Description
Discover how banking deregulation and foreign capital flows drained Australia’s wealth and sovereignty—and what we can do to reclaim it.
A Nation Opened; A Future Sold
Picture this: It’s the early 1980s. Australia is beginning to untie the red tape around its financial system. In Sydney’s Martin Place, bankers sip coffee while reading headlines about deregulation. There’s excitement, yes, but also uncertainty.
Paul Keating, then Treasurer, announces a revolutionary shift: foreign banks are welcome, capital controls are gone, and the nation is open for business. But few realise the long-term cost. Fast-forward to today: Australian assets are foreign-owned, public wealth has been privatised, and capital flows out faster than it comes in. How did we lose control of our own economy?
Many economic observers argue that Australia has become the victim of its own financial liberalisation—a story woven with digital money, deregulated banks, and foreign ownership. This guide explores how we got here—and how we can get back.
The Problem: Digital Money, Private Power, and Lost Sovereignty
Most Money Isn’t Physical—It’s Digital Debt
When we say, “this money is essentially debt,” we are not referring to public debt owed by the government, but rather private debt created by the banking system.
In Australia, more than 90% of the money in circulation exists only in digital form. It comes into being when private banks issue loans. This is how it works:
- A customer applies for a loan at a bank.
- The bank approves it and credits the borrower’s account with newly created money.
- That money is not transferred from someone else’s savings—it is created on the spot.
- This new money is a liability (a loan) for the borrower and an asset for the bank.
In this way, most of the money we use in everyday transactions is created as private debt, which must be paid back with interest. This debt-based system concentrates financial power in private banks and reduces public control over the money supply.
By contrast, public debt—such as that issued by the federal government—is fundamentally different. As of 2024, Australia’s gross public debt stands at approximately $1.1 trillion AUD. But unlike households, the Australian Government is a monetary sovereign—it issues the Australian dollar and can never run out of money. Its real constraint is not solvency, but inflation and available real resources.
Understanding this distinction is essential: most of the money in the economy is created by banks as private debt, not by the government through public spending. And yet, the power to shape the economy lies with whoever controls the money supply. Currently, that power rests mostly in private hands.
Walk into any café in Melbourne and pay with a card—no cash exchanged. Over 90% of money in Australia exists only in digital form. Created not by the government, but by private banks when they issue loans, this money is essentially debt.
Private banks lend money into existence, then charge interest on it. That interest is extracted from the real economy—labour, goods, and services—and flows into the financial sector.
This system centralises power in the hands of a few institutions, reducing democratic oversight over something as fundamental as money. The Reserve Bank may control the cash, but the real monetary power lies elsewhere.
Reserve Bank Notes? Just a Fraction
Banknotes and coins make up less than 10% of the money supply. These are liabilities of the Reserve Bank—government-issued—but they’re not the source of most purchasing power. Digital bank money dominates, and it is not created with public purpose in mind.
Australia, as a sovereign currency issuer, could create money directly for public investment. But we’ve chosen to let private banks do it—profit first.
Deregulation and the Global Capital Trap
Keating’s Deregulation: A Door Flung Wide Open
In the 1980s and 90s, the Hawke-Keating government deregulated the Australian banking sector. They floated the dollar, removed capital controls, and allowed foreign banks to run freely. The rationale? Increased competition, efficiency, and integration into global markets.
But this move had consequences. Capital became highly mobile. Australian wealth could now leave the country with no oversight. Money earned here could be reinvested offshore. And it was.
“We didn’t realise what we were giving up until it was too late. It was like opening the floodgates.” – Former Treasury insider (1992, confidential source)
Chasing Foreign Investment by Selling Ourselves
With capital bleeding overseas, governments began courting foreign investors. How? By selling off national assets: energy companies, ports, transport infrastructure, water utilities. Entire industries were sold to multinationals in the name of progress.
The narrative said, “Foreign investment creates jobs.” But the truth? Many of those profits were sent offshore, often avoiding Australian tax.
Real-Life Example: From Power Grid to Offshore Account
In 2016, the NSW Government leased 50.4% of Ausgrid, the state electricity distributor, to foreign investors from China and Australia. Profits now go offshore—yet prices for consumers have risen. The public lost ownership, and nothing truly improved for the average Australian.
Meanwhile, similar deals for ports and rail have seen sovereign wealth funds from foreign countries owning critical Australian infrastructure.
