HOUSE_OVERSIGHT_029661.jpg

He lists them. It is a mix of the new and old Keating agenda: a shift in resources to the extractive industries; a lift in capital inflow driving a high current account deficit putting a premium on savings; recognition that competitiveness will lie "in the creativity of our people as much as it does in our oil and gas"; a renewed emphasis on the value of hi- tech and education; and above all, a cultural change that integrates Australia more into East Asia. "Cultural transformation is the key for us," Keating says. He rates it as more important than economic reform. "There is less interest now in being part of East Asia than there was in the 1990s," he laments. Keating wants this idea revived. And he ties it to the republic arguing that to succeed in Asia we must become a republic, a proposition Howard always dismissed. On China, Keating is an optimist yet alive to the daunting economic challenge China now confronts. "What is happening in China knows no precedence in world economic history," he says. "Never before have 1.25 billion people dragged themselves from poverty at such a pace. China is now half the GDP of the US and incomes have risen by a factor of 10." He argues, however, that the origin of the 2008 financial crisis lies in the global imbalances - China has built huge foreign exchange reserves by exporting too much and America, in turn, is saving too little. Keating says: "China must shift the basis of growth from net exports and investment to domestic consumption. Will they achieve this? Probably. Will there be strains along the way? There have to be." Unlike many Australian leaders, Keating is a Europhile. "I think the European project is the most significant project since the second world war," he says. But he sees two huge blunders made in Europe. From the euro's inception, Keating said it should constitute only Germany, France and the Benelux nations, not the peripheral countries around the Mediterranean, and "Greece should never have been allowed in”. Why were the weaker economies given entry? Keating says: "It's because president Mitterrand and the French wanted it. They weren't ready to sit beside the German unified state without some friends." So the eurozone was flawed from the outset, a structure awaiting internal assault: "The problem is we have a single currency without a political union and without a fiscal union." The second blunder was the 1990s expansion of NATO to the Russian border. For Keating, this was recklessness for which the world may yet pay. "Sensible policy would have included a place for Russia in the new world order,” he says. “But that didn't happen. So Russian liberals were pushed to one side by Russian nationalists. In a sense the US has created Vladimir Putin." Who is responsible? He points the finger at Bill Clinton. On the 2008 financial crisis, he says former US Federal Reserve chief Alan Greenspan must bear "a fair amount of responsibility”. "Greenspan is someone | know and like,” Keating says. "But if you are so naive to believe that institutions with a balance sheet with assets geared at 45 to one is not an accident waiting to happen then you don't deserve to be chairman of the Federal Reserve." He praises Obama for seeking a return to the “liberal internationalism" that, in Keating's view, made the US great in the post-World War Il age. This is the US he loves but it is still in retreat. Asked about the nature of leadership, Keating reveals what lies within his heart: "| believe there is a poetic strand to life that doesn't exist in an economics textbook. HOUSE_OVERSIGHT_029661