ABSTRACT
This chapter demonstrates how Australasian economists responded to the convulsive changes in the world economy of the 1970s and early 1980s. It was an age in which the Keynesian consensus and pluralist approach of the post-war years was replaced by a more inflexible neoclassical paradigm. Concurrent with this was a marked rise in the use of econometric modelling in macroeconomic policy. Downing blamed the process of an escalating increase in average earnings on 'not only a much more permissive society but also a permissive economy. When the Whitlam Labor Government was elected to office at the end of 1972 it inherited an economy beset by incipient stagflation; the previous Coalition Government had refused to revalue the currency with the result that the country was awash with liquidity. New Zealand had its own version of the real wage gap, which took hold from 1978 – as evidenced by econometric research, particularly by economists within the RBNZ.
