Stopping the rot requires antibiotics for our infected institutions
Recently, a friend recommended John Anderson’s Conversations podcast on Spotify.
One of the more immediately relevant is Anderson’s interview with former senior Treasury official David Pearl.
Listening, I discovered, beyond the discussion about the energy transition, that Australia’s decline – a decline I believe many are now witnessing and believing – is not fate but the product of bad choices made by the people running our institutions.
David Pearl is a former assistant secretary of the Australian Treasury and now a full-time writer and commentator on economic and cultural policy. He spent some three decades in the federal bureaucracy, with postings to the Organisation for Economic Co-operation and Development (OECD) in the late 1990s and a period as the Treasurer’s representative in the United States, working across taxation, fiscal management and energy policy. He writes regularly for The Australian and The Spectator Australia and appears frequently on Sky News, where he has been among the most persistent critics of Treasury’s modelling of the renewable energy transition.
Pearl contends, for example, that Treasury, once feared for its scrutiny of policy, has been captured from above by secretaries who treat emissions reduction as a moral imperative rather than a trade-off, and who withhold the true cost of the energy transition – a figure he puts as high as $1 trillion.
The failure of the institutions
Australia was once celebrated as a beacon of opportunity – a cohesive, pragmatic, and prosperous nation that consistently punched above its weight on the world stage. We had built a resilient economy paired with a strong social safety net, while our living standards outpaced the rest of the OECD.
But now, national unity is faltering, and Pearl lays the blame squarely on those who run our core cultural and public institutions.
If those institutions – from schools and government bureaucracies to mainstream media – actively upheld the nation, taught future generations to be proud of their country, and fostered genuine respect for our way of life, it would be far more difficult for fringe elements to reject shared national values.
But when institutions stop instilling a common story and sense of pride, they leave a vacuum.
A lesson from history
What we’re seeing in Australia, isn’t new. U.S. President Abraham Lincoln famously observed,
“the philosophy of the schoolroom in one generation will be the philosophy of government in the next.”
What we choose to teach in our classrooms today shapes the cultural and political reality of tomorrow. Pearl contends our institutions must take up the mantle of teaching people to value and protect the very foundation of our way of life.
Today, that foundation is fracturing.
Australia faces record-high inflation, the highest inflation in English-speaking countries and the equal-highest in the OECD, skyrocketing energy prices, and unprecedented social division. Yet, the root cause isn’t economic cycles or global headwinds: it’s a systemic breakdown of trust, a departure from economic reality, and an institutional refusal to discuss real-world trade-offs.
The breakdown of social cohesion
Social cohesion relies on an implicit social contract: every citizen, whether native-born or an immigrant, embraces foundational national values, meets their obligations, and contributes to the broader community. In return, individuals are judged on the strength of their character rather than their inherited traits.
When national unity falters, as it has done, responsibility falls squarely on the leadership of our core cultural, political, and educational institutions.
For decades, many public institutions have shifted away from instilling a shared sense of pride in Australia’s history and democratic foundations.
When institutions stop teaching a shared national story, they leave a vacuum. Without a unifying identity, a society naturally fractures into competing factions, eroding the mutual trust a nation needs to thrive.
The renewable energy transition
According to Pearl, the erosion of trust is nowhere more evident than in national policy discussions – specifically regarding energy transition and climate change.
Historically, economic policy was guided by rigorous cost-benefit analyses. When governments considered major policy shifts, central agencies like the Treasury clearly communicated the required trade-offs to the public. Today, that frankness has largely disappeared in favour of ideological narratives.
“Big lies contain a grain of truth. The grain of truth in the renewable lie is that the variable inputs – sun and wind – are free. But that hides the lie.”
— David Pearl
The unspoken reality of grid integration
While solar and wind generation costs have fallen, relying heavily on intermittent power sources requires building parallel systems:
Gas, coal, or extensive battery storage must remain on standby to backfill the grid when the sun isn’t shining, or the wind isn’t blowing. Meanwhile, connecting remote, spread-out renewable generation to urban centres demands vast investments in new transmission infrastructure.
No major jurisdiction globally has dramatically increased renewable grid penetration while simultaneously lowering system-wide energy costs.
Yet, public discussion frequently presents the energy transition as a zero-cost, purely beneficial process.
When energy bills inevitably rise, working-class households, regional communities, and low-income families bear the brunt of these hidden costs – while insulated decision-makers (the Champagne Socialists) remain shielded from the consequences.
Economic decline and the death of frank advice
First, some facts:
Prosperous nations are built on high-trust institutions that prioritise long-term growth over short-term political narratives. However, recent economic management highlights a broader shift inside these institutions.
Inflation acts as a regressive tax, hitting wage earners and low-income families hardest. Delays in addressing inflationary pressures directly harm the most vulnerable economic sectors.
Fiscal frameworks historically aimed for balanced budgets across economic cycles. Moving away from these benchmarks in favour of managing net debt ratios allows public spending and tax burdens to expand continuously without clear accountability.
A healthy public service exists to challenge bad ideas with intellectual rigour. When questioning policy assumptions – whether about economic modelling or infrastructure costs – is treated as disloyalty, or when the public service is stacked with loyalists – bad policy naturally follows.
The path forward. Restore pragmatism and transparency
Pearl makes the point that decline is never inevitable. Australia’s past success was built on pragmatism, robust public debate, and an unshakeable commitment to individual opportunity.
To turn the trajectory around, Pearl suggests Australia must restore integrity to its public institutions. To do this we have to re-establish Institutional Neutrality. That means public agencies and central departments must return to providing objective, evidence-based advice that acknowledges real-world trade-offs.
Policy decisions – especially those impacting energy security and economic growth –must be open to questioning without ideological gatekeeping.
Educational and public bodies must foster a unifying national identity based on equal rights, individual character, and shared responsibilities.
By replacing ideological rhetoric with transparent, candid conversations about costs and priorities, Australia can rebuild trust, restore its economic foundation, and secure a prosperous future for generations to come.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