The Gold Sell-Off: A Missed Opportunity for Sovereignty
In the late 1990s, the Howard Government sold two-thirds of Australia’s gold reserves—around 167 tonnes—at historically low prices. At the time, gold was around USD $300 an ounce.
Some critics argue this move was influenced by advice from private bullion dealers, with little public scrutiny. Other countries, like Russia and China, were increasing gold reserves as a hedge against the global financial system.
“It was a fire sale. We dumped a national asset, just as the smart money was buying.” – Financial analyst.
Today, that gold would be worth over AUD $16 billion. It could have strengthened our economic resilience, especially during global crises like the GFC and COVID-19.
Political Complicity in the Looting of Our Common Wealth
The financial cost of privatisation has been staggering. Since the 1980s, Australian governments have sold off hundreds of billions of dollars’ worth of public assets, including telecommunications, electricity grids, water utilities, transport systems, ports, and banking institutions. While these sales generated short-term revenue, they resulted in the loss of long-term income streams that could have continued funding vital public services.
For example:
The sale of Telstra—Australia’s publicly owned telecommunications provider—removed a consistent and substantial dividend stream from the federal budget.
The privatisation of electricity networks in New South Wales and Victoria has meant that billions in annual profits now flow to private and foreign investors instead of into public coffers.
The sale of ports, such as Port Botany and the Port of Melbourne, generated one-time windfalls but forfeited long-term control over strategic trade infrastructure and associated revenues.
According to various economic assessments, the cumulative loss in potential public revenue due to privatisation over the last few decades may exceed $70–100 billion. This excludes additional costs borne by citizens through higher prices, reduced services, and increased inequality.
In each case, governments gave up reliable, inflation-linked income in exchange for one-off payments. This approach has undermined Australia’s fiscal resilience and contributed to growing economic insecurity for ordinary citizens.
The erosion of Australia’s economic sovereignty did not happen accidentally—it was facilitated by successive governments from both major parties. Politicians of all persuasions embraced neoliberal economic doctrines that prioritised market freedom over public welfare, competition over cooperation, and privatisation over public ownership.
Labor’s deregulation under Keating was mirrored by Howard’s aggressive sell-offs and tax cuts for corporations. Rudd and Gillard made minor regulatory changes but did not reverse the structural changes. Morrison’s government doubled down on asset sales, while the current government has yet to show any real commitment to reversing the damage.
Instead of safeguarding Australia’s common wealth, political leaders enabled its looting—treating public assets not as a shared inheritance, but as inventory to be sold. It was a dereliction of duty, and it continues to this day, masked by media spin and economic jargon.
“When leaders forget who they serve, the people lose everything.”
It’s time to hold all parties accountable. This is not about left or right—it’s about right and wrong.
Privatisation: A Cancer on Society and the Environment
Privatisation is often sold to the public as a way to increase efficiency, reduce costs, and improve service quality. But over time, it acts like a cancer—spreading across sectors, weakening the public body, and degrading vital institutions that once served the common good.
Social Consequences
Privatised services focus on profit, not people. When hospitals, electricity, aged care, or water services are turned into revenue streams for shareholders, community needs are sidelined. The result?
- Higher costs for consumers
- Job losses and wage suppression
- Service cuts, especially in rural or low-income areas
- Reduced accountability and transparency
These consequences are not hypothetical—they’re visible. Aged care scandals, skyrocketing power prices, and deteriorating public transport networks all trace back to decisions to privatise.
Environmental Damage
Privatisation undermines environmental stewardship. When natural resources like forests, water, and minerals are handed to corporations, the incentives shift from sustainability to maximum extraction. Companies clear land, drain rivers, and pollute ecosystems to deliver quarterly returns. The long-term environmental costs are borne by the public.
Public ownership, in contrast, allows for integrated planning that balances economic, social, and ecological needs. It empowers citizens to demand climate resilience, energy transition, and land restoration—priorities that rarely align with private profit motives.
Just as cancer weakens the body’s ability to regulate and heal itself, privatisation erodes society’s capacity to govern for the common good. Reversing it is not radical—it’s the only way to restore health to our economy and environment.
