22 Government–business relations

Introduction

The relationship^[1] between government and business is best understood through the actions, incentives, and capabilities of the actors who inhabit and shape these interactions. These actors, often referred to as stakeholders, determine the characteristics of these public/private relationships through a consideration of how their values, motivations and agendas align or conflict. The public/private sectors do not exist in a vacuum as their actions mutually inform the character of their social impact. Government establishes the rules, which produce stable environments for productive markets; while business provides the jobs, investments, and innovation that governments need to deliver services.^[2] Where governments are concerned, business stakeholders are essential partners in policy design and delivery, capable of generating capital, disseminating technology, and translating public goals into investable projects. Concurrently business relies on government to create and enforce the rules that determine market trust, balancing power asymmetries between organisations and consumers, creating the parameters for market equity, and sustaining transparent governance. Within this relationship success and growth are constantly negotiated, and competition is a result of productivity and innovation. As such, understanding this interaction is critical for ethical and sustainable growth.^[3]

This interdependence is not without complexity or contentiousness as both governments and businesses face competing demands. This is due, in part, to the need to balance multiple objectives and interests that at times are unaligned. A government for example, may seek to reduce carbon emissions through stricter regulations, which would potentially increase costs for businesses. While business may support the underlying aim and its motivation, they may also seek to protect their profitability and competitiveness. To that end, the business must engage with government to negotiate a balance between environmental targets and their economic viability. Thus, at the core of the relationship between government and business is an evolving knowledge exchange, which is underpinned by compromise and often the (re)negotiation of practice and priorities. In addition, this complexity can enhance productivity by revealing competing priorities, creating forums for information, and creating institutional networks and coalitions, that when co-created, generate responsiveness and market performance.

In Australia, government-business relations involve a wide network of stakeholders across federal, state, and local levels, as well as amongst the private sector. Each aims to mutually reinforce and support the development of cohesive public/private partnerships capable of achieving organisational goals, while also using resources efficiently by avoiding practices such as duplication, and overlap. At a federal level, Cabinet and national regulators, such as the Australian Securities and Investments Commission (ASIC), and the Australian Competition and Consumer Commission (ACCC) are critical for establishing a transparent market economy. At the state level, departments such as Queensland’s Department of State Development, Infrastructure and Planning are responsible for engaging with businesses to develop projects that benefit citizens, while meeting the needs of the corporation. Managing the government-business relationship also requires input from industry associations, civil society organisations, trade unions, investors and research bodies. These actors are critical for shaping policy, innovation and regulatory agendas. Notably, the work and agendas of business and government have become so intertwined, that many organisations, particularly multinational corporations, incorporate into their structures dedicated government relations personnel and functions to facilitate meaningful government consultation.^[4] Similarly, public agencies increasingly create avenues for the solicitation of external stakeholder ideas when designing policy reforms. Significant for the study of government-business relations is the recognition that these actors do not merely operate within pre-established rules and regulations, they co-create and constantly (re)make the norms, and capacities that structure markets and public authority, through their interactions and the production of shared knowledges.

Globalisation has expanded the forums where these actors operate, creating a complex network of systems for businesses and governments to negotiate, including domestic legislatures, transnational standards and supply-chain governance.^[5] However, authority and political legitimacy remain with the nation-state. Systems and structures such as laws, courts, budgets and compliances anchor expectations, mediate interactions, and determine legitimacy.^[6] Despite this, the relationship is inherently dynamic, responsive also to changes in societal values and technological advancement. The situatedness of this relationship with societies ensures that as values and capacities shift so do the nature of interactions which inevitably produces developments in co-regulation, public-private partnerships, advisory councils, impact assessments, data sharing protocols, and norms. This chapter provides an overview of the relationship between government and business, looking at the evolution of ideological approaches, different models of government-business relations, approaches to regulation, and the emergence of environmental, social and governance (ESG) considerations as more central to business practices. It demonstrates the relational nature of interactions between governments (the public sector) and business (the private sector).

