Renowned Italian economist and author Loretta Napoleoni says the Australian model of economic development could provide a new framework for Europe to follow.
Professor Napoleoni, the author of Author of Maonomics: Why Chinese communists make better capitalists than we do is in Sydney for the city's annual Writer's Festival.
Professor Napoleoni told ninemsn that Australia's mining tax and strong financial regulation were hallmarks of an alternative development model to the Neoliberal-inspired programs that have dominated the US and Europe.
She said unlike other nations Australia didn't wait for the GFC to toughen financial regulations, but set up the Australian Prudential Regulatory Authority as an industry watchdog in the wake of the Asian crisis of the late 90s.
The result was a strong banking sector that avoided the fate of its European and American counterparts because Australia did not deregulate as much as the rest of the western world.
"Could Australia be a model to imitate or to inspire the new model for Europe? Yes, I think very much so," Professor Napoleoni said.
The mining tax was a good example of a flexible policy that allowed the industry to expand while attempting to spread the benefits of the resources boom, she said.
"You can't rely entirely on the trickle-down effect. This wealth needs to be distributed and migrate to other areas of the economy. You need government intervention and that's why taxation is fundamental."
However, she doesn’t support all the decisions the Gillard government is making.
Professor Napoleoni said western governments had been too ideologically rigid in their responses to the GFC and she saw aspects of the federal government's recent Budget in the same light.
The author said she did not support the move to slash over $40 billion in spending to return the budget to surplus.
"I disagree, I wouldn't have done it," Professor Napoleoni said.
"But, then of course, they probably did it for political reasons because the Opposition is putting so much pressure upon them.
This is an argument supported by many prominent Australian economists.
Former Reserve Bank Governor and Treasury Secretary Bernie Fraser told the ABC's 7.30 that he thought the decision was a "dud".
"This is another attempt to try to rationalise what is really a pretty poor political commitment to deliver a budget surplus next year irrespective of the economic circumstances," Mr Fraser said.
"I think that's a dud policy."
Professor Napoleoni said she would have recommended keeping the budget in the red for at least another year.
"In moments like these you should expand the economy because there is only one sector that is doing very well. The rest of the country is actually in recession."
The nation's retailers and manufacturers have essentially made the same argument as they put pressure on the Reserve to ease interest rates.
On Australia's relationship with China Napoleoni said apprehension to Chinese investment, particularly in agriculture, could be explained as a fear of "the great unknown".
"It's almost like the Chinese are extra-terrestrials… from a place we don’t know, a place we don't understand and they're coming to get us," Napoleoni said.
"But that's totally wrong. The Chinese want to do business. So let's do business in a way whereby you protect your community, because they are protecting their community and that's the difference between them and us."
She said the Neoliberal model adhered to in the west, has elevated the needs of the market above the needs of people.
Her latest book Maonomics analyses the Chinese economy's robust period of growth that began with Deng Xiaoping's liberalisation policies in the late 1970s and continues to this day.
The professor argues that China became a successful global player by adopting a flexible system that blends socialism with capitalism.
She is a professor of economics, columnist, political commentator and author of a number of bestselling books including Rogue Economics and Terror Incorporated.