September 8, 2020
Date: 8 September 2020
Author: Ronald Mizen
Source: Australian Financial Review
Prime Ministerial aspirants like to talk about their vision for Australians, and in 1996, John Howard’s was simple.
“I would like to see them comfortable and relaxed about the present and I’d also like to see them comfortable and relaxed about the future,” he told the ABC’s Four Corners program.
Fast forward 20 years and another Liberal leader – this one already Prime Minister – pitched his vision to the public.
“The Australia of the future has to be a nation that is agile, that is innovative, that is creative,” Malcolm Turnbull said.
“The disruption we see driven by technology, the volatility in change is our friend if we are agile and smart enough to take advantage of it.”
Howard and Turnbull’s visions were poles apart. History shows which resonated best with voters. Howard went on to win four elections and govern for nearly 12 years; in 2016, Turnbull scraped in and was dumped by his colleagues less than three years later.
One of the biggest hurdles for major reform in Australia is the task of convincing voters of the need for change.
The benefit Howard had over Turnbull was that by the time he came to office, most of the economic heavy lifting – save for the GST – had been done.
His predecessor, Paul Keating, as both treasurer then prime minister, had rolled out the largest suite of economic reforms in more than a generation, driven by his vision for where Australia needed to be.
“It’s the old cargo cult mentality of Australia that she’ll be right,” Keating said. “In the 1970s … we became a third world economy selling raw materials and food and we let the sophisticated industrial side fall apart.
“If in the final analysis Australia is so undisciplined, so disinterested in its salvation and its economic well being, that it doesn’t deal with these fundamental problems … then you are gone. You are a banana republic.”
Turnbull, like Keating, recognised the uncomfortable truth that the global economy changes rapidly, and Australia needs to change with it. But unlike Keating, he was unable to bring people along with him.
Even before the coronavirus pushed Australia into recession, business investment was at an almost three-decade low coming off the end of a resource sector investment cycle, while wages growth was anemic.
Spending on research and development was stagnating, productivity growth was low and Australia’s economic complexity ranking continued to decline. Red flags were being raised long before the virus hit our shores.
Gabriel Metcalf, chief executive of the think tank, Committee for Sydney, says part of the problem was Australia’s failure to diversify.
“Australia has been very reliant on digging things out of the ground, and while lots of that will continue, the way a developed country remains wealthy is by coming up with new products and services it can sell.”
Andrew Charlton, AlphaBeta director and former economic adviser to Kevin Rudd, says analogies can be drawn between the Keating era and today.
“We look back with rose-coloured glasses and give ourselves a huge pat on the back for the reform agenda of the ’80s and ’90s, which was about opening up the Australian economy to globalisation,” Charlton says.
“We need to have a mindset change to think about opening up the Australian economy to global digitisation, which is going to have a similar if not greater effect than the globalisation trend of the ’80s and ’90s.”
Metcalf says the only way to power back the economy is for Australia to create new jobs in industries that are globally competitive.
“Really that’s true of every recession,” he says. “In a sense, Australia is a bit out of practice with that harsh reality because it has had such a long run of economic growth.”
Charlton points to the growth of the US stock market, which he says has outstripped the Australian bourse due to its strong indexing of tech stocks.
“We need to build digital capabilities and digital industries. Digital industries have been the value creators of the last 10 years and Australia has substantially missed that boat,” he says.
“It’s also about introducing digital technologies to our existing industries to maintain their competitiveness.”
On how to foster this change, experts broadly agree Australia needs to pivot the economy to focus on innovation, research and development, and skills.
Turnbull’s innovation tsar Bill Ferris, a former venture capitalist, says the current government already has a blueprint for this in the form of the 2017 National Innovation and Science Australia 2030 report.
The report made 30 recommendations across five key areas of education, industry, government, research and development, and culture and ambition. “I think all of those recommendations stand the test today and therefore that report still has strong messages that are relevant,” Ferris says.
He also wants to see a 50 per cent R&D collaboration premium introduced into the RDTI Act to encourage far greater business-research collaboration.
“That should be put through the parliament and enacted right now,” he says. “Especially given the negative impact the pandemic is having on university research dollars.”
In the decade to 2017-18, only the higher education sector experienced any substantial increase in R&D expenditure, while business and government investment remained largely stagnant. Australia’s expenditure on R&D is about 1.8 per cent of GDP compared to an OECD average of 2.37 per cent.
The Committee for Sydney wants to see Australia’s spend lifted by more than $10 billion a year to bring it up to the OECD average.
“It would make a lot of sense for us to be one of the world leaders in R&D spending, given that we need to probably play some catch up,” Metcalf says.
But that goal is made difficult by a hit to international student revenue, which has long cross-subsidised university R&D expenditure.
The government is not unaware of the challenge, and in July, Education Minister Dan Tehan established the Research Sustainability Working Group to provide advice on funding during COVID-19 and beyond.
Trade Minister Simon Birmingham was early to recognise the opportunity of a strong digital economy. Over the past two years, he has inked world-first digital trade agreements with Britain and Singapore.
The agreements are part of broader efforts to unlock up to $192 billion of value in the domestic economy by 2030 by boosting digital trade, which encompasses e-commerce and digitally enabled products and services.
In skills, too, the government has been implementing reforms with an eye to the future needs of the economy. Legislation currently in the parliament would incentivise students to study science, technology, engineering and maths at university by making them cheaper than other courses.
“We [want to] incentivise students to make more job-relevant choices, that lead to more job-ready graduates, by reducing the student contribution in areas of expected employment growth,” Education Minister Dan Tehan says.
Larry Marshall, chief executive of the CSIRO, wants to reverse-engineer Australia’s approach to innovation by focusing on “moon shot” missions – named for the United States’ efforts in the ’60s to put a man on the moon.
Marshall says the way Australia currently innovates is the wrong way around, with the focus on research without thinking about the problem.
“The missions for us are about turning that around. So not starting with the science … but we actually start with the problem – what’s the problem we want to solve?” he says.”Then we go and look for science to solve that problem. It’s doing science in reverse. The way Silicon Valley does it.”
The CSIRO has put forward six national challenges in environment, food production, health, future industries, energy and security.
But Liberal MP Andrew Hastie summed up the problem facing governments of both persuasions following Turnbull’s near defeat at the 2016 election – where his big vision was for an innovative and agile nation.
“A lot of what we were campaigning on nationally just wasn’t resonating with everyday Australians,” he said.
Charlton says the problem was it was framed in alienating language. “It was framed in the language of disruption, which was threatening,” he says.
“I actually think that’s both the wrong message and the wrong content. The right content is making things better for people.”
Ferris is hopeful the large technological steps taken during the coronavirus pandemic have shifted public sentiment on the innovation agenda and made people more open to the possibilities.
“It’s only going to be by way of demonstration of how innovation can help that that will change,” he says. “There may now be a majority of citizens around the country that, even if they don’t love innovation, respect the fact it’s happening and has to happen.”
In 2019, Scott Morrison’s pitch to voters was about “simple, decent, honest aspirations”.
But Morrison’s aspirations were telling: “Get an education. Get a job. Start a business,” he said. And his government has not shied away from promoting innovation in the right forums, even if it wasn’t central to his campaign.
The question now is whether Morrison, known for his salesmanship, can pitch the reforms needed to move the country forward – because it is certainly clear we can no longer afford to settle for comfortable and relaxed.