In 1990, Treasurer Paul Keating admitted that Australia was in recession. “The first thing to say is, the accounts do show that Australia is in a recession. The most important thing about that is that this is a recession that Australia had to have,” he said in November 1990. The remark that this was the ‘recession we had to have’ became as famous as Keating’s previous prediction that Australia would become a “banana republic”.
Keating said, in 1986:
We took the view in the 1970s – it’s the old cargo cult mentality of Australia that she’ll be right. This is the lucky country, we can dig up another mound of rock and someone will buy it from us, or we can sell a bit of wheat and bit of wool and we will just sort of muddle through … In the 1970s … we became a third world economy selling raw materials and food and we let the sophisticated industrial side fall apart … If in the final analysis Australia is so undisciplined, so disinterested in its salvation and its economic well being, that it doesn’t deal with these fundamental problems … … Then you are gone. You are a banana republic.
He was warning against the dangers of relying on mining and primary product for our export earnings. In the event, it was the excesses of the 1980s that brought the economy undone.
The recession of 1990 followed the stock market collapse of October 1987 and was caused by the international recession and high interest rates. By 1992, unemployment in Australia reached 11 per cent. The standard variable mortgage interest rate was 17 per cent.
Household budgets felt the pinch. Fortunately, pasta was very much in vogue. Perhaps the affordability of spaghetti and minced meat contributed to the growing adoption of spaghetti bolognese as one of our national dishes.