The state and the market

To understand government and business relations, we must start with differentiating between ‘the state’ and ‘the market’. ‘The state’, in this context, does not mean a state like Queensland, or New South Wales. Rather, the state is a political entity that governs a region and regulates that region’s society. The market can mean many different things, such as a physical space where goods and services are bought and sold (e.g. a shopping mall) or even a virtual space where the sale and purchase of goods and services is conducted completely online (e.g. eBay). But in the context of government and business relations, ‘the market’ is essentially the incentive mechanism for the production and distribution of property, goods and services and, through ‘competitive interactions of businesses and consumers’, for the creation and dispersion of wealth.^[7]

Both the state and the market engage in distribution of resources, motivated by power, but are differentiated in two key ways. First, the state derives its power from political legitimacy, which in liberal democracies like Australia is from the consent of the governed, i.e. the people, and the Australian Constitution. The market derives its power from its capacity to generate and distribute wealth. Second, while the state is accountable to its voters or supporters, market actors like corporations are accountable to shareholders and private owners. These differences in the source of power and accountability dictate often differing perspectives, priorities, and responsibilities within society, and are particularly evident when government and business clash.

Economic activity in capitalist systems occurs across three interrelated sectors: the for-profit private sector, government and the public sector, and the civil society or not-for-profit sector. These sectors overlap in practice, but they can be delineated by their legal status and sources of revenue. Government agencies are created through Acts of Parliament and funded mainly by taxes. Private businesses are formed under corporate laws, rely predominantly on private investment, and generate income through goods and services. Civil society organisations rely on donations and grants and provide charitable or welfare services that the other two sectors may be unwilling or unable to supply. In practice, the distinction between these sectors is porous, and civil society often pursue partnerships or financial support from business and government to fulfil their functions.

Managing the market

The state bears the responsibility for regulating markets. Although markets are often perceived as being “self-regulating”, government intervention is central for maintaining fair competition, preventing harmful outcomes (such as environmental damage or human rights abuses), and providing support for people unable to participate fully in the labour market. How governments regulate markets reflects broader ideological beliefs about the character of the relationship between the state and the economy. Over the past century, government-business relations have evolved to reflect changing values, moving away from classical liberalism towards embedded liberalism (Keynesianism), and then to today’s prioritising of Neoliberal principles.

With an emphasis on individual freedom, property rights and entrepreneurship, classical liberalism dominated during the 18th and 19th centuries. Markets were seen as key drivers of resource allocation and the state was perceived as having a minimal role, largely due to the belief that markets were self-organising and self-correcting. Under this view of the market, the first wave of globalisation thrived, and free-trade flourished, due to European imperial expansion and industrialisation. Yet external factors such as the First World War and the Great Depression constrained the continuation of market expansion, making it impossible for governments to maintain the ‘hands-off’ approach of low taxes and spending that had come to define their fiscal policies.

The aftermath of these crises prompted a rethinking of economic policy, crystallized in Keynesian economics by John Maynard Keynes. Keynes challenged the assumption that markets will self-correct, arguing instead that unregulated markets are volatile, and advocating for increased public spending and investment to compensate for shortfalls in private spending. This interventionist approach, called ‘embedded liberalism’ or ‘Keynesianism’ was widely adopted following the Second World War. For example, in the United States of America, President Franklin Delano Roosevelt introduced a ‘New Deal’ expanding government control and spending through public works and financial regulations, to stabilise the economy.

Embedded liberalism can be viewed as a compromise intended to retain the benefits of free markets, while allowing governments to intervene to ensure economic and social stability, and was supported internationally by institutions like the Bretton Woods System, which established the World Bank, the International Monetary Fund (IMF), and the General Agreement on Trade and Tariffs (GATT). Embedded liberalism led to three decades of economic growth, rising wages, and expanding global trade known as the ‘long boom’. In the 1970s, however, the long boom came to an end, amidst political turmoil from the Cold War and the Vietnam War. At this time, several nation-states faced a problem of ‘stagflation’, when economic growth becomes stagnant while inflation rises^[8].

