IMF rebuke has echoes of 1976 – but this crisis could be much worse

FOr those with very long memories, harrowing echoes of 1976 reverberate in our minds now. Not, unfortunately, the long hot summer, but the major IMF crisis that tested the early days of the Labor government headed by James Callahan.

Back then, as now, there was a flight of sterling. It was caused by mistrust in the government’s management of public finances, rampant inflation, and the seemingly intractable problems of poor productivity, uncompetitiveness, and slow growth – intermittent stagflation.

It wasn’t caused by a particularly catastrophic “financial event,” but then counselor Dennis Healey was often pushed into having to introduce mini-budgets to get things back on track. In those days, $1.50 was the psychological barrier and the pound had been falling on and off for years. It was $2.80 a decade ago. Ironically, the crisis occurred around the same time of the year, disrupting the annual Labor Party convention. Healy had to turn around at the airport on his way to the top of the International Monetary Fund to deal with the collapse of the pound sterling. The backdrop of strikes, dilapidated infrastructure, and an air of national anxiety complete the unhappy feeling of deja vu.

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