The Disappearance of Local Banking and Rise of the Global Finance Scam
In the past, Australia’s banking system had local integrity and with practical safeguards. Banks operated with a clear, dual structure: savings banks for housing loans and trading banks for business loans and overdrafts. Australians’ savings funded Australians’ homes—simple, direct, and reliable. Each branch managed its books weekly and reported to head office monthly, with unexpected issues flagged immediately. Oversight was centralised, yet transparent and efficient.
This system ensured depositor security and community investment. Fixed deposits bore higher interest and helped finance everyday essentials like cars and appliances through in-house finance companies. Banks like the Bank of New South Wales (now Westpac), the National Bank of Australasia, and ANZ each had their own finance arms, serving domestic needs rather than foreign interests.
Deregulation and Exposure to Foreign Debt Markets
The financial deregulation in Australia during the 1980s, particularly under the Hawke-Keating government, involved significant changes such as floating the Australian dollar and removing capital controls. These reforms opened Australia’s financial sector to international markets, allowing for better foreign investment and competition.
While these changes aimed to increase efficiency and integration into the global economy, they also increased exposure to foreign debt markets. Australian banks began to rely more on offshore borrowing to fund domestic lending, which introduced new risks associated with foreign exchange fluctuations and global financial market volatility. References: https://treasury.gov.au/sites/default/files/2019-03/p2018-t332486-economic-reform-v2.pdf and https://www.rba.gov.au/speeches/2007/sp-dg-160707.html
Currency Exchange Costs and Impact on Borrowing
When Australian banks borrow funds in foreign currencies, such as US dollars, to lend domestically, they incur costs related to currency exchange. These costs can include exchange rate margins, transaction fees, and hedging expenses to mitigate currency risk.
For instance, banks often apply a margin to the exchange rate when converting currencies, which can add approximately 0.5% or more to the cost of each transaction. These additional costs are typically passed on to borrowers, increasing interest rates for Australian consumers and businesses.
Moreover, the reliance on foreign funding exposes the domestic financial system to external shocks, as changes in global interest rates or investor sentiment can affect the availability and cost of offshore financing. Reference: https://www.ppesydney.net/content/uploads/2020/05/Australian-financial-deregulation-and-the-growth-of-the-foreign-debt.pdf
In summary, the deregulation of Australia’s financial sector led to increased integration with global financial markets, resulting in greater reliance on foreign borrowing by domestic banks. This shift introduced new costs and risks associated with currency exchange and exposure to international market dynamics, ultimately impacting the cost and stability of domestic lending.
Australian branches still perform weekly credit-debit reconciliations. If a branch has more debits than credits, it must rely on neighbouring credit branches. Reserve requirements are minimal—once at 30% for conservative institutions, now closer to 20% or less. Fixed deposits and hire-purchase lending still exist, but the profits now feed multinational shareholders.
The result is absurd: we borrow foreign capital, pay higher interest, and allow global institutions to profit from our economy. Instead of sovereign control, we’ve outsourced national financial stability to offshore interests, leaving Australians vulnerable to foreign exchange volatility and capital flight.
It’s time to rethink this system. A sovereign nation should not depend on external borrowing to fund local housing and business development. By restoring localised, publicly accountable banking, Australia can end this parasitic model and put its economic future back in its own hands.
A Strategic Future: Why Australia Should Consider Joining BRICS
As the global financial landscape shifts, many countries are seeking alternatives to Western-dominated financial institutions such as the IMF and World Bank. The BRICS alliance—comprising Brazil, Russia, India, China, and South Africa—offers an emerging framework that promotes multipolar cooperation, national sovereignty, and economic development free from US dollar dependence.
For Australia, joining or cooperating with BRICS could provide a viable path toward reclaiming monetary and political independence. It would allow Australia to diversify trade relationships, reduce exposure to volatile US dollar transactions, and access development financing outside of Western banking constraints.
Currently, every transaction with US-linked financial institutions often incurs fees, interest burdens, and compliance rules that erode Australia’s economic sovereignty. By aligning more closely with BRICS, Australia could create trade agreements in local currencies, encourage mutual infrastructure development, and foster a less exploitative international financial system.
However, such a move would face resistance from entrenched political interests and global financiers who benefit from the status quo. Political donations and behind-the-scenes influence are likely to obstruct any serious shift in foreign alignment. Nevertheless, this option deserves public debate and strategic consideration if Australia wishes to chart a path toward long-term independence and prosperity.