Thus, neoliberalism became the dominant economic paradigm from the 1980s onwards. Neoliberalism embraces the classic liberal approach of favouring minimal government intervention in the free market, along with the deregulation of labour, privatisation of state-owned enterprises, and removal of much financial regulation. In the context of contemporary globalisation, neoliberalism also facilitated the rise of multinational corporations, and the globalisation of production, with complex supply chains emerging.

While neoliberalism brought increased efficiency, economic growth, and significant global integration of markets, it also generated significant wealth inequality^[9]. Economic policies including tax cuts for corporations and wealthy individuals fuelled a growing political discontent, evident in protests at the World Trade Organisation meeting in Seattle in 1999. The Global Financial Crisis of 2008 demonstrated the significant pitfalls of deregulating financial markets, opening the door for the sub-prime mortgage crisis in the USA that crashed global markets. The Occupy Wall Street protest movement called for greater accountability for the corporate sector, and improved regulation of the finance sector^[10].

Political leaders in nation-states including Australia, France, and the United Kingdom called for an end to the era of unrestrained capitalism, with some introducing stronger finance sector regulation to prevent a similar collapse^[11]. The Australian Prime Minister at the time, Kevin Rudd, wrote:

The time has come, off the back of the current crisis, to proclaim that the great neo-liberal experiment of the past 30 years has failed, that the emperor has no clothes. Neo-liberalism, and the free-market fundamentalism it has produced, has been revealed as little more than personal greed dressed up as an economic philosophy.^[12]

In Australia during the 2008–10 Global Financial Crisis, the Rudd government introduced a series of industry policies designed to stimulate the economy (or ‘fiscal stimuli’). A green car initiative was introduced to subsidise the automotive manufacturing industry to develop fuel-efficient vehicles, enabling the industry to compete internationally by using Australia’s highly skilled workforce to develop sophisticated technologies. In addition, funding was provided to schools for building halls and fences, and subsidies were provided for householders to install roof insulation to stimulate these industries. In addition, one-off cash payments of approximately $900 were given to low-income Australians to stimulate the retail sector. While not considered protectionism per se, this level of government intervention in the economy challenged the orthodoxy of the previous decades’ neoliberalism. More recently, the current Australian Federal Treasurer Jim Chalmers has reiterated the need to move away from neoliberalism, calling for ‘values-based capitalism’^[13].

Despite recognition from political leaders that neoliberalism ‘has failed’, this approach to government-business relations remained dominant throughout the 2010s, though has been challenged by two further significant political events. First, the Covid-19 global health pandemic highlighted the vulnerability of nation-states to economic interdependence through neoliberal globalisation. While Australia may be relatively self-sufficient when it comes to food and energy, supply chain disruptions in the context of the pandemic highlighted significant concerns with securing other necessary goods such as medicines and personal protective equipment (PPE). Second, the interdependence of our markets has been further challenged by political developments in recent years. In 2025, decisions by the Trump administration to impose significant tariffs on trading partners and traditional allies, including Australia, has sparked a rethink of how trade policy should be pursued, and how this intersects with diplomacy. Speaking at the World Economic Forum in January 2026, Canadian Prime Minister Mark Carney described the current state of the world order as a ‘rupture’, necessitating action from middle powers such as Canada and Australia, to secure their economic stability. Carney said:

Over the past two decades, a series of crises in finance, health, energy, and geopolitics have laid bare the risks of extreme global integration. But more recently, great powers have begun using economic integration as weapons, tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited … the middle powers must act together, because if we’re not at the table, we’re on the menu.^[14]

While governments have been reluctant to fundamentally shift their approach to government-business relations away from neoliberalism, it is yet unclear whether the current ‘rupture’ will lead governments back towards classic or embedded liberalism, or towards a new economic paradigm.

Models of Government-Business Relations

Government Business Relations (GBR) is influenced heavily by different political ideologies, histories, and cultures, and as a result there is no single model to explain the relationship between government and business in capitalist economies. However, the different ways that capitalism is practised within nation-states is often referred to as ‘varieties of capitalism’.^[15] These differences stem from the intersection of economic and political institutions within nation-states, where institutions are defined as the formal and informal values, rules, routines and procedures that influence behaviour through what is considered by a given society to be ‘appropriate’.^[16] Hall and Soskice primarily differentiate between two main types of capitalism: liberal market economies and co-ordinated market economies.

