The first time I met Mr Malcolm Turnbull, Australia's new leader, all he could talk about was Japan.
It was June 2002 and the Goldman Sachs banker-turned-politician could not comprehend how a smart, democratic government could simply stand by as an enervating malaise strangled the economy.
When I asked him whether something similar could happen in Australia, Mr Turnbull stared out his Sydney office window. "There are real risks for Australia in globalisation and we could be a loser in the future just as we have been a winner to date," he said.
Those risks are more than obvious now. Unlike Japan, Australia is not suffering from deflation and demographic blight. But its leaders, too, are guilty of not moving fast enough to adjust to a changing economic reality. Over the last two years, neither then-prime minister Tony Abbott nor Treasurer Joe Hockey implemented the structural reforms needed to increase incomes and boost competitiveness. Rather than invest in education, training and infrastructure and tweak taxes to empower small businesses, Mr Abbott's team protected mining billionaires (by scrapping carbon-tax policies). His government championed fiscal austerity even as the economy experienced its weakest run of growth since the 1991 recession. Business leaders complained, rightly, about a lack of resolve to overhaul an outdated labour market. As a historic property bubble from Sydney to Perth massively outpaced wage growth, Mr Hockey told voters they were imagining the problem.
In fact, it is the government that has appeared blind to the competitive pressures of globalisation. For years, China's voracious appetite for iron ore, coal, copper and other commodities fuelled growth and filled Canberra's coffers. That dampened the urgency for Mr Abbott or his predecessors to diversify growth engines away from the mining industry, leading to a two- speed economy and widening inequality.
There is plenty of blame to go around, but Mr Abbott's Liberals deserve much of it thanks to former prime minister John Howard's failure to diversify the economy during his 1997 to 2007 term. Mr Howard's stint followed those of reformists Bob Hawke (1983 to 1991) and Paul Keating (1991 to 1996).
Governments during the Hawke-Keating era lowered trade tariffs, opened the financial industry, floated the Australian dollar and built a compulsory, national pension system. And then Mr Howard coasted, riding China's coat tails and leaving economic management to the central bank.
Mr Howard's successors, the Labor Party's Kevin Rudd and Julia Gillard, should have done more to rebalance the economy. But their fight to impose taxes on excessive mining profits, share Australia's wealth and put a price on carbon emissions was the right one.
By contrast, Mr Abbott allowed even Beijing to grab the mantle of leadership on climate change away from Canberra.
Australians need Mr Turnbull to lead on reform, not relax. The new government must be less ideological about attaining Budget surpluses and more attuned to how Australia risks getting left behind by globalisation. It must invest more in human capital to increase productivity and in physical hardware - better roads, ports, power grids and telecommunications systems.
Mr Turnbull needs to create new jobs to mitigate the hollowing out of industries, including the manufacturing sector.
He also must overhaul an antiquated tax system to encourage Australia's best and brightest to create a home-grown Apple or Google.
The good news is that, as far back as 2002, he was mulling this very problem. At that time, he said Australia's tax system was "totally uncompetitive", and it drives would-be entrepreneurs to Silicon Valley and Singapore.
"These risks are real, because the playing field is, by force of geography, tilted against us," Mr Turnbull told me. For 15 years now, Mr Turnbull has been touted as a future Australian prime minister - the Sydney Morning Herald did not dub him the "raging Turnbull" for nothing. Now, he finally has his chance to rage against the Canberra smugness that is holding back one of the world's great economies.
BLOOMBERG