Reclaiming Australia’s Economic Sovereignty
The Currency Sovereignty Contradiction
One of the greatest contradictions in Australian economic policy is this: despite being a sovereign issuer of its own currency, the Australian government behaves as if it must borrow or attract private capital to fund essential services and infrastructure.
Australia sells public assets—power grids, ports, railways—then claims it must borrow money or woo foreign investors to fund new public works. But this ignores a critical fact: the federal government issues the Australian dollar. It does not need to ‘raise money’ before it can spend. Unlike a household or business, it cannot run out of its own currency.
What this means is simple yet profound: Australia can fund hospitals, housing, education, and infrastructure directly, using public money created for public purpose. The real limit is not budget deficits—it’s inflation and the availability of real resources like workers, materials, and energy.
By pretending to be financially constrained, our governments have handed control of essential services to private corporations—many of them foreign-owned—who extract profits while Australians face higher costs and less accountability.
It’s time to reject the manufactured scarcity and reclaim our ability to invest in ourselves.
The Parasite vs the Sovereign
Privatisation is not simply a policy decision—it is the systematic transfer of public wealth into private hands. What is often framed as economic reform is, in essence, the theft of public assets. These are institutions and infrastructures built over generations with public money for public benefit. When sold, they are no longer accountable to the people but to shareholders seeking profit. The public loses control, transparency, and long-term revenue—while bearing the rising costs and deteriorating services.
The current system can be described as “parasitic”: Australia sells assets, loses ownership, then has to borrow or attract capital to fund basic infrastructure. Profits go offshore, while we mortgage our future.
Contrast this with China. China’s economic management approach starkly contrasts Australia’s embrace of deregulation and privatisation. While Australia opened its markets and sold public assets, China kept stringent capital controls, protected key industries, and strategically invested public funds to foster long-term development.
For instance, China’s capital control policies have been pivotal in keeping macroeconomic stability, allowing the government to manage cross-border capital flows effectively. This control has enabled China to shield its economy from volatile global financial markets and focus on domestic growth.
Moreover, China’s industrial policy has been characterised by significant state support to shape industries and guide investment. This approach has led to rapid progress in many advanced sectors, reinforcing the country’s economic resilience.
Ref: https://bigdatachina.csis.org/wins-and-losses-chinese-industrial-policys-uneven-success/
Ref: https://www.wsj.com/world/china/the-u-s-has-been-spending-billions-to-revive-manufacturing-but-china-is-in-another-league-75ed6309/
Ref: https://www.wsj.com/world/china/for-chinese-tech-startups-beijing-fills-a-funding-void-left-by-vcs-deeb0e2c/
Ref: https://www.reuters.com/breakingviews/china-is-reshaping-not-choking-private-business-2024-10-30/
In contrast, Australia’s deregulation and privatisation efforts have led to the transfer of public wealth into private hands, often resulting in higher costs and reduced services for citizens. By comparing these two approaches, it becomes evident that strategic state intervention, as shown by China, can lead to greater economic control, stability, and development.
How Public Money Can Serve Public Good
Australia is a monetary sovereign. This means our federal government cannot run out of money—it creates the Australian dollar. Yet, instead of using this power to invest in people, we let private markets dictate our future.
Imagine if public money was used to:
- Build public housing
- Fund world-class healthcare
- Re-nationalise key infrastructure
- Transition to renewable energy
- Free education
It’s not a fantasy—it’s a choice. And it starts with understanding our system.
The Price of Deregulation
For decades, Australia’s leaders told us deregulation would make us richer. Instead, we’ve sold off our assets, lost control of our financial system, and watched profits vanish into tax havens.
It’s time to stop playing by the rules of global finance and start prioritising national wellbeing. The tools are in our hands—Australia’s dollar sovereignty gives us the power. It’s time we use it.
Q&A Section
Q1: Isn’t foreign investment necessary for economic growth?
A: Not when it means selling off assets and sending profits overseas. Domestic investment through public money creation is sustainable and keeps wealth within the country.
Q2: What does ‘monetary sovereignty’ really mean?
A: It means the Australian Government issues its own currency and can fund national programs without needing to borrow or tax first. The real limit is inflation—not debt.
Q3: Can Australia reverse these decisions?
A: Yes. We can re-nationalise essential services, implement capital controls, and invest directly in public infrastructure.
Question for Readers
Have you seen the effects of privatisation or foreign ownership in your community? What public services or industries do you think should be reclaimed?
Call to Action
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