Few names in global finance carry the gravitas of Alan Greenspan. As the long-serving Chair of the US Federal Reserve (1987–2006), Greenspan’s approach to interest rates, market deregulation, and crisis management reverberated far beyond American borders—reshaping how Australia and the world think about central banking. In 2025, as the Reserve Bank of Australia (RBA) navigates inflation, housing pressures, and digital disruption, Greenspan’s legacy remains a touchstone for debate.
The Greenspan Doctrine: Low Rates and Deregulation
Greenspan’s hallmark was a belief in the self-correcting nature of markets. Throughout the 1990s, he championed lower interest rates and advocated for minimal regulatory intervention. The result? The so-called ‘Great Moderation’—an era marked by low inflation, steady growth, and relative financial calm. Australian policymakers took note, with the RBA often mirroring Fed strategies to maintain currency stability and support economic expansion.
- Influence on Australia: The RBA adopted inflation targeting in the early 1990s, aligning with Greenspan-era policy orthodoxy.
- Financial Deregulation: Both the US and Australia moved to relax restrictions on banks, believing competition would benefit consumers.
However, the seeds of future instability were sown. Greenspan’s reluctance to intervene in asset bubbles—famously, his nonchalance during the dot-com boom—became a cautionary tale in the lead-up to the 2008 Global Financial Crisis (GFC).
Lessons from the GFC: Rethinking Risk and Oversight
By the time the GFC hit, Greenspan’s legacy was under scrutiny. Critics argued that his policies enabled excessive risk-taking and speculative lending. While Australia escaped the worst of the crisis, thanks in part to stronger banking regulations and a resource-fuelled economy, the aftershocks led to a global reappraisal of central bank responsibilities.
- Australian banks, while more conservative, were not immune to global liquidity shocks.
- The RBA introduced stricter oversight and macroprudential measures post-GFC, departing from Greenspan’s hands-off approach.
In 2025, the RBA’s more proactive stance—tightening lending standards, monitoring housing credit, and responding quickly to inflation—can be traced back to lessons learned from the Greenspan era.
Greenspan’s Legacy in a Digital Age
Today’s monetary landscape would be unrecognisable to Greenspan. Central banks, including the RBA, now grapple with digital currencies, climate risk, and rapid-fire market shifts. Yet his influence lingers:
- Communication: Greenspan’s cryptic style gave way to greater transparency—a hallmark of the RBA’s 2025 approach.
- Data Dependence: The emphasis on economic modelling and ‘wait-and-see’ decision-making remains central to RBA policy.
- Market Sensitivity: Greenspan’s belief in market signals continues to inform rate-setting, but with more caution about asset bubbles.
As Australia debates the role of AI, digital finance, and monetary stimulus, Greenspan’s tenure serves as both inspiration and warning. The central lesson: trust in markets must be balanced with vigilant oversight.
Conclusion
Alan Greenspan’s legacy is a blend of brilliance and blind spots. For Australian policymakers and investors, understanding his impact is crucial—especially as the RBA forges its own path through economic uncertainty. The ‘Maestro’ may have stepped off the stage, but his music still plays in the corridors of global finance.
