Australia’s economic prosperity can be sustained with focus and reform

 

Queensland's attributes of above-average population and economic growth; an  investment pipeline of $142 billion (AUD) in mining and resources projects1; and close proximity to our Asian neighbours; ensures it is well placed to capitalise on future growth opportunities, but only if the right reform agenda is adopted now.

 

While recent statistics for Australian GDP growth and employment paint a picture of an economy on steroids, there are some lingering questions about the current and

future contribution of various sectors to the nation's long-term economic sustainability.

 

Much is still being heard about our multi-speed economy, with genuine concerns being voiced by retailers and the manufacturing industry about their ongoing economic viability. Wealth generation is very much centered in the mining industry that employs only about seven per cent of Australia's workforce.

 

It is generally assumed by economists and policymakers that the current elevated terms of trade will return to more normal conditions, while business investment will continue for several years to support GDP. However, many of these assumptions are based on Australia's continuing trade relationships with our Asian neighbours, specifically in commodities, and the view that this trade will continue at current levels.

 

Whilst Australia has a 'first mover' advantage in exploiting resources, in the medium term the exploration and investment underway elsewhere will have a major influence on both the terms of trade and the willingness of business to continue high levels of investment. If Australia becomes a high cost destination, it may price itself out of future investment.

 

However, a renewed focus in key areas will ensure Australia can continue to be a strong investment destination. Importantly, not all areas require significant expenditure to reap substantial benefits.

 

Australia's current economic prosperity has been supported by past policies, primarily the reforms of the 80s and 90s, that focused the nation on its international competitive advantage and that focus needs to be reinvigorated.

 

One of the key areas of reform in this era was the pursuit of free trade and it is here that substantial benefits could again be delivered. Australia is currently engaged in negotiating an additional eight free trade agreements (FTAs), with significant and emerging trading partners including China, Japan, Indonesia and India.

 

Some of these have been protracted negotiations and we should be aiming to conclude these as quickly as possible and move forward.

 

A reform agenda for our services sector, particularly in Queensland, is also vital to ensure future economic growth and drive change. We would only need to improve Australia's productivity growth to around 1.5 per cent per annum (still low by historical norms) to potentially underpin robust economic growth for the next decade.

 

At the same time, continued technological advances are expanding what constitutes tradable goods and services. While this represents a potential opportunity for a highly educated nation such as Australia, it also represents a potential challenge to sectors of the economy that have not been globally integrated or exposed to international competitive pressures in the past.

 

With the mining boom taking the spotlight in recent years, it is easy to forget that the services sector provides 80 per cent of Australia's employment.

 

In Queensland, health care and social assistance - a major services sector industry - is the biggest employer and recent quarterly statistics confirm that it is regularly the biggest employment growth area. Jobs growth in education and skills has also been strong in recent years.

 

Future employment opportunities will most likely continue to be offered in the services sector.

 

A significant challenge is that this sector has historically not exhibited high levels of productivity growth, at least not as measured by official statistics, and has not been exposed to productivity reforms to the same degree as other sectors of our economy.

 

Export opportunities for skills and services from these and other sectors are expected to be robust, but only if their potential is realised through an appropriate policy mix that will help them prepare and equip them for future competitive pressures.

 

We need reforms in these sectors that focus on building competitive capability, through reviews of the tax system, workplace relations, regulatory frameworks and

public spending.

 

Ensuring we have the right skills to meet demand for the jobs of the future, must also be a priority. Skills Australia is working on a National Workforce Development Strategy, with a discussion paper recently released. This could not come at a better time, particularly for a state such as Queensland.

 

The development of the right skills will contribute to meeting the needs of the more than $142 billion (AUD) of mining and resource projects. Additionally, by virtue of proximity, Queensland, and in particular Brisbane, has a significant opportunity to provide and export technical skills, knowledge and education and training opportunities to other Asia Pacific countries. These will be significant future growth areas.

 

Developing a long-term skills plan for Queensland is a vital component in making sure that we can capitalise on growth sectors that can and will contribute to Australia's future prosperity. But that policy must ensure that the future of work is the driving force behind this and training is focused on developing the skills needed for our future workforce.

The tourism sector in Queensland would also benefit from a productivity focus. We should not accept that we are a high cost destination, and the award structure needs to be re-examined to bring down costs to attract people back to Australia without disadvantaging workers. A starting point should be to critically examine infrastructure needs of the industry and current workplace regulations.

 

Recognition by the business community of the need for vital economic change helped drive public acceptance of the sweeping reforms of the 80s and 90s. These have been a key factor in protecting Australia from the international economic turmoil of recent years and provides a foundation for future reform.

 

Australia has proven in the past that it is capable of implementing significant economic reform and the current economic climate provides a real opportunity to once again drive an economic reform agenda with a long-term vision.Improving productivity in the services sector, particularly education, health and tourism, along with reducing trade barriers and embracing structural reform, must be priorities if Australia is to maintain its strong economic growth.

