Woke in Fright

Returning to Australia after a long stint in the US, IPA Senior Fellow and Chief Economist Adam Creighton argues for some Trump-style shock therapy.

The sign blared ‘Welcome to Gamay, home of Sydney Airport’. When I returned to Australia in January, after almost four years in the US as The Australian’s Washington Correspondent, I noticed this prominent new greeting had been erected for arriving passengers. Few Australians—let alone puzzled foreigners—would have any clue that Gamay is an Indigenous word for Port Botany. Flicking on the ABC a few hours later, I happened upon a news bulletin for Dharug Country, where I learned of a raging political debate over how much small businesses should be able to tax deduct for lunches.

Venturing out to the supermarket, “where are the plastic bags?” I asked, soon learning of perhaps the most noticeable economic reform introduced in Australia since I left the United States in March 2021. At least in Washington DC, which is similarly gripped by an aversion to the highly useful invention, customers can pay five cents for plastic bags when they shop.

On moving to Melbourne in February to take up my position as Senior Fellow and Chief Economist at the IPA, I noticed black CFMEU flags fluttering menacingly on the drive from Tullamarine to the city. Perhaps it is no surprise the stunning $2.7 billion twin tower project in Southbank, which would have added the tallest building in Australia to Melbourne’s impressive skyline, was placed into administration earlier this year amid soaring construction costs.

At least residents can look forward to a four-bin, colour-coded rubbish collection system by 2030.

The joy of spending time with friends and family once again, and excitement about the next chapter of my career at the IPA, have been tempered by the realisation Australia has become even more fixated on virtue signalling and tokenism, despite the huge fall in living standards—on some measures, the worst in the developed world since 2019. Practically every Western country endured a significant decline following the hysterical response to Covid, which crippled supply chains and saw economies flooded with unprecedented torrents of new fiat currency.

The diminution of Australia’s economic place in the world was starker for me, an Australian living in the US whose assets were practically entirely denominated in Australian dollars. In both the US and Australia prices have risen by a cumulative 20 per cent—according to official statistics, which a striking share of Americans and Australians believe understate the real increase—sending real wages into a reverse. At the same time, the Australian dollar plunged around 20 per cent, from 78 US cents in early 2021 to around US 63 cents at the time of writing—a savage double whammy. For Americans, the cost of a small flat white coffee at the local Starbucks in DC surged from around US$4.50 in 2021 to $5.50; for me, it went from AUD$5.75 to $9.

Banning things has become an Australian speciality.

Optimists like to point out our currency sank below 50 cents against the American dollar in the early 2000s, but Australia didn’t have a mining boom then. Indeed, the value of Australia’s iron ore exports, still our largest earner, has averaged around US$135 billion annually over the last four years, more than double the average of the previous four years.

Keynesian economists like to extol the virtues of a declining or weak currency; I have never been convinced. In the long run, poor nations have weak currencies. The world appears to have substantially marked down our country’s prospects.

The seeming complacency of Australia’s political class jarred with me having just come from the US, where the start of Donald Trump’s second presidency had triggered a wave of change across every political dimension, from healthcare and energy to foreign policy and education. By contrast, the biggest policy debate in Australia in a decade was over whether to establish a new bureaucracy—The Voice. Even the outgoing Biden administration, which would never have dared give Native American Indian names to US public infrastructure, cannot be accused of lethargy. It managed to pass a series of big spending climate change and industry subsidy bills which, however damaging, at least reflected the courage of the administration’s convictions.

The Overton Window is now a narrow slit.

The only Australian reforms that made the news in the US, prompting incredulity among many Americans, were the Federal government’s ban on vaping, and later a ban on social media use for under 16s. Banning things has become an Australian speciality, it seems. Indeed, the so-called ‘Stage 3’ tax cuts—supposedly the biggest economic reform of the last few years—were laughably inconsequential: a few tweaks of the income tax thresholds here and there, while the inflation-adjusted income tax burden continued to increase.

