When globalisation loomed on the horizon in the late 20th century, governments around the world faced a choice: open the economy fully or manage the transition strategically.

Some nations, like the United States and the United Kingdom, chose the former, exposing entire communities to rapid economic change. Australia, under the stewardship of the Hawke and Keating Governments, chose a more tempered path.

Their economic reforms were far from painless, but they were purposeful. Hawke and Keating understood that modernising the economy through trade liberalisation, competition policy and industrial relations reform was inevitable, and that it would come at a cost to the industrial working class. They also recognised that political stability required cushioning that blow. Through investments in education, universal healthcare and the social wage compact, their government constructed the social infrastructure that helped Australia avoid the populist ruptures now dominating politics across Europe, the UK, and the US.

Unlike other governments that left market forces unchecked, Australia took deliberate steps to balance economic transformation with social responsibility. That decision didn’t just prevent widespread unrest; it helped preserve a sense of national cohesion. And it offers a powerful lesson for what lies ahead.

Today, Australia stands at another inflection point. This time, the disruptor is artificial intelligence. And its pace and reach will likely surpass that of globalisation.

Where globalisation hollowed out blue-collar manufacturing jobs, AI is set to reshape white-collar professions. Legal services, media, finance, education, marketing, customer service and even software engineering are vulnerable to significant disruption. These roles form the backbone of Australia’s knowledge economy, the very foundation of the post-industrial future we embraced as the factories shut down.

Cities like Sydney and Melbourne have thrived in this transformation. Knowledge-based jobs have clustered in inner-city electorates such as Sydney, Grayndler, Kooyong and Macnamara. Sectors like communications, IT, finance, education, research and design have driven economic growth and attracted a young, university-educated workforce.

In contrast, outer suburbs and regional centres such as Newcastle, Broadmeadows, and Geelong experienced a different trajectory. Stable industrial jobs were replaced by insecure, lower-paid service work. This divergence reshaped not just local economies, but also political allegiances.

Now, AI is beginning to flip that script. The communities that once benefitted most from the global knowledge economy are now on the frontline of automation. Electorates like Bennelong, Parramatta, Wills and Brisbane are home to large numbers of Millennials and Gen Z professionals in highly exposed fields: legal clerks, junior analysts, digital marketers, copywriters, researchers and customer service agents.

Unlike previous waves of disruption, AI is not targeting traditional manual labour. It is targeting cognitive work, the foundation of middle-class economic security. The irony is unmistakable: workers who once appeared insulated from the impacts of globalisation may now find themselves even more vulnerable than the manual workers who managed to adapt and endure.

Jobs that rely on hands-on labour, in construction, logistics, healthcare, aged care and maintenance are far less susceptible in the near term. These roles require physical presence, contextual judgment, and human interaction, areas where AI continues to fall short. But occupations built around information processing and pattern recognition, the very domains AI excels at, are increasingly at risk.

The implications are profound. Economically, we may see a downward shift in wages and a surge in professional displacement. Politically, the consequences could be just as disruptive. The disillusionment we saw after globalisation, fuelled by rising inequality and a sense of betrayal, could return in new and more volatile forms.

This is where history must repeat itself and where the Albanese Government must follow the legacy of its political forebears.

Australia urgently needs a national AI strategy. But it must go beyond innovation hubs, university research grants and productivity targets. It must grapple directly with labour market consequences. That includes:

• Targeted retraining and workforce transition programs for at-risk professional cohorts;
• A reformed education system that prioritises adaptability, ethics, and critical thinking over narrow technical skills;
• Strategic investment in human-centric industries, aged care, mental health, early education and green infrastructure;
• Regulatory oversight to ensure AI deployment aligns with public benefit, not just private profit; and
• Tax reform to ensure that the gains from automation are reinvested in communities, not simply extracted from them.

Crucially, the response must be proactive. Waiting until the damage is visible in the data will be far too late. Once communities begin to feel the loss of career pathways, the erosion of income security, and the rise of underemployment, the political fallout will already be underway.

Reform will not be easy, especially given the widespread assumption that AI will mostly affect people who can adapt. In reality, those who feel most secure today, young professionals in cosmopolitan cities, may be among the hardest hit. They have built their lives around intellectual labour and the belief that their education, experience and networks would protect them from the economic marginalisation faced by previous generations.

Governments that fail to act decisively risk ushering in a two-tiered economy: a shrinking elite of highly specialised workers thriving in AI-augmented industries, and a much larger group of professionals facing lower wages, less security and downward mobility. The social contract that has underpinned post-industrial Australia will not hold, especially against the backdrop of rising housing costs and structural economic pressure already being felt by younger Australians.

The parallels with globalisation are clear. So is the danger of inaction. Australia once made the choice to manage economic reform with a strong safety net and a clear political vision. That legacy must be honoured with a renewed wave of policy ambition.

This is not a call to resist technology. It is a call to manage its consequences. In the age of automation, leadership will not be defined by who adopts AI the fastest, but by who protects their people the best.

A version of this article appeared first in the Australian Financial Review, 30 June 2025

The views expressed in this article may or may not reflect those of Pearls and Irritations.