For decades, Australia’s financial landscape has been shaped by mainstream economic theories—think rational markets, efficient equilibrium, and the invisible hand. But in 2025, a wave of fresh thinking is gaining momentum: heterodox economics. As the nation grapples with cost-of-living pressures, climate transition, and shifting global dynamics, alternative economic schools are capturing attention from policymakers, investors, and everyday Australians.
What is Heterodox Economics? Breaking the Mould
Heterodox economics is a broad label for approaches that challenge or complement mainstream (neoclassical) economic thought. Rather than assuming all actors are rational or markets always self-correct, heterodox economists draw on diverse traditions—like post-Keynesian, institutional, Marxist, feminist, and ecological economics—to explain real-world phenomena.
- Post-Keynesian economics questions the reliability of markets and highlights the role of uncertainty and government intervention.
- Institutional economics explores how laws, norms, and power shape economic outcomes.
- Ecological economics argues that the economy must operate within environmental limits.
- Feminist economics focuses on gender, unpaid labour, and inequality in economic analysis.
In 2025, heterodox economics is not just an academic curiosity—it’s influencing debate on everything from Australia’s housing crisis to the energy transition.
Heterodox Economics in Action: Policy and Markets in 2025
With mainstream models under fire for failing to predict or prevent crises—from the 2008 GFC to the COVID-19 shock and now inflationary aftershocks—heterodox voices are gaining institutional ground. Here’s how:
- RBA’s Policy Review: Following the 2023 Reserve Bank of Australia review, the central bank has expanded its analytical toolkit. New hires include economists trained in behavioural, post-Keynesian, and ecological economics, reflecting a recognition that monetary policy must grapple with uncertainty and distributional impacts.
- Cost-of-Living and Housing: In 2025, the Australian Treasury is trialling models from institutional economics to better understand rental affordability and the impact of speculative investment on home prices—areas where traditional supply-demand logic has fallen short.
- Climate and Energy Transition: Heterodox approaches, especially ecological economics, underpin many of the government’s 2025 green investment initiatives. The National Net Zero Authority is using systems-based modelling to evaluate the true costs and benefits of Australia’s decarbonisation pathways, taking social and environmental factors into account.
For example, the Queensland government’s 2025 job transition package for coal communities draws heavily from heterodox labour market theory, prioritising job guarantees and local investment over market-based retraining schemes.
Why Investors and Households Should Pay Attention
Heterodox economics is not just for policymakers—it’s reshaping how investors, businesses, and households view financial risks and opportunities in 2025:
- Rethinking Risk: Ecological and institutional economists warn that climate risk, supply chain fragility, and social unrest are underpriced by traditional models. Australian super funds are incorporating these insights into long-term portfolio strategies, especially as 2025’s extreme weather and global volatility persist.
- New Value Metrics: Beyond profit, investors are tracking metrics like social cohesion, ecosystem health, and gender equity—areas championed by heterodox thinkers. Australia’s 2025 Social Impact Investment Framework, launched by the federal government, draws on these ideas to guide both public and private capital.
- Household Decisions: Behavioural and feminist economics are influencing how banks and fintechs design products for diverse Australians, from flexible mortgage features for single-parent families to budgeting apps that account for unpaid caregiving work.
Ultimately, heterodox economics is helping Australians see that financial wellbeing isn’t just about GDP growth or market returns—it’s about resilience, fairness, and sustainability in a rapidly changing world.
Where Does Heterodox Economics Go From Here?
In 2025, heterodox economics is no longer on the fringes. It’s in the policy toolkit, the boardroom, and the household budget spreadsheet. The next frontier? Integrating these diverse perspectives to build a more robust, inclusive, and adaptive financial system for Australia’s future.