I used to shock my American friends by explaining that a worker on the equivalent of US$120,000 a year (a little over AUD$190,000), an unimpressive income in New York or Washington, would pay a marginal income tax rate of 47 cents in the dollar were they working in Australia. Why would bright young Americans even consider the idea of emigrating to Australia?

Even in high state income tax California, such a worker would face a marginal rate of only 33.3 per cent (including a federal marginal rate of only 24 per cent). In New York, another high income tax state, only income above around US$620,000 would be taxed at around our 47 per cent level. Of course, in some big states such as Florida or Texas, there isn’t any state income tax at all.

Our government has been patting itself on the back for a smattering of tiny budget surpluses, but these are thanks only to this insidious increase in the tax burden, among the largest since WWII. Critics of government excess really should focus on regulations and spending, which reflect the actual size of government, not on surpluses, which are an arbitrary choice, reflecting government decisions to allocate costs between current and future taxation and inflation.

There are glimmers of hope on the reform front. The Coalition deserves credit for embracing nuclear energy; Americans are typically shocked to learn it is banned entirely in Australia. In February my parents and I enjoyed a cruise around Jervis Bay’s most spectacular beaches. The captain-cum-tour guide pointed out the southern side of the bay could have been the site of Australia’s first nuclear reactor, praising Gough Whitlam for canning the project, bemusing the group of foreign tourists.

The energy debate in the US, where regulators are even in the process of reopening the Three Mile Island nuclear power plant, which had a partial meltdown in 1979, is far more mature. Even if our bizarre ban on the most reliable source of baseload power, with the lowest carbon dioxide emissions, is lifted after any change of government, Australia’s energy conundrum will remain. The forced rollout of wind and solar threatens to cripple the energy market well before any new nuclear power station could start to operate.

There is no excuse for Australia’s political inertia, really. It should be easier, not harder, to implement serious reforms in Australia because our constitutional framework does not include the strict separation of powers that deliberately throttles change in the US. A government with a strong majority in the parliament can, without a bill of rights to worry about, do what it wants. Compulsory voting must be part of the answer why. I went to the US broadly in favour of Australia’s internationally highly unusual practice, but I left opposed to it. Aside from the philosophical objections, it is hard to see how Australia can elect a government willing to take risks when the two major political parties need to care almost exclusively about individuals in marginal seats who would not otherwise be bothered to vote. The Overton Window, the range of ideas considered palatable, has become a narrow slit in Australia as result.

Even individual US states have been more ambitious than Australia: numerous mainly Republican jurisdictions, led by Arizona, have begun to experiment with ‘school choice’, a radical idea by Australian standards whereby the government provides parents with a fixed sum of money per child to spend on whichever school they prefer—a policy once championed by American economist Milton Friedman. Pennsylvania, one of the most populous US states, abolished the requirement to have a university degree from 92 per cent of state government jobs in early 2023, immediately opening up 65,000 positions to bright high school students who don’t want to be lumbered with a massive college debt. In Australia the political class remains obsessed with pushing ever more young people into useless degrees at significant cost to themselves and taxpayers.

Paying a much lower rate of income tax is not the only thing I will miss about living in the US compared to Australia. The US remains a genuine federation, unlike Australia where a meddling federal government with the power of the purse ensures states have little real autonomy. US states can and do compete. I was personally grateful for this jurisdictional independence. Throughout much of 2021 most of ‘blue’ America, and certainly Washington DC, where fewer than seven per cent of voters opted for Donald Trump in the 2024 election, was in a state of lockdown. Anyone without a vaccine passport could not enter a bar or café. Pull down your mask a little to be heard through the Perspex screens that proliferated almost everywhere, and one risked being asked to leave.

In October of that year, when Victorians were locked in their homes for the umpteenth time as police fired rubber bullets and sprayed water jets at Australians who wanted to work, I took a holiday and headed to Miami, Florida. It was another world: no lockdowns, everything was open, hardly anyone was wearing masks, which were never compulsory, even indoors. Other states such as Texas and Georgia were similarly sensible. The contrast within a single country was breathtaking, especially for an Australian who had been glued to watching the collective insanity unfold in Victoria.

