In terms of economic history, how does Advance Australia fare?

The story of Australia’s economic history goes back long before most modern economists will recognise, and Tim Harcourt examines why it is important to understand Australia’s economic roots

With Australia Day 2020 on our doorstep, one thing always goes missing in the mass media about Australia: our successful economic history. The books Why Nations Fail and Why Australia Prospered, show evidence that Australia has developed very successful economic institutions (like property rights) and political (like democratic rights) to succeed in a world much more successfully than other nations with similar natural resources, agricultural endowments and increases in human capital through immigration. This is partially due to our successful record as a trading nation. Indeed, if you look at Australia’s history through an economic lens, we have a lot of things to reflect on.

For instance, did you know that Indigenous Australians were our first exporters? There’s evidence that trade took place in sea cucumber (trepang) between the people of Arnhem land and Makassar (now Sulawesi in Indonesia) in the 18th century and maybe as early as 1650.

Australia’s convict economy

Secondly, in convict times, we know a lot of bad things happened, but one innovation was interesting. There was an imbalance in numbers between convicts and troopers (as the police were called) and a requirement that a convict report to someone every day.

So to solve this problem, the colonial authorities deemed that a convict report to his wife. So this began the many successful men and women partnerships in family businesses, particularly in agriculture, that exist in Australia today.

And it was a probably a lot better for a convict to be working on agricultural land, reporting to his wife and being with their children that rotting on the bottom of a hulk on the Thames because of overcrowding of British prisons. (It should also noted that convicts did very well as emancipists after they finished their sentences and became the colony’s first architects, farmers, traders, and professional business people). 

‘Did you know that China’s first retail sector had its origins in Australia?’


Gold rush economics

Thirdly, did you know that China’s first retail sector had its origins in Australia? The Chinese came in large numbers in the 1850s to dig for gold, but they also developed the first retail sector and took that concept back when they went back to China.

The department store empires of Sincere Wing On and Sun Sun companies in Hong Kong and Shanghai and even in Singapore were all started by the Chinese entrepreneurs returning from the Australian gold rushes.

The boom of the colonies

Fourthly, despite the tough times for the convicts, for much of the nineteenth century the Australian colonies boomed, only Argentina was richer (see my piece Don’t but from Argentina) with a gold rush, a wool boom and a commitment to trade and immigration.

The colonies also managed to grow right up until the 1890s whilst other countries struggled economically. And as economic historian Ian McLean points out in Why Australia Prospered, the colonies did so without a national government and “lacking many of the institutions and sources of advice now regarded as essential for macroeconomic management – such as a central bank and a phalanx of economists” to advise them. 

Trade with Asia

Finally, Asian engagement didn’t appear on our doorstop five minutes ago, it was a long process. As well as the early times with Makassar, and the gold rushes, our colonial governments ran trade missions in the 19th century and after Federation, Australia set up trade offices in Shanghai in the 1920s, Tokyo in the 1930s and Batavia (Jakarta) in the 1940s despite opposition from the Foreign Office in London.

After World War Two, we experienced the ‘four waves’ of Asian engagement. The first was the Japan- Australia Commerce agreement in 1957, the second, Gough Whitlam’s recognition of China, the third, the Hawke-Keating economic reforms to the fourth wave, in the Asian Century. It’s been a long process and whilst Paul Keating was not the first Prime Minister to advocate closer ties with Asia, he may have been the most enthusiastic. 

‘Asian engagement didn’t appear on our doorstop five minutes ago, it was a long process’


4 reasons to recognise past achievements

So that’s the history. But there are many things we can be cheerful (and proud about) in 2019 that have historical roots.

First, we can be very pleased to hear about Indigenous exporters and entrepreneurs today, Think of Ros and John Moriarty of Balarinji that painted the Qantas jumbo jet, Peter Cooley founder of Blak Markets, who hosts his own business show, and creative performers David Williams and the world-class dance company, Bangarra.

And now, there’s a new generation of young Indigenous business students who just completed the Summer School at UNSW Business School, many of who will be our Indigenous business stars of the future. 

Secondly, those men and women partnerships of convict times have their modern equivalents. There are almost 1.5 million family businesses in Australia – around 70 per cent of all businesses. Wives and husbands do well together and pass on their knowledge to future generations. There are well-known families like Fox, Lowy, Pratt and (Bing) Lee but also many hard-working family businesses in the small and medium enterprise (SME) sector. 

Thirdly, as well as the hard work of the those “Currency lads and lasses” who descended from convicts and the first batches of migrants from the British Isles (mostly from the bottom of society) Australia has been blessed by waves of immigrants who have the entrepreneurial spirit just like the Chinese of the 19th century, the Jews fleeing persecution, or the Southern Europeans of the 1950s and 50s to Aussies coming from almost all corners of the world today. Around 1 in 4 Aussies are born overseas and they represent 1 in 2 exporters and 2 out of every 3 entrepreneurs as well.

Fourthly, like the 19th century we have enjoyed a long boom and the modern Australian economy can show it can handle crises like the Asian Financial Crisis (AFC) of 1997 and more recently the Global Financial Crisis (GFC) of 2008.

Finally, we’ve embraced the Asian Century and the rest of the world for that matter. The Hawke- Keating reforms (‘the third wave’) set us up for over a quarter century of economic growth, drawing us the praise we saw in Why nations Fail and Why Australia prospered.

No nation is perfect. They all have their failures and aspects of their history not to be proud of. But Australia, on the whole, is a remarkable story.

Tim Harcourt is the J.W.Nevile Fellow in Economics at UNSW Sydney and host of The Airport Economist


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