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

The strange effect of the 30% minimum capital gains tax

The 30% minimum tax on capital gains sits at the heart of the budget's proposed reforms. Yet the mechanics reveal anomalies that introduce unexpected distortions that raise questions about its design.

Does your will qualify for the discretionary testamentary trust exemption?

Treasury has confirmed the exemption many families were hoping for. But buried in the fine print are two conditions that could leave some wills on the wrong side of the exemption, despite years of careful planning.

Ranking three common retirement strategies

The defining challenge of retirement isn't just about building wealth, it's about converting your lifetime savings into sustainable income. A holistic understanding of different strategies can improve long-term outcomes.

Are you making these SMSF mistakes?

After four decades advising investors, there are a few common mistakes I've seen SMSF investors make. From holding too much cash and chasing yield to overtrading and trusting tips. Are these errors costing you?

Why Australian shares are falling behind the world

Australia’s market boasts a long record of outperformance, but recent results tell a different story. Is the ASX’s lagging performance a temporary setback or evidence that structural forces will keep global markets ahead?

Australia has saved $4.5 trillion for retirement. Here's what matters more

Most Australians approaching retirement can tell you the exact dollar value of their super account. But success depends on more than a sizeable balance. Here's four key questions to ask yourself at the start of the financial year. 

Latest Updates

Economy

Why have Australian living standards 'fallen' and how do we fix it?

For the last few years there has been much talk of a 'cost-of-living' crisis in Australia and of 'falling living standards'. Lately this has flared up again with the pickup in inflation resulting in a renewed fall in real wages.

Latest from Morningstar

Four options for an income investor’s next dollar

What if Australia’s golden age of dividends is ending? Rather than overhaul your portfolio, it may be worth considering where new capital can work harder. I discuss four income strategies and the trade-offs behind each.

Taxation

Completing the reform of CGT: tax real losses like real gains

Recent CGT reforms tax real gains by indexing capital gains to inflation. However, the reform fails to index losses, leading to higher tax on assets that do not keep pace with inflation, creating inefficiencies in the tax system.

Investment strategies

Blockbuster AI debt issuance coming to a bond market near you

With Australia likely to attract a growing share of AI-related issuance, investors should prepare for increasing influence from AI funding demands, evolving credit fundamentals and changing valuation dynamics.

Investment strategies

Active managers: Bringing a gun to the gunfight

When data arrived, basketball abandoned the mid-range shot, Formula 1 reinvented the pit stop and chess embraced humans working with machines. Active managers confronting today's markets may learn from the same path.

Retirement

What Australian super funds can learn from the UK

Most people want answers to three retirement questions: What have I got? Is it enough? What can I do with it? A leading UK pension innovator shares his lessons on helping members better understand and prepare for retirement.

Investment strategies

What the market may be missing in FY27

We asked ten fund managers the same question following FY26. While their investment styles differ dramatically, their answers revealed several surprising areas of agreement about where markets may be heading next.

Sponsors

Alliances

© 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.