In liberal market economies, government-business relations fall into a Regulatory, or Adversarial Model. This model is shaped by a neoliberal ideology which favours a hands-off approach. Government establishes a basic legal framework under which businesses must operate, and regulates to ensure competition, and prevent negative externalities to protect the public and the environment. In this context, business often resists government interference or regulation, which is why this model is sometimes referred to as the Adversarial model. Australia and the United States of America are examples of a Regulatory Model of GBR.

In a coordinated market economy, government-business relations operate under a Cooperative or Corporatist model where business and government work in partnership. In this model, a tripartite partnership between government, capital (i.e. business) and labour (i.e. the workforce) guides economic decision-making, with the priority of economic stability. Germany and Sweden are examples of a Cooperative Model of GBR.

These two models do not encapsulate every nation-state’s approach to government-business relations. For instance, a third model of GBR can be termed the ‘developmental state’ in which governments take a coordinated approach, but decision-making is not the result of compromise. Instead, capital and labour are largely seen as tools to achieve the aims of government. Both Japan and China have elements of this approach in their government-business relations^[17].

Government-business relations models in Australia

The current model of government-business relations in Australia is an adversarial, or regulatory model. However, at different times since colonial settlement Australia has also reflected aspects of the developmental and cooperative models.

From the 1800s through to the 1960s, Australia’s model of GBR could more accurately be described as ‘developmental’ with a highly interventionist state, and policy of trade protectionism, particularly for the primary industries of wool and wheat. As Australia developed secondary industries in textiles, clothing and footwear and automotive manufacturing, these were also protected by tariffs (government charges that increase the cost of cheaper, imported goods) and quotas (government-imposed limits on the number of goods imported). This approach to protecting domestic industries from international competition is known as barrier protectionism. Protectionism was a major form of industry policy in Australia until the 1970s and 1980s, at which time Australia’s economy, following international trends, was increasingly the subject of trade liberalisation and competition reform.

The Australian government in the 1980s, led by Bob Hawke and Paul Keating, attempted to establish a more cooperative model by building a social safety net through higher spender on education and health (especially through the establishment of Medicare), and introducing the Prices and Incomes Accord. The Accord was designed to achieve a tripartite agreement between government, capital (i.e. businesses) and labour (i.e. workforces represented by trade unions). However, ultimately unions and businesses were not able to come to an agreement, and the cooperative model did not last.

During this era, protectionist policies also began to end, due to concerns that protectionism provided little incentive to innovate, and keep prices low. This meant that tariffs and quotas were reduced or removed and domestic industries, and the textile, clothing and footwear and automotive manufacturing industries faced increasing international competition. By the second decade of the 21st century, cheaper labour costs overseas meant that Australian manufacturing continued to decline as a result of the end of protectionism. For example, the automotive industry in Australia is often highlighted as a victim trade liberalisation under neoliberalism, with Ford Australia closing in October 2016, and Holden and Toyota factories in Australia closing in 2017.

While neoliberalism has been the dominant economic paradigm within Australia for the past three decades, the Australian government led by Anthony Albanese has demonstrated a move towards policies that retain an ethos of liberalism and free enterprise, but with a focus on reducing Australia’s vulnerabilities through building resilience, rather than engaging in protectionism. The Future Made in Australia policy, announced in 2024, is a core example of this approach, as it aims to boost domestic manufacturing and investment, particularly in ‘green’ and sustainable industries. Policies such as this combine with government regulation to set the framework through which business operates, with government using both incentives and threats to achieve compliance. In the next section, we examine how the Australian government regulates business.

