Milton Friedman is a name that echoes across the halls of economic policy, from Wall Street to Canberra. While he never set foot in Parliament, his ideas have profoundly influenced how Australia manages money, inflation, and the broader economy. As we move through 2025, Friedman’s free-market philosophies are still the subject of lively debate among policymakers, investors, and everyday Australians alike.
Who Was Milton Friedman—and Why Does He Matter in 2025?
Born in Brooklyn in 1912, Milton Friedman became one of the 20th century’s most influential economists. His groundbreaking work on monetary theory, consumption, and the limits of government intervention won him the Nobel Prize in 1976. But why does an American economist matter so much to Australia in 2025?
- Monetary Policy: Friedman’s advocacy for controlling the money supply, rather than relying on fiscal stimulus, helped inspire the Reserve Bank of Australia’s (RBA) inflation-targeting regime—still the backbone of Australian monetary policy today.
- Floating the Dollar: The Hawke government’s decision to float the Australian dollar in 1983 was rooted in Friedman’s belief in free markets and flexible exchange rates.
- Current Debates: As Australia faces persistent inflation and housing affordability crises in 2025, politicians and economists regularly reference (and challenge) Friedman’s theories.
Friedman’s Fingerprints on Modern Australian Finance
Australia’s economic landscape in 2025 owes much to Friedman’s ideas—both those adopted and those fiercely debated. Here’s how his legacy shows up in the headlines and policies shaping your finances today:
- Inflation Targeting: The RBA continues to target a 2–3% inflation band, a strategy rooted in Friedman’s dictum that “inflation is always and everywhere a monetary phenomenon.” This approach has come under scrutiny amid recent spikes in global energy prices and supply chain disruptions.
- Interest Rate Policy: As the RBA raised the cash rate to 4.35% in early 2025, debates raged over whether monetary tightening alone can tame inflation without triggering recession—echoing Friedman’s warnings about the lag between policy moves and economic effects.
- Privatisation and Deregulation: From banking to telecommunications, successive Australian governments have pursued privatisation and deregulation since the 1980s, citing Friedman’s faith in market efficiency. Critics argue that this has contributed to rising inequality and affordability challenges.
How Australians Experience Friedman’s Legacy in Daily Life
Friedman’s influence isn’t just academic. His ideas shape everyday realities for Australians, sometimes in ways that spark controversy:
- Mortgage Holders: The RBA’s response to inflation—guided by Friedman’s monetary theories—directly affects home loan rates, monthly repayments, and property prices. In 2025, many borrowers are feeling the pinch as variable rates climb.
- Superannuation: The shift toward self-managed and market-based super funds reflects Friedman’s belief in individual choice and responsibility, but exposes retirees to market volatility.
- Welfare Policy: Recent debates about introducing a Universal Basic Income or negative income tax (both ideas with roots in Friedman’s work) highlight the ongoing tension between social safety nets and free-market principles.
Is Friedman Still Relevant? The Debate Continues
While some Australian economists argue that Friedman’s ideas are too rigid for a complex, globalised economy, others see his warnings about excessive government spending and the dangers of inflation as more relevant than ever. The 2025 Federal Budget includes renewed calls for fiscal discipline, even as the government grapples with demands for cost-of-living relief and climate action spending.
Whatever your view, it’s clear that Milton Friedman’s influence on Australian finance remains profound. His theories frame the choices facing policymakers and shape the financial realities of millions of Australians every day.
