<i>Illustration: Rocco Fazzari</i>

Illustration: Rocco Fazzari

As the treasurer who's presided over the death sentence of the Australian car industry, Joe Hockey seems remarkably upbeat. There was no wringing of hands, wailing or gnashing of teeth in the treasurer's office this week. On the contrary: "I am more positive about Australia than I have ever been," he said in an interview with Fairfax Media.

How can this be? Bill Shorten called the announcement of Toyota's manufacturing shutdown "an economic catastrophe with a terrible human cost." Even Hockey's own leader, Tony Abbott, said that "every single one of us … is devastated."

Not quite everyone. Hockey is not showing advanced symptoms of devastation because the collapse of an uncompetitive, subsidised industry is entirely consistent with his view of the world and his vision for Australia.

Indeed, the Minister for Industry, Ian Macfarlane, tells me that "we thought we had a bit more time," before the announcement of the closure of Holden and Toyota. "But in the end it's only hardened our resolve."

Hardened their resolve to do what?

A pair of reporters from The Wall Street Journal interviewed Hockey this week. When they wrote it up, they thought it was worth telling their readers that he had a ceramic figurine of Winston Churchill in his office as well as one of Chairman Mao.

Interesting, perhaps, but it's what he's reading that tells you what's on his mind. The treasurer is halfway through Not for Turning, the authorised biography of Margaret Thatcher, Britain's longest-ruling prime minister of the 20th century.

She led the world in shrinking the sphere of government and enlarging the scope for markets, the forerunner of Ronald Reagan and Paul Keating, Roger Douglas and John Howard. Sure enough, it's her ideals that the new Treasurer serves, her words he evokes.

A quarter-century after the Iron Lady left office and a year after her death, Hockey sees himself as one of the leaders of an antipodean Thatcherite renaissance, a great return sweep of the ideological, political and policy pendulum.

In 2009 Kevin Rudd wrote an essay in The Monthly arguing that the global financial crisis had "called into question the prevailing neo-liberal economic orthodoxy of the past 30 years," which is also known as Thatcherism. The challenge for social democrats worldwide, he said, was "to save capitalism from itself."

Today, Hockey sets out his version of modern history: "Kevin Rudd said that government has to go back to the centre of activity in the wake of the global financial crisis," he says in his Fairfax interview.

"I think what happened was many governments were caught by surprise by the GFC, and then were looking for someone to blame, and they blamed capitalists, entrepreneurs. They blamed the private sector, especially given the number of countries that would bail out private sector organisations.

"So what we've got to do is reaffirm the principles that have alleviated poverty, that have empowered communities - which are the principles of capitalism, of enterprise, of freedom and those principles of enterprise rely heavily on less regulation, less tax and less government."

Macfarlane puts it this way: "If you don't create incentives, you don't get progress. I'm a capitalist at heart." Or as Abbott put it in his speech at Davos three weeks ago: "Profit is not a dirty word because success in business is something to be proud of."

These leading figures in the Abbott government don't think capitalism needs saving, only reaffirming. And there isn't much that is classically capitalist about the car companies.

The Productivity Commission estimates that total government support for the car industry over the past 15 years, counting cash handouts plus tariff protection, amounted to $30 billion. And it still couldn't turn a profit. To continue to subsidise this sector isn't industry, it's charity.

Hockey says that the feedback he's had from Abbott's Davos speech restating the essentials of capitalism has been remarkable: "Other countries, and CEOs in particular … are sort of like 'Thank God someone's saying the things that we know are important.'"

The Australian electorate seems to agree that classical capitalist principles should apply to the car industry. An Essential Media poll this week asked voters whether they approved of the government paying production subsidies to the car industry. Thirty-six per cent approved; 47 per cent did not.

Still, it's one thing to allow the collapse of a failed industry. It's quite another to generate new industries and new jobs. Especially at a moment when the mining boom is fading and the economy softening.

How can Hockey be so confident? One reason is precedent: "We've done it before, we can do it again," says the Treasurer.

He's right about that. The near-hysteria over the collapse of the car sector suggests amnesia in the opposition and much of the media. Australia stripped back its tariff wall in the 1980s and 90s, saw enormous job loss in manufacturing, yet went on to record its longest boom in recorded history.