Government approaches to regulation

Regulation can be understood through three main perspectives: regulation as state intervention, regulation as governance, and regulation as social control. The first, regulation as state intervention is a traditional view, which sees regulation as government-imposed rules that businesses must follow, often referred to as a command-and-control model. Here, the government sets standards (commands) and enforced penalties for non-compliance (control). The clear definitional parameters which articulate unacceptable behaviour, as well as legally backed performance standards are clear strengths of this approach. However, its tendency to become overly complex, difficult to implement, and high vulnerability to regulatory capture, where regulators protect industry interests over those of the public are potential challenges for this regulatory lens. Under this model of regulation government has assumes a high level of responsibility and ownership of industry.

The second approach, regulation as governance views the state as occupying an oversight role, rather than the direct provision of services. Under this model, the state evolves from the service provided (welfare state) to a regulator supervising businesses responsible for service delivery. Industries such as telecommunications, electricity, gas and water, which in Australia were once government owned, experienced a shift to this form of governance during the 1990s, bringing about an era of privatisation. When privatisation occurs, the state takes a ‘back seat’ on service operation, and prioritises instead the establishment of rules to ensure fairness, competition, accountability and growth in the market. The third view is the broadest and recognises that regulation exists outside of the state and encompasses all mechanisms of influence and control originating from the state or otherwise. Regulation scholars began referring to a ‘regulatory society’ after observing the increase of non-state actors regulating organisations.^[18] They argue that regulation might be conceptualised in a broader sense to better capture the complexity, fragmentation, autonomy, interdependence, and blurred boundaries between the public and private sphere.^[19] These changes in governance led to the concept of ‘decentred regulation’, whereby regulation is not tied to the government and rather diffused throughout society.^[20] Consumer boycotts and buycotts, or shareholder activism on social and environmental issues, could be understood as forms of decentred regulation, with individuals and collectives regulating market actors through market mechanisms.

Aligning with decentred regulation, the concept of regulatory capitalism helps us to understand regulation in the context of the changing nature of capitalism and its indivisible relationship to markets, society, and the state.^[21] There are two distinguishing features of regulatory capitalism.^[22] First, that capitalism privileges businesses over governments as the providers of goods and services. As a result, businesses have a responsibility to meet the values and goals set out by the state and society and do so through self-regulation. Second, regulation is networked in the sense that various stakeholders (including civil society, industry, consumer groups, and NGOs) govern markets (e.g. certification programs, multi-stakeholder initiatives, industry standards). So, while in the past we have seen the Australian government have total ownership and control of entire industries (e.g. post, telecommunications), the state has predominately stepped into a ‘steering’ position, where businesses and other actors are essentially doing the ‘rowing’ by being made responsible for their own behaviour and the provision of good and services (via privatisation of the market).The trend towards decentred regulation in countries like Australia has also seen a trend towards adopting transparency or disclosure regulations designed to encourage corporations to reflect on the targeted behaviour and determine whether that behaviour would be acceptable to external stakeholders (e.g. consumers, investors).^[23] The expectation is that mandatory reporting will prompt self-regulation to address unacceptable behaviour and ensure/maintain good public standing.^[24] However, the effectiveness of disclosure regulation remains a subject of debate.^[25] For example, studies on the Australian Modern Slavery Act 2018 (Cth), a disclosure regulation requiring companies to disclose what they doing to address exploitation in their supply chains, found that corporate responses have been weak and superficial,^[26] highlighting the failure of the market to regulate itself to prevent negative externalities.

Interactions and battles between government and business

Jacoby^[27] has listed a variety of ways that government–business interactions occur in practice. Governments may attempt to stabilise the economic environment for businesses; subsidise some industries; promote business abroad; finance small and minority firms; purchase military hardware and other products from businesses; enter into joint or mixed ventures with businesses; tax businesses and make businesses tax collectors (such as the current arrangements for the Goods and Services Tax); regulate particular functions of businesses; engage in joint management of public utilities (such as ActewAGL); and sell postal services, power, government publications, police and fire protection, and many other commodities and services. Businesses, on the other hand, may consult with government informally or individually, or formally and collectively, through lobby groups such as the Business Council of Australia or through specialist lobbying firms; support political candidates financially or in other ways; or publicly criticise governments in an effort to influence the policy agenda. Businesses may also engage in corporate political activity by launching campaigns against government policies through advertising and other forms of public appeal.

