Reimagining Australia's economic future
If the challenge of this election campaign is to reimagine Australia’s economic future, it’s clear that the policy offerings fall short of what’s required. This is the consequence of starting things we don’t finish.
Who can forget the Ideas Boom, and how exciting it was to be an Australian? That was Malcom Turnbull in 2015. Or wanting to be a country that makes things? That was Kevin Rudd in 2007.
Some may even recall “Innovation Nation”, preparing for the day we could no longer rely on exporting unprocessed raw materials? That was Paul Keating in 1995.
The mining boom increased our terms of trade, without any additional effort on our part, adding 15 per cent to our national income over a six year period. We could now be “relaxed and comfortable”. That was John Howard.
Except we couldn’t, because the underlying structural problem of our economy had not gone away. Measured by the research intensity of our exports, Australia’s “economic complexity” ranks between Kazakhstan and Lebanon.
Our future living standards depend on how we pay our way in the world. This means identifying new, more sustainable sources of export income, including those addressing climate change as an opportunity not just a cost.
This won’t happen automatically through the market. It will require active intervention to manage our post-mining boom transition to a competitive knowledge-based economy. And to reverse the productivity slowdown associated with current wage stagnation.
During the boom, Australia’s poor productivity performance was hardly noticed as the impact on our national income was more than compensated by high commodity prices. But now that mining no longer contributes to growth, the impact has hit home.
That’s why it was important for Malcolm Turnbull to reinvigorate the national innovation and science agenda, after Tony Abbott’s $3 billion cuts to Labor’s programs. And why it was then so disappointing that he could not make the case for this agenda in the 2016 election.
From that point on, Australia’s political class was spooked by the idea that innovation had become a vote loser. Instead of our best chance for a shared vision of a high skill, high productivity economy, it was seen as a threat to jobs – mostly their own.
As the Coalition cycled through three prime ministers and six industry ministers, it continued to make swinging cuts to science, research and innovation programs.
The result is that total spending on R&D has now collapsed to 1.88 per cent of GDP from 2.11 per cent five years ago. Meanwhile other countries are committing more than 3 per cent, and some like Korea and Israel more than 4 per cent.
Apart from the Biomedical Translation Fund, the Coalition has confined its election announcements to a space agency, defence innovation, genomics, food and marine science.
Labor for its part will “bank” the Coalition’s savings to achieve its promised budget surplus. Opposition innovation spokesman Kim Carr has committed to an R&D target of 3 per cent of GDP, but the pathway to achieving this is not obvious.
Labor has announced a $1 billion Manufacturing Future Fund and a series of initiatives on renewable technologies, biofabrication, food and fibre, artificial intelligence, blockchain, space and electric vehicles.
Senator Carr has also committed to a “collaboration premium” with universities and CSIRO as part of a restructured R&D Tax Incentive. These are worthwhile initiatives, but where’s the bigger picture?
Labor’s strategic vision for the election campaign is a “fair go”, which is resonating with many voters. However, making this vision a reality in government will also require the policy connections to be drawn between higher wages, productivity and industrial transformation.
This opinion piece was first published in the Australian Financial Review.