Competitive federalism saw hundreds of thousands of Americans migrate, many permanently, from California and New York to the freer southern states. A federal Florida judge, Kathryn Mizelle, in April 2022 struck down the Biden administration’s controversial mask mandate for passengers on planes, trains and buses, for the entire country—testament to the extraordinary power of the judiciary in the US. It is hard to imagine Australian courts, more subservient to executive power, behaving in a similar manner. Diversity among Australian states is most evident in terms of fiscal profligacy, where Victoria stands out for its shameless mismanagement. As IPA executive director Scott Hargreaves recently pointed out in a note to members, the net debt of Australia’s second largest state already far exceeds levels reached at the tail end of the Kirner government in the early 1990s. By 2026 net debt—not even gross, which some bodies argue is the more relevant measure—is projected to hit 25 per cent of net state product, well above the last peak of 16 per cent in 1993. One of the biggest decisions for whoever forms government in Canberra in the upcoming federal election may well be whether to bail out a defaulting Victorian government. To do so will inevitably reward the state’s recklessness and encourage others to behave similarly. Not to do so could prompt a loss of confidence in Australian assets at the very time China’s economy and demand for our resources is likely to slow.

This country is still a paradise.

To be fair, Australia as a whole—however much debt has soared during and since the response to Covid19—remains in an enviable position. The privilege of issuing what is still the global reserve currency, the US dollar, has fuelled an extraordinary addiction to debt in Washington. At more than US$35 trillion or the equivalent of more than 100 per cent of GDP, the US now has World War levels of debt, without having fought a major war of any sort. Indeed, the Trump administration’s greatest challenge will be delivering on ambitious promises to cut taxes without triggering a financial crisis. Cutting taxes is a lot easier than cutting spending, and Trump has promised not to touch Medicare and Social Security.

Trump’s return to the White House has put Australia in a difficult position internationally. We appear to be modelling ourselves on economically sclerotic European nations ever more keenly, at the very time the US, by far our most important ally, is heading in a wholly different direction. We are doubling down on bloated government, identity politics, renewable energy zealotry, and censorship at the very time the US is seeking to shred all four. The ideas behind DEI (Diversity, Equity and Inclusion), the American term for race and sexuality-based career advancement programs, remain entrenched in Australian businesses and government departments, even as their US counterparts ditch them. Vice president JD Vance made clear in his speech at the Munich Security Conference in February that the US did not look kindly on the continent’s growing predilection for censorship, which is antithetical to the US Constitution and President Trump’s political movement. Vance’s criticisms of Europe could as easily be levelled at Australia, which is even more dependent on the US for its defence.

“It would be insane that we would support a military alliance if that military alliance isn’t going to be one that is pro-free speech,” then Senator Vance told a podcaster in September last year, indicating his later Munich outburst was not a flight of fancy but a solid principle.

Since Covid, Canberra has proposed Orwellian new censorship laws under the banner of reducing so-called misinformation and disinformation. After even the Democrats disbanded the idea of a Disinformation Governance Board in embarrassment in 2022, Americans learned that Australia had a ludicrously named eSafety Commissioner, who had been picking—and losing—very public fights with Elon Musk’s X.

Australia’s hysterical and highly coercive response to Covid severely tarnished Australia’s reputation among a large swathe of Americans, too. I will always remember a doorman at a Manhattan hotel in 2021 who scurried up to me after hearing my accent to ask what on Earth was going on in Australia. “What happened to Crocodile Dundee, man?” he asked. Numerous times throughout 2021 and 2022 Americans would ask me to explain the helicopters hovering over the beach, or the pictures of police arresting or tackling the unmasked.

Australians tend not to talk about our extreme Covid response, perhaps through embarrassment, but many Americans won’t forget. Florida’s powerful Republican governor Ron DeSantis, now back in the Trump orbit, openly likened Australia to communist China in public remarks in 2022. One of the president’s best friends, Dana White, chief executive of Ultimate Fighting Championship, described the Australian media on a recent trip here as “the biggest pussies of all time”.