As the name implies, an adversarial model of government-business relations often results in an adversarial relationship between government and business. As governments seek to regulate, business may resist. Business will also seek to influence government policy on issues that will impact business operations. Scholarly research has contributed to our understanding of how governments and businesses interact in an adversarial context. Fuchs^[28] adapts Lukes’ concept of the three faces of power to identify three faces, or facets, power that both government and business can wield. The first is instrumental power, where one actor is able to get another actor to do something which they would otherwise not do. For example, governments can wield instrumental power over business by introducing legislation to force them to pay higher taxes on their profits. The second is structural power, where socio-economic and organizational structures limit policy options. For example, the importance of the mining industry to Australia’s economy gives that industry outsized power and influence in relation to some smaller industries. The third is discursive power, where norms and ideas shape the framing of political interests. Lukes describes discursive power as the ‘supreme exercise of power’, as it will ‘secure their compliance by controlling their thoughts and desires’.^[29]

Business frequently attempts to influence government to secure favourable regulatory outcomes. A key example of lobbying and corporate political activity to influence both government policy and public discourse has been the mining industry’s response to attempts by various governments over the last twenty years to secure higher tax revenue from the mineral resources mined in Australia. Most notably, in 2010, the Australian government led by Kevin Rudd tried to introduce a Resource Super Profit Tax (RSPT) to tax the profits of mining companies at 40 per cent. Mining industry interest groups, primarily the Minerals Council of Australia, spent a reported $22 million over six weeks on advertising to criticise the proposal. The mining industry was ultimately successful in convincing a large number of voters that the proposal would damage employment and economic growth, leading to the Bill’s abandonment and Prime Minister Rudd’s resignation following intense pressure.^[30] More recently, in 2025, the Minerals Council has opposed the current Australian government’s efforts to establish a National Environment Protection Agency, though with less success to date.

In battles between government and business over regulatory issues, who typically wins? Recent scholarship has pointed to the importance of issue salience in predicting which party is likely to succeed in introducing or resisting greater government regulation over business. Culpepper argues that if an issue is ‘noisy’, i.e. it receives a lot of public attention via media and parliamentary debate, that governments are more likely to impose regulations against the wishes of business. In situations of ‘quiet politics’ where the public is not engaged on the issue, business interests are more likely to shape the direction of regulation by governments.^[31] In Australia, however, this is not always the case. The case of the Resource Super Profit Tax noted above is a clear exception to this rule, as business interests were able to win the very noisy public debate over this issue. Government and business often clash over issues of environmental and social harm, leading to regulation and changes in business norms to embed greater consideration of environmental, social and governance (ESG) factors in decision-making. In the next section, we discuss this trend and the implications for government-business relations.

Environmental, Social and Governance (ESG) and Ethics in Government-Business Relations

ESG and business ethics inform how governments and organisations co-produce market rules, reflect public values, and determine the legitimacy of actions. Both ESG and Corporate Social Responsibility (CSR) are tools that reflect the values and aspirations of a business in the context of sustainability. CSR, which is self-managed and determined by corporations, is used internally to create positive workplace culture. In contrast ESG, presents stakeholders with outward facing, quantifiable metrics for understanding business performance and assessing values synergy.^[32] ESG reflects a holistic understanding of sustainability and is underpinned by environmental factors (including climate change, energy and water use, carbon emissions); social responsibility (fair trade principles, human rights, gender equality); and corporate governance (board independence, corruption and bribery, reporting and disclosure). Together these frameworks provide a foundation for ethical business operations translating ethical duties into systems, policies, metrics, reporting and evaluation, in ways that are visible to regulators, investors, consumers, and civil society.

While initially a voluntary corporate initiative, the ESG framework increasingly reflects interactive governance through the alignment of private incentives with public mandates. In Australia, this interplay is visible in climate and sustainability disclosures, modern slavery reporting, First Nations heritage protections, as well as broader efforts by companies to adopt responsible business standards such as the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises. These frameworks establish shared responsibility and reference points for policymaking, procurement and cross-board investments.

