Paul Keating's interview on Lateline has been doing the rounds, and well it should, this is genuine news, rather than delivered soundbites. Keating transitioned into a statesman a while ago, as did Malcolm Fraser, and in a manner which Bob Hawke and Gough Whitlam have not really managed to do. Statesman should be opinionated. We rely on them, to be free of the political pressures, but with their former inside knowledge, knowing when to call BS.

Keating in the end was too arrogant for me, and he was Prime Minister at the end of a hectic Labor period of governance. Government's tire after three terms and political gamesmanship often replaces good governance, which is an issue the Howard and Carr/Iemma governments are having. It was time in 1996 to give the Liberals a go again.

Australia needed the kick in the pants from the likes of Keating, Greiner and Kennett. It also needed the mundane and bland managerial innoffensiveness of the likes of Howard, Carr and Bracks afterwards as well.

However, I consider Keating and Greiner two of the great politicians and policy makers of the modern Australian political era. Keating is extra special as his use of language and ability to articulate a policy narrative is still unparalleled. He is as a statesman should be - shaking the status quo with "can't take your eyes off" delivery.

The Keating interview is entirely on policy, and politics only intrudes as much as the interviewer is trying to get his drama out of the piece.

Keating is defending his legacy, but he is correct in what he is saying. In terms of economic rationalism (liberalism) and establishing a market-state; he and Hawke have it all over the Howard government.

He is also correct when he talks of his policies of establishing apolitical or non-political pressure valves such as floating the dollar, the reserve bank doing interest rates and the dropping of tariffs. His argument was weakest with the Chinese Effect but low-cost Japanese manufactures have been coming to Australia for years. This is a new version of that process.

The Howard Government is not particularly economically liberal. The best that can be said of their economic management is that they have not interfered politically in the non-political institutions. But in areas that need economic liberalisation, they have botched policy for political reasons. QANTAS and Telstra are two ongoing examples.

Howard's economic management has followed Frasernomics - which is not a surprise as he was Treasurer under Fraser. If we look at Howard's economic management in that light, the Budget and Workchoices as policy become obvious.

Frasernomics has two main principles - keep inflation down by; one, keeping the budget out of deficit; and two, stopping unions increasing wages.

Under those principles the anti-federalist grab by Howard for Industrial Relations to be in Canberra and the prohibition of collective bargaining in Workchoices make sense.

But this is a very dated view, as Keating commented. The services industry in Australia is going gangbusters, and it has almost no union penetration. The best way to limit union involvement is by having real wage growth - not statutorial prohibition which is an affront to individual liberties. Keating said:

I mean you take the instance, the liquor allied entertainment restaurants, entertainment industry in this country since the '80s. It's been massive. Unionisation hasn't happened. There's some of it there, basically hasn't happened.

Keating blames union incompetence for it. It is more likely, in my opinion, the 2% wage growth each year for twenty years that he mentioned in the interview. Personal prosperity is an important motivator.

Additionally, despite the interference of nation-states in a globalised economy, labour is becoming a global resource rather than a protected one inside a nation-state. This makes union power ineffective anyway - as Fred Argy commented:

In today's highly competitive, globalised economy, unions cannot determine market wages and conditions except in rare situations where businesses have monopoly power (in which case unions are merely giving their workers a share of the monopoly profits).

Another method to lower wages is to increase the supply of labour in Australia - and immigration has increased under Howard, but given the employment figures of the last few weeks - not enough. This is where the nation-state and its non-porous political boundaries limit an economy's ability to satiate its labour needs.

There appears to be consensus amongst economists that real wage growth follows productivity growth. Since most of the market-state structural changes were made under Hawke and Keating, I don't think Howard, or Rudd for that matter, know what they can do from that level of government other than chip around the edges and stay largely hands off until something becomes a political issue that threatens their political power.