Paul Keating warns a ‘long down cycle’ looms

The ex-PM warns the digital economy means the world faces low capital investment and slow jobs growth.

Paul Keating says the internet is “chipping jobs away” and undercutting traditional industries. Pic: Getty Images

Former prime minister Paul Keating has predicted the world is headed for a “long down cycle”, in a period where the digital economy means low capital investment and job growth.

Speaking at the first annual Sohn Hearts & Minds conference in Sydney today, he said the long period of infrastructure investment in the post-war period may have been an aberration which would not return any time soon.

“We are in a post-capital phase of world development,” Mr Keating said.

“We are moving into a capital-light world.

“The question is, is the digital economy — the capital market’s sparkling creator — its undertaker?”

Mr Keating said the internet was “chipping jobs away” and was undercutting traditional industries like retailing and adding to pressures for deflation.

The former PM — the architect of Australia’s economic deregulation — said Australia should set up a reserve bank of infrastructure, to oversee a major investment in infrastructure.

Mr Keating said the election of Donald Trump as US president had shown a rise in popular opposition to globalisation, with voters saying “we are not taking it any more.”

Mr Trump’s rise would see a change in the world order, where the US may develop a policy of being able to work with Russia, and where it may well ease back on what was a policy of “containment” with China under Barack Obama.

“Instead of its policy on China being run by crazy admirals in CINCPAC (US fleet headquarters) in the Pacific, it will be run from the White House.”

Mr Keating said the Democratic Party in the US had lost its traditional support among blue collar workers.

The former PM also took a swipe at leading lobby group the Business Council of Australia.

Asked about his own investments he said he had “avoided the ignominy of getting a board seat on one of the dunderhead companies in the BCA.”