Australia’s political and economic direction is beginning to travel a well-trodden and dangerous path. A path that increasingly looks Argentinian.

For decades, successive Australian governments have expanded the personal and corporate welfare state. But instead of lifting citizens into economic independence, or businesses into international competitiveness, these policies have created a culture of dependency, a culture so entrenched that most Australians receive more in transfer payments than they pay in tax. The Australian welfare state, once a safety net, is becoming a political tool; used less to alleviate suffering than to secure votes.

This shift was glaringly evident during the May election, where the major parties seemed locked in a contest of generosity with other people’s money, each offering ever-greater handouts, a soufflé of bracket-creeping taxes, and an ever-ballooning national debt. This was not just economically reckless but politically unsustainable.

If Australians want a cautionary tale of where this path leads, they need look no further than Argentina.

In late 2023, Argentinians elected Javier Milei, a libertarian economist who ran on an audacious platform to slash public spending, eliminate ministries, and open the economy to free-market forces. Unsurprisingly, the ABC deemed him to be ‘far right’. At the time, Argentina was facing 276 per cent annual inflation and a poverty rate north of 50 per cent. The country had become a case study in the perils of economic populism, spiralling debt, and chronic government overreach.

For 70 years, Argentine politics had been dominated by Peronism, a corporatist, state-centric ideology that mingled welfare with nationalism and patronage based on Mussolini’s fascist Italy. This is a system that Australia is familiar with, as society is organised into groups – trade unions, business groups, public employees – that compete for public largess via rent-seeking such as providing funds to political parties or other favours.

Milei’s reforms were sweeping. He abolished ten ministries, shut down hundreds of government agencies, and dismissed 37,000 public servants. These cuts targeted the national government, which employed around 740,000 people meaning that only five per cent of that workforce was let go.  Nationwide, Argentina had roughly 3.5 million public servants across all levels, so the overall impact was modest in scale but symbolically significant.

Milei also scrapped rent controls, removed import restrictions, and dismantled bureaucratic obstacles to housing and investment. 100 secretariats and more than 200 lower-level bureaucratic departments were removed.

The results have been striking. Inflation has dropped sharply to only 2.4 per cent in February, rents have plummeted by 30 per cent, housing supply has soared with a three-fold increase in the number of apartments available for rent, and poverty has declined to 38.1 per cent with extreme poverty falling from 18.1 per cent to 8.2 per cent. Economic growth has resumed. A dramatic improvement given the exceedingly dire circumstances.

The first lesson for Australia is that poverty is fought, not by handouts and dependency creation, but by freeing up markets from deadly state regulation. The simple lessons of free-market economics not only work, but work exceedingly quickly.

The second lesson is that politicians with the fortitude of Milei, Hawke or Keating, do not come along every day. Argentina had to suffer for over 70 years.

A third lesson for Australia is that the larger the governmental bloat, and the later the inevitable reform, the more painful and costly for the citizenry. The speed and severity of Milei’s reforms triggered social unrest, strikes and sharp political resistance.  Argentina’s Congress, still populated by the old guard, has stalled or diluted much of his agenda. The result is a fragile but ongoing tug-of-war between economic overhaul and institutional inertia. Despite this opposition, Milei’s approval ratings hover near 55 per cent.

Fourth, unchecked welfare growth eventually becomes a trap. As more Australians become dependent on state benefits, the harder it becomes for any government to enact meaningful fiscal reform. Welfare stops being about need and becomes a political currency. Australian’s governments, accelerating under John Howard, have followed this logic to the letter, massively increasing the public sector and entrenching Labor’s political support through taxpayer-funded dependence. It’s a strategy rooted not in compassion, but in calculation.

Fifth, economic dissatisfaction can be a powerful political force. Australians aren’t facing Argentina’s hyperinflation, but cost-of-living pressures, stagnant wages, and unaffordable housing have eroded public trust in mainstream politics. Voters frustrated by political inertia and economic stagnation have begun to look outside the major parties with the primary vote of both parties exceedingly low. We are already seeing echoes of this trend in the rise of independents and minor parties.

Sixth, Australia must guard its institutional integrity. Argentina’s economic collapse was exacerbated by decades of corruption, opaque governance, and political patronage. The resulting cynicism opened the door for a radical saviour like Milei. While Australia’s democracy remains relatively strong, it is not immune. Public trust in institutions is falling. Media fragmentation, political polarisation, and the accelerating migration of politicians from parliaments to lobbying operations are slowly undermining the democratic consensus. If our political culture continues to erode, we too could face a reckoning.

Finally, and most soberingly, ideology alone is not governance. Milei’s reforms, while bold and in most cases effective, have encountered serious roadblocks. That tension between idealism and implementation is something Australia’s reform-minded politicians would do well to remember.

Ultimately, Milei’s story is not one of pure triumph or unmitigated disaster. It’s a test case in what happens when a society finally runs out of other people’s money after decades of state overreach, economic mismanagement, and institutional decay.  Milei’s chainsaw, both literal and symbolic, was a message to a country choking on bureaucracy and dependency.

For observers that have been around for some time, Milei’s policies look familiar as they echo Hawke and Keating. Australia urgently needs the resurrection of the free market policies of Hawke and Keating. If we continue to blur the line between welfare and political bribery, if we erode economic incentives with bloated state dependency, and if we sacrifice long-term prosperity for short-term popularity, we may find ourselves facing not reform, but rupture.

Better to trim the excess now – before someone arrives with a chainsaw.