 

Queensland's attributes of above-average population and economic growth; an  investment pipeline of $142 billion (AUD) in mining and resources projects1; and close proximity to our Asian neighbours; ensures it is well placed to capitalise on future growth opportunities, but only if the right reform agenda is adopted now.

 

While recent statistics for Australian GDP growth and employment paint a picture of an economy on steroids, there are some lingering questions about the current and

future contribution of various sectors to the nation's long-term economic sustainability.

 

Much is still being heard about our multi-speed economy, with genuine concerns being voiced by retailers and the manufacturing industry about their ongoing economic viability. Wealth generation is very much centered in the mining industry that employs only about seven per cent of Australia's workforce.

 

It is generally assumed by economists and policymakers that the current elevated terms of trade will return to more normal conditions, while business investment will continue for several years to support GDP. However, many of these assumptions are based on Australia's continuing trade relationships with our Asian neighbours, specifically in commodities, and the view that this trade will continue at current levels.

 

Whilst Australia has a 'first mover' advantage in exploiting resources, in the medium term the exploration and investment underway elsewhere will have a major influence on both the terms of trade and the willingness of business to continue high levels of investment. If Australia becomes a high cost destination, it may price itself out of future investment.

 

However, a renewed focus in key areas will ensure Australia can continue to be a strong investment destination. Importantly, not all areas require significant expenditure to reap substantial benefits.

 

Australia's current economic prosperity has been supported by past policies, primarily the reforms of the 80s and 90s, that focused the nation on its international competitive advantage and that focus needs to be reinvigorated.

 

One of the key areas of reform in this era was the pursuit of free trade and it is here that substantial benefits could again be delivered. Australia is currently engaged in negotiating an additional eight free trade agreements (FTAs), with significant and emerging trading partners including China, Japan, Indonesia and India.

 

Some of these have been protracted negotiations and we should be aiming to conclude these as quickly as possible and move forward.

 

A reform agenda for our services sector, particularly in Queensland, is also vital to ensure future economic growth and drive change. We would only need to improve Australia's productivity growth to around 1.5 per cent per annum (still low by historical norms) to potentially underpin robust economic growth for the next decade.

 

At the same time, continued technological advances are expanding what constitutes tradable goods and services. While this represents a potential opportunity for a highly educated nation such as Australia, it also represents a potential challenge to sectors of the economy that have not been globally integrated or exposed to international competitive pressures in the past.

 

With the mining boom taking the spotlight in recent years, it is easy to forget that the services sector provides 80 per cent of Australia's employment.

 

In Queensland, health care and social assistance - a major services sector industry - is the biggest employer and recent quarterly statistics confirm that it is regularly the biggest employment growth area. Jobs growth in education and skills has also been strong in recent years.

 

Future employment opportunities will most likely continue to be offered in the services sector.

 

A significant challenge is that this sector has historically not exhibited high levels of productivity growth, at least not as measured by official statistics, and has not been exposed to productivity reforms to the same degree as other sectors of our economy.

 

Export opportunities for skills and services from these and other sectors are expected to be robust, but only if their potential is realised through an appropriate policy mix that will help them prepare and equip them for future competitive pressures.

 

We need reforms in these sectors that focus on building competitive capability, through reviews of the tax system, workplace relations, regulatory frameworks and

public spending.

 

Ensuring we have the right skills to meet demand for the jobs of the future, must also be a priority. Skills Australia is working on a National Workforce Development Strategy, with a discussion paper recently released. This could not come at a better time, particularly for a state such as Queensland.

 

The development of the right skills will contribute to meeting the needs of the more than $142 billion (AUD) of mining and resource projects. Additionally, by virtue of proximity, Queensland, and in particular Brisbane, has a significant opportunity to provide and export technical skills, knowledge and education and training opportunities to other Asia Pacific countries. These will be significant future growth areas.

 

Developing a long-term skills plan for Queensland is a vital component in making sure that we can capitalise on growth sectors that can and will contribute to Australia's future prosperity. But that policy must ensure that the future of work is the driving force behind this and training is focused on developing the skills needed for our future workforce.

The tourism sector in Queensland would also benefit from a productivity focus. We should not accept that we are a high cost destination, and the award structure needs to be re-examined to bring down costs to attract people back to Australia without disadvantaging workers. A starting point should be to critically examine infrastructure needs of the industry and current workplace regulations.

 

Recognition by the business community of the need for vital economic change helped drive public acceptance of the sweeping reforms of the 80s and 90s. These have been a key factor in protecting Australia from the international economic turmoil of recent years and provides a foundation for future reform.

 

Australia has proven in the past that it is capable of implementing significant economic reform and the current economic climate provides a real opportunity to once again drive an economic reform agenda with a long-term vision.