With this growth phase at 22 years and counting, Australia is unique among the developed countries of the world. The Chicken Littles of today are as foolish as the Chicken Littles who foretold national collapse when the Hawke government began the rationalisation of the car industry in 1984. At that time, Australia was in a long, slow, genteel decline in relative living standards and unemployment was over 9 per cent.

Still, Hawke and Keating didn't just remove tariff protection; they conducted a much broader liberalisation of the economy. And that is what Hockey has in mind today too.

One thing seems pretty clear. Maintaining the status quo is a formula for stagnation. A key economic adviser to Hawke, the eminent economist Ross Garnaut, has called the years from 2000 to 2013 the Great Complacency.

If Australia chooses "business as usual", Garnaut wrote in his book Dog Days, its unprecedented run of uninterrupted growth will come to an end: "We will experience deep economic recession with high unemployment."

But Australia hasn't practised British Thatcherism or the American version, Reaganomics. It's pursued its own version, a fairer one. Hawke and Keating achieved smoothly the national restructuring that Thatcher achieved with blunt trauma.

When Thatcher died last year, her funeral was marred by bitter protests. Hawke and Keating are today hailed all round as heroes. There will be no angry demonstrations at their funerals. They achieved this largely because of the Accord, the grand partnership with the union movement that managed the economic change. Howard and Peter Costello also managed to continue economic renovation without social ruction and when they did overreach, with WorkChoices, they were summarily dismissed.

The Coalition under Abbott will not be writing a new Accord with the unions, but neither will it repeat Howard's miscalculation. Abbott and Hockey both speak of the need to retain social cohesion. And when Hockey talks about the "end of the age of entitlement," he also adds the rider that a government needs to take care of the most vulnerable.

Is this because of Australia's egalitarian ethos? It probably has more to do with the system of compulsory voting, or, more accurately, the system of compulsory attendance at a polling place - you aren't actually obliged to vote once your name's been noted. This system means that it's high-risk for any government to be too radical. To hold power, a government must appeal to the broad centre, not to the extremes.

But even today, with Australia's current Great Complacency unreformed, there is plenty of evidence that Australian entrepreneurialism can thrive. While national attention has been focused on the failed car companies, there has been scant attention to the companies that make vehicles profitably and without government subsidies.

There is at least as much to learn from the successes as from the failures. The Swedish truck maker AB Volvo has invested $25 million in a plant in Brisbane that assembles trucks, employs 500 workers, makes money and does not seek subsidies.

And in Sydney, the fast-growing Byron Group makes high-tech ambulances, many for export. Run by a former Toyota executive, it has also invested $25 million. It does $50 million in sales annually and $5 million in profit. No handouts involved.

The failure of the car companies is a commentary on those firms and their arrangements; it's not a verdict on Australia. Says Macfarlane: "You can go literally anywhere in Australia and find extraordinary technological success stories at the leading edge, employing 20 to 100 people."

His ambition is to stimulate more, drawing universities and the CSIRO more directly into industrial innovation, making innovation more attractive to superannuation investors, and encouraging firms to exploit free trade agreements to sell more to the world.

And despite his treasurer's Thatcherite rhetoric, his program to cut subsidies and to privatise assets, the government does not have a scorched-earth approach to government involvement with industry.

Macfarlane sees a key role for the government as a catalyst, providing "seed capital for highly innovative industries."

He cites the example of how the federal and Victorian governments gave a total $25 million to a project to develop fibre composite materials for Boeing in Australia. It now has $3 billion in orders for the fibre composite products that the project developed for aircraft wing components.

Says Hockey: "Good policy is good politics at the end of the day. You've got have something, when we go to the next election we have to have a story to tell and something to promise.

"We are not going to be the Howard-Costello government, or the Hawke-Keating government in 12 months. We can't have a reform program that is immediate. And we should not be judged by the last year or the legacy of other governments.

"We have to forge our own destiny and our own destiny has to be focused on the fundamental policies that will drive a stronger economy and a more cohesive society."

This combination - economic liberalisation with an eye to social cohesion - might be called Thatcherite economics with Australian characteristics.

Promises Hockey: "It won't be a do-nothing government."