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?

 

  •   11 November 2016
  • 2
  •      
  •   
banner

Most viewed in recent weeks

Why spending more in early retirement can improve lifetime income

Conventional wisdom encourages retirees to preserve superannuation. But if those likely to qualify for the Age Pension later in life spend a little more today, it may deliver higher lifetime income and a more stable retirement.

It’s time for LICs to die

A high-profile dividend cut and a prominent fund manager’s apology have reignited a long-running debate. If investors can access similar exposures more cheaply and efficiently elsewhere, what exactly is keeping LICs alive?

Is it time to bail on Australian stocks?

For generations, Australian investors have backed banks, miners and dividends. But has that loyalty come at a cost? A look at the numbers raises an uncomfortable question about where future returns will come from.

Testamentary trusts survived the trust tax. The drafting battle has just begun.

The fight over testamentary trusts looked settled. Then the draft legislation arrived. Hidden in a technical detail is a question that could force many families to rethink wills they thought were already future-proof.

The new capital gains tax trap for your portfolio

Investors have long accepted one portfolio rule without much question. A major tax shift could change that calculation entirely, forcing difficult trade-offs between risk, discipline and an overlooked cost lurking beneath.

The investing rule that explains the next market crash

What if investment success depends less on picking the right assets and more on understanding the decisions of other investors? A principle borrowed from game theory offers a different perspective on markets.

Latest Updates

Fixed interest

Higher yields are creating opportunities in global bonds

Bond markets are adjusting to a new reality, but not in the ways investors expect. With markets repricing and capital competing for attention, investors may need to rethink where resilience and opportunity lie. 

Economy

Are we in a recession?

What if the warning signs are already everywhere? From supermarket aisles to company failures, investors are being bombarded with recession signals. But most face a different risk that can be just as dangerous for portfolios. 

SMSF strategies

Meg on SMSFs - Division 296 actuarial certificates

The tax bill might be yours, but the event that caused it may not be. A key Division 296 calculation can sometimes attribute earnings in ways that many SMSF trustees won't instinctively expect or fully appreciate.

Property

The first impact of negative gearing reform is not the tax bill

Negative gearing changes formally begin in 2027, but the first consequences may already be here. A subtle shift is quietly influencing who can borrow, how much they can access and which property strategies still stack up.

Economy

The oil market is running out of easy answers

The biggest threat to markets may not be what investors are watching. The numbers have stopped adding up and supply is harder to measure, with forecasts becoming simple guesses. A more fragile reality is being masked.

Investment strategies

The state of investor knowledge in Australia

Australians are investing more than ever, yet a surprising divide is emerging between those building wealth effectively and those making costly mistakes. Surprisingly, the gap has little to do with income, age or starting capital.

Taxation

Complexity and capital gains

A case study shows that the ‘30% minimum CGT’ is a poorly conceived tax that adds significant complexity to an already over-complex system. A less complicated model would create a much fairer progressive tax scale.

Sponsors

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
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. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. 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.