On top of all this, Trump, the great disruptor, appears to have little nostalgia for military alliances or trade agreements. Australia should tread carefully, especially after signing the AUKUS security pact, which in effect makes our national defence almost entirely dependent on US submarine production schedules and the whim of the US president of the day. Our ambassador to Washington and numerous of our federal and state ministers have, foolishly, made highly disparaging remarks about the US president on the record in recent years. It would not be a surprise to me if Trump chooses, for a second time, not to visit Australia as president. Nor would it be a shock if Australia doesn’t obtain the US nuclear submarines as promised.

I do not want readers to think I am disappointed to return to Australia. Throughout my time I found myself telling sceptical Americans—who typically knew little about Australia, often guessing the population was somewhere around 50 million—that for all its faults, this country is still a paradise for ordinary people. To be sure, I witnessed opulence on a scale that simply does not exist in Australia, most memorably when attending an awards night at the magnificent Breakers Hotel in Palm Beach (with the smallest rooms going for US$2,000 a night, I stayed in Fort Lauderdale and caught the train).

Economic statistics might suggest Americans live better than we do on average, but the reality on the ground is different. Across most socio-economic measures, including life expectancy and crime, Australia remains far ahead. And that analysis doesn’t include the weather, which makes outdoor activities difficult if not impossible by the extreme heat or cold that blights at least a quarter of the year.

On my way to the Republican Iowa caucuses last year, when stuck in Kansas City for a night I headed to a football game between the Miami Dolphins and the local Chiefs that evening. The temperature was minus-20 degrees Celsius at kick off with a windchill factor of minus-32 degrees. I had never been scared of the cold until then, and admittedly left the open-air stadium at half time. Tragically, at least a dozen people, mainly children, later had to have fingers and toes amputated, according to the New York Times.

Support for established parties is collapsing.

I am also very happy to say goodbye to tipping, which concerningly appears to be creeping into Australian hospitality. At DC’s most famous French restaurant, Le Diplomate, on a date in early 2021, I thought my accent would be enough to get away with tipping 10 per cent on a US$300 bill excluding tax, only to have the waiter return, flustered, to ask me what was wrong with the service—20 per cent it was to be.

Students of Australian economic history know that Australia and Argentina were among, if not the, richest nations in the world in the late 19th century, owing to their rich farmland and resources. Australia stayed near the top of the global tree as it remained a free-market nation that welcomed global trade. Argentinians endured massive relative declines in their living standards as their governments embraced fascism and turned inward. Fortunately, their new president Javier Milei appears to be turning the country around. We do not want to swap places.

The Trump renaissance should be a wake-up call for Australia’s political class. Is our economy actually ‘resilient’, a word long beloved by politicians on both side of the political divide? What would we do if a US government changed its mind about AUKUS? Yes, Australia’s population growth is impressively large, but are these the sorts of people we want coming?

How can we make our country more efficient, competitive, independent and attract more foreign investment? The extraordinary waste in federal spending uncovered by the new Department of Government Efficiency (DOGE), overseen by Elon Musk, should be an inspiration for our own political class to undertake a root-and-branch review of our own spending.

Trump’s return to power in the US could be a political opportunity to shift to a more sensible energy policy, too. Whatever one thinks of climate science, it is ludicrous for Australia to ignore our abundant supplies of fossil fuels in favour of ever-more solar and wind power, given our impact on global carbon dioxide emissions is irrelevant whatever we do.

The Trump administration has withdrawn the US from the Paris agreement on climate emissions; we could at least do the same.

A great political realignment is occurring in the US, Australia and Europe, as voters vent their fury at established political parties which increasingly are failing to deliver rising living standards. Support for established parties is collapsing. The concepts of ‘left’ or ‘right’ are increasingly meaningless in this era that pits the globalists against nativists; the ‘everywheres’ and the ‘somewheres’, as English journalist David Goodhart once put it.

By coming home, it turned out I was more of a ‘somewhere’—but one anxious about Australia’s readiness to meet the challenges that are already starkly apparent.
This article from the Autumn 2025 edition of the IPA Review is written by IPA Senior
Fellow and Chief Economist Adam Creighton.