massive changes which can take us anywhere. They will change the way the world works. P2P relationships will grow in importance, and the distinction between leisure and work will become more blurred.

Keating left us with this question. Is the digital economy capitalism's great creator or its undertaker?



Most viewed in recent weeks

Lessons when a fund manager of the year is down 25%

Every successful fund manager suffers periods of underperformance, and investors who jump from fund to fund chasing results are likely to do badly. Selecting a manager is a long-term decision but what else?

2022 election survey results: disillusion and disappointment

In almost 1,000 responses, our readers differ in voting intentions versus polling of the general population, but they have little doubt who will win and there is widespread disappointment with our politics.

Welcome to Firstlinks Election Edition 458

At around 10.30pm on Saturday night, Scott Morrison called Anthony Albanese to concede defeat in the 2022 election. As voting continued the next day, it became likely that Labor would reach the magic number of 76 seats to form a majority government.   

  • 19 May 2022

Betting markets as election predictors

Believe it or not, betting agencies are in the business of making money, not predicting outcomes. Is there anything we can learn from the current odds on the election results?

Keep mandatory super pension drawdowns halved

The Transfer Balance Cap limits the tax concessions available in super pension funds, removing the need for large, compulsory drawdowns. Plus there are no requirements to draw money out of an accumulation fund.

Welcome to Firstlinks Edition 455 with weekend update

The resolve of many investors to focus on the long term with their share portfolios is increasingly tested as the list of negatives lengthens. There is a lack of visionary policies during an election campaign and stimulatory spending is contradicting the aims of tighter monetary policy.

  • 28 April 2022

Latest Updates

In praise of our unique democracy and its sausage

For all the shortcomings of our political campaigns, our election process is the best. We are blessed with honest administrators and procedures that we all trust to hand over power peacefully, with a big snag. 

Investment strategies

Is the investing landscape really different this time?

Many market analysts argue that the pandemic has changed everything but we must judge whether the circumstances are as drastic as billed. A quick review of four major events helps decide if this time is different.


Comparing generations and the nine dimensions of our well-being

Using the nine dimensions of well-being used by the OECD, and dividing Australians into Baby Boomers, Generation Xers or Millennials, it is surprisingly easy to identify the winners and losers for most dimensions.


When will I retire? Economic impact of an ageing population

About 39% of the labour force is aged over 45. Intergenerational reports highlight the challenges of an ageing population and the impacts on consumption patterns, dependencies, public finances and economic growth.

The real story behind the crypto crash

The recent sell-off in the crypto market and its trigger - the collapse of the Terra UST coin - has affected many institutions either holding or trading crypto assets, including crypto fund managers.

Investment strategies

Cash is the nightingale, the bird in the hand

The bird in the hand is worth two in the bush, and it's an apt metaphor for investment choices. In 2021, as investors hunted in the bush for decent returns, demand overwhelmed supply. Cash is the bird in the hand.


Book review of 'Putin’s People' and his motivation for war

Author Catherine Belton argues Putin’s sole ambition is to hold onto power. Her book seeks to understand why Putin invaded Ukraine after he became isolated and out of touch with reality during the pandemic.



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.