Alan Kohler on the stories he covered — and the ones he missed

This is my last column for the ABC after 31 years with this wonderful place, mainly on TV and, lately, also writing these columns and doing podcast interviews.

Inevitably, the end arouses reflections about the beginning and the middle, and the seeds sown then for things happening now.

I joined Kerry O'Brien's team on the new national 7.30 Report in December 1995 as business and economics correspondent after a turbulent stint as editor of The Age.

Paul Keating had three months to go as prime minister, and opposition leader John Howard was about to deliver the fourth of his headland speeches, ostensibly laying out his agenda for government but perhaps disguising more than he revealed.

Looking back, I now understand that the next 10 years were more about the stories I missed than the ones I got. I was not alone in that — a lot of people missed the significance of what Howard was doing.

Howard's quiet legacy rings loudly today

We remember the decade before that as Australia's great reform era: the dollar floated, tariffs came down, finance was deregulated, superannuation was made compulsory, and competition policy remade old public monopolies.

But the late 1990s and early 2000s were just as consequential; it's just that while Howard arguably changed Australia as profoundly as Keating and Bob Hawke did, he did it with less fanfare.

For example, a couple of years after I started with The 7.30 Report, I was up to my neck every day covering the 1998 waterfront dispute. This was definitely a nation-shaping event, but there was something else going on that was more important but largely ignored in Australia.

In Kyoto in 1997, the world had agreed a set of protocols designed to combat global warming by reducing carbon emissions, and as the wharfies were fighting both Patrick Stevedores and the Howard government in 1998, the world was in Buenos Aires to finalise and sign the deal.

But John Howard refused to sign, saying Australia as a fossil fuel exporter would be damaged by it. This was true, but in the process he set the country up for 30 years of debilitating political conflict and energy-policy paralysis that is still going.

A year later, in 1999, we were obsessed with the lead-up to the global chaos of Y2K — which did not happen — as well as the political wrangling about a GST Howard had promised not to implement, but then reneged on. 

We all completely missed the significance of the 50 per cent capital gains tax discount.

Replacing the indexation of capital gains with a 50 per cent discount was an idea that originated in the Ralph Review of Business Taxation and was sold as a way to stimulate investment in company shares and businesses.

But instead, with negative gearing as an income tax break as well, the tax system suddenly offered a potent incentive for geared property investment, especially when the stock market crash of March 2000 put everyone off buying shares.

That change kicked off 25 years of a nation-altering surge in house prices. Twenty-six years later, those distortions have finally been removed and guess what? House prices are falling, helped by rising interest rates.

The CGT discount in 1999 and its removal in 2026 are not the only reasons house prices went up and are now going down, but they kicked it off and have been a big part of the story ever since, not foreseen at the time.

And the increase in house prices is one reason Australian politics has descended into an unedifying immigration auction, because housing construction could not keep up with a boom in migration.

Now, rather than promising to build more houses, opposition politicians are finding it easier to promise to undo the rise in immigration (not that doing either is simple; it just sounds better).

In fact, the seeds for Australia's migration boom were quietly sown by Howard in 2001, while we were watching the dot.com crash, the Tampa refugee affair, the terrorist attacks on New York on 9/11 and the federal election in November — the one that Howard might have lost but turned around with the help of 44 wretched Afghan refugees and 19 mostly-Saudi terrorists.

On July 1, 2001, the Howard government made foreign student visas a pathway to permanent residency, and at the same time removed the old categorisation of the countries students came from — away from "gazetted" (UK, Europe, US, Canada) and "non-gazetted" (India, China, etc) countries, where those from the latter group could not get a visa.

Those changes both supercharged demand for student visas and levelled the playing field between European and Asian countries, turning education into a residency pathway for migrants from Asia, and Australia's second biggest export-earner.

The result, from 2005 on, was a huge increase in both temporary and permanent migration; there are now nearly 3 million temporary migrants in Australia — more than 10 per cent of the population — and politics has turned into a migration auction with no winners.

Opening the doors to China

Something else happened in 2001 that very few (including me) did not understand the significance of: China joined the World Trade Organization (WTO) on December 11 after 14 years of negotiation.

That was the moment when the world's largest pool of labour and manufacturing ambition, expressed via an undervalued currency and mass urbanisation, was welcomed into the global economy.

Manufacturing industries everywhere else, especially in the United States, were on borrowed time, and as a result, large parts of that country were left behind and, in frustration, eventually voted for a property mogul and TV celebrity named Donald Trump.

Meanwhile, Australia walked into the greatest commodity boom in its history, and a dependence on China that has been both enriching and complicating.

Our resources and trade patterns were beautifully paired to China's industrialisation: iron ore, coal, energy, alumina and other inputs for a newly urbanising manufacturing superpower.

There was another angle to this story, also missed at the time: the accumulation of massive excess savings in Asia, which started with the 1997-98 crisis and was supercharged by China's WTO membership and subsequent trade surpluses.

After the crisis, Asian countries generally, and China in particular, decided that undervalued currencies were the way to go and began to build up massive surpluses, which were invested in either US Treasuries or German Bunds.

That excess of savings over investment drove real global interest rates to zero in 2021, with the pandemic capping that decline off with a coordinated panic by central banks.

That is now in reverse, with the deficit nations of the West, led by the United States and France, competing for capital with AI data centres, and the resulting excess investment demand over savings driving interest rates back to where they were 25 years ago.

The final thing I missed during John Howard's decade in charge was his healthcare revolution: the Medicare Levy Surcharge in 1997 penalised higher-income households that did not buy private cover; the Private Health Insurance Rebate began in 1999; Lifetime Health Cover began in 2000 and made hospital cover more expensive for people who joined after age 30.

Howard did not abolish Medicare but did something much more subtle; he built a taxpayer-subsidised private system alongside it and entrenched the tension between the two systems.

There were a few other things that hindsight has enlightened, such as the decision to link east coast gas prices to global markets and turn it into an under-taxed export industry, leaving domestic manufacturers and households paying too much for gas.

And then there is the way the internet went from being the cause of a share market bubble and bust to the operating system for everything – retailing, news, social connection, work, TV, politics and now AI — although I think I did see that one coming.

And now, as I finish up at the ABC, I cannot help thinking that the next 31 years are going to see much more change than the past 31.

As with the late 1990s, we think we know now what is going to be important in 2057, but we probably do not.

Maybe one of the things I am missing is that I will still be around to see it because AI has cured cancer — wouldn't that be good.

Alan Kohler is a finance presenter on ABC News for three more days and still writes for Intelligent Investor.