ESG responsibilities are central to how businesses operate and how governments regulate economic activity. In Australia and globally, corporate expectations have been redefined to reflect growing expectations that businesses will generate profit and ensure a positive social footprint. Underpinning the ESG framework is a recognition that the impacts of business operations are wide reaching and that corporations bear a responsibility to workers, communities, consumers and the environment. Galbreath concludes that this shift is due to growing public scrutiny, increased global integration, and a heightened awareness of social and ecological risks.^[33] These factors have informed shifts in the relationship between governments and business, which increasingly prioritises a need to manage how firms fulfil their ESG responsibility.^[34] The increased focus on ESG has also facilitated a heightened focus by governments on the creation of policies and regulatory frameworks to encourage and enforce ethical behaviour in corporate governance.^[35]

Ethics play a central role in shaping the business/government nexus. Ethical reasoning, the ability to identify and evaluate the moral dimensions of a problem, is critical to business decision-making behaviour, as it provides a framework for revealing what constitutes fair, responsible, and socially acceptable action.^[36] Ethics, ESG and Corporate Social Responsibility (CSR) are inextricably linked. On the one hand, ethics frames purposes and boundaries, while CSR, particularly as it is embedded within ESG metrics, operationalises those responsibilities and creates a framework for building trust between stakeholders. ESG and ethics therefore are foundational characteristics of a modern governance system, essential for establishing trust, transparency and accountability between the public and private sectors.

Traditionally, ESG is associated with ethically and socially responsible investment.^[37] Today, the proliferation of ESG in global and national governance highlights its relevance to assessments of broader claims of good governance and corporate social responsibility.^[38] Scholars such as Galbreath demonstrate that, Australian corporations have significantly improved their ESG performance over the past two decades, particularly in governance practices such as board oversight, transparency and accountability.^[39]The relationship between ESG and ethics becomes clearer when considering why corporations adopt ESG practices. Armstrong argues that ethical theories, including utilitarianism, deontology and virtue ethics, provide businesses with the tools to evaluate the broader consequences of their actions and consider their responsibilities beyond profitmaking. ESG frameworks help operationalise these ethical commitments by turning them into measurable actions, such as carbon reduction targets, fair labour practices or improved governance procedures. In Australia, ESG reporting has become more prominent due to regulatory developments and investor expectations, with companies increasingly disclosing their ESG risks and strategies under market driven or stock ‑exchange requirements.

New challenges in government-business relations – disputes over woke capitalism

Between the Global Financial Crisis of 2008, and the ‘rupture’ resulting from US President Trump’s tariff war in 2025, political leaders have been signalling the end of neoliberalism and the need for more ‘values-based capitalism’ for nearly 20 years. Yet, economic policy has been slow to catch up, and government-business relations in Australia still reflect a largely neoliberal ideology, within an Adversarial, or Regulatory model. Yet hints of the transition to a new approach are emerging in the introduction of policies like the Albanese Government’s Future Made in Australia policy, and political debates over ‘woke capitalism’.

Woke capitalism can be defined in two different ways. First, it can be understood as virtue-signalling by corporations on progressive issues without systemic change, such as by donating money to environmental causes while also engaging in business practices which cause environmental degradation.^[40] The term has also been used by conservative political leaders to criticise the embedding of progressive values in corporate governance, for example in considering ESG factors in investment decision-making.^[41] Conservative-led governments in Australia and the USA have attempted to introduce regulations on the financial sector to prevent ‘woke capitalism’ in the form of pension and superannuation funds considering the environmental and social impacts of their investments.^[42] This move indicates a new dynamic between government and business where government seeks to protect the interests of some businesses (for example, high polluting fossil fuel companies), while curtailing the activities of others, such as institutional investors seeking to embed ESG factors in their governance processes.

The next ten years will likely see an intensification of battles between government and business, particularly over environmental issues as activists push governments to meet net zero targets as part of the Paris Agreement on climate change. Only time will tell how the relationship between the state and the market will evolve, and whether we see the emergence of a new economic paradigm, or a return to past models of government-business relations to meet current challenges.

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