Former Reserve Bank board member Warwick McKibbin said the big issue in the new Senate will be protectionism and free trade.
His observations come at a time when the new parliament is likely to face calls for increased protection and subsidisation of local industries from Bob Katter in the House of Representatives and Pauline Hanson and members of the Nick Xenephon team in the Senate. What makes it more complicated in the new Senate is that this time, the cross bench senators will be from different power blocs.
Professor McKibbin, now an economist at Australian National University (ANU), said the backlash against free trade which had contributed to the success of the populist parties and independents in this election had been driven by the major parties failing to respond to seismic economic changes.
“Both because of increased technological change and openness to cheap goods from overseas, there are parts of the economy which are being put under severe pressure,” Professor McKibbin told ABC Radio’s Saturday AM program.
“So there are definitely problems in society that should have been addressed before now.
“Politicians have been very slow to respond and now we’re seeing the consequences.”
He said an ANU Centre for Applied Macroeconomic Analysis study had found that rising trade barriers in the post-Global Financial Crisis world economy could reduce Australia’s economic growth by around 1.5 per cent.
“This is not small, this is quite serious if this trend continues,” Professor McKibbin said.