Improving productivity in the services sector, particularly education, health and tourism, along with reducing trade barriers and embracing structural reform, must be priorities if Australia is to maintain its strong economic growth.

Queensland's attributes of above-average population and economic growth; an  investment pipeline of $142 billion (AUD) in mining and resources projects1; and close proximity to our Asian neighbours; ensures it is well placed to capitalise on future growth opportunities, but only if the right reform agenda is adopted now.

While recent statistics for Australian GDP growth and employment paint a picture of an economy on steroids, there are some lingering questions about the current and future contribution of various sectors to the nation's long-term economic sustainability.

Much is still being heard about our multi-speed economy, with genuine concerns being voiced by retailers and the manufacturing industry about their ongoing economic viability. Wealth generation is very much centered in the mining industry that employs only about seven per cent of Australia's workforce.

It is generally assumed by economists and policymakers that the current elevated terms of trade will return to more normal conditions, while business investment will continue for several years to support GDP. However, many of these assumptions are based on Australia's continuing trade relationships with our Asian neighbours, specifically in commodities, and the view that this trade will continue at current levels.

Whilst Australia has a 'first mover' advantage in exploiting resources, in the medium term the exploration and investment underway elsewhere will have a major influence on both the terms of trade and the willingness of business to continue high levels of investment. If Australia becomes a high cost destination, it may price itself out of future investment.

However, a renewed focus in key areas will ensure Australia can continue to be a strong investment destination. Importantly, not all areas require significant expenditure to reap substantial benefits.

Australia's current economic prosperity has been supported by past policies, primarily the reforms of the 80s and 90s, that focused the nation on its international competitive advantage and that focus needs to be reinvigorated.

One of the key areas of reform in this era was the pursuit of free trade and it is here that substantial benefits could again be delivered. Australia is currently engaged in negotiating an additional eight free trade agreements (FTAs), with significant and emerging trading partners including China, Japan, Indonesia and India.

Some of these have been protracted negotiations and we should be aiming to conclude these as quickly as possible and move forward.

A reform agenda for our services sector, particularly in Queensland, is also vital to ensure future economic growth and drive change. We would only need to improve Australia's productivity growth to around 1.5 per cent per annum (still low by historical norms) to potentially underpin robust economic growth for the next decade.

At the same time, continued technological advances are expanding what constitutes tradable goods and services. While this represents a potential opportunity for a highly educated nation such as Australia, it also represents a potential challenge to sectors of the economy that have not been globally integrated or exposed to international competitive pressures in the past.

With the mining boom taking the spotlight in recent years, it is easy to forget that the services sector provides 80 per cent of Australia's employment.

In Queensland, health care and social assistance - a major services sector industry - is the biggest employer and recent quarterly statistics confirm that it is regularly the biggest employment growth area. Jobs growth in education and skills has also been strong in recent years.

Future employment opportunities will most likely continue to be offered in the services sector.

A significant challenge is that this sector has historically not exhibited high levels of productivity growth, at least not as measured by official statistics, and has not been exposed to productivity reforms to the same degree as other sectors of our economy.

Export opportunities for skills and services from these and other sectors are expected to be robust, but only if their potential is realised through an appropriate policy mix that will help them prepare and equip them for future competitive pressures.

We need reforms in these sectors that focus on building competitive capability, through reviews of the tax system, workplace relations, regulatory frameworks and public spending.

Ensuring we have the right skills to meet demand for the jobs of the future, must also be a priority. Skills Australia is working on a National Workforce Development Strategy, with a discussion paper recently released. This could not come at a better time, particularly for a state such as Queensland.

The development of the right skills will contribute to meeting the needs of the more than $142 billion (AUD) of mining and resource projects. Additionally, by virtue of proximity, Queensland, and in particular Brisbane, has a significant opportunity to provide and export technical skills, knowledge and education and training opportunities to other Asia Pacific countries. These will be significant future growth areas.

Developing a long-term skills plan for Queensland is a vital component in making sure that we can capitalise on growth sectors that can and will contribute to Australia's future prosperity. But that policy must ensure that the future of work is the driving force behind this and training is focused on developing the skills needed for our future workforce.

The tourism sector in Queensland would also benefit from a productivity focus. We should not accept that we are a high cost destination, and the award structure needs to be re-examined to bring down costs to attract people back to Australia without disadvantaging workers. A starting point should be to critically examine infrastructure needs of the industry and current workplace regulations.

Recognition by the business community of the need for vital economic change helped drive public acceptance of the sweeping reforms of the 80s and 90s. These have been a key factor in protecting Australia from the international economic turmoil of recent years and provides a foundation for future reform.

Australia has proven in the past that it is capable of implementing significant economic reform and the current economic climate provides a real opportunity to once again drive an economic reform agenda with a long-term vision.

Download pdf -  Brisbane Economic Series, Issue Four