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Australia must ‘seize the moment’ through economic reform or fall behind: BCA
Anaemic productivity growth and a “disastrous investment drought” present existential threats to Australia’s future, a business group has warned in a sprawling report recommending major economic reform. Sticking with the status quo, it says, would stunt the economy and leave individual Australians worse off by $7,000 in 10 years.
“On our current trajectory, without remedial action, we risk surrendering our advantages in energy, and our chance to capitalise on the skills and experience of our people,” the Business Council of Australia (BCA) said in the new report, titled Seize the moment: A plan to secure Australia’s economic future. “We will let the opportunities in front of us slip away as other nations take our place on the global stage.”
Substantial and simultaneous global shifts, including decarbonisation, deglobalisation and digitisation, mean the Australian economy is at a turning point that require it to adapt or be left behind, the BCA argued. The 225-page report therefore identifies six shifts needed domestically to drive the increased productivity needed to stay competitive, as well as policy levers to support change.
“If we want sustained wages growth and to maintain full employment, the nation needs a reinvigorated economic growth agenda driven by large-scale investment, higher productivity and greater innovation,” BCA president Tim Reed said.
While other countries diversify, adopt new technologies, increase productivity and tap into changing global supply chains and the associated opportunities, Australia’s narrow economic base makes it vulnerable to global shocks, not to mention decarbonisation risks, the BCA said.
It pointed out that just six products – coal, iron ore, natural gas, education, gold and wheat – make up more than 60 per cent of Australia’s exports.
“To get ahead, we must remove the obstacles that are harming our economy and holding us back globally,” the report stated.
At a crossroads
According to the BCA – an industry association made up by the chief executives of more than 100 of Australia’s largest companies – there are two choices from here. Australia can “act immediately” through broad-reaching economic reform, or it can choose complacency and “risk bequeathing our future generations a country that is economically and socially weaker”.
A critical challenge is the “disastrous investment drought that has left business investment at near-30-year lows as a share of GDP, the report stated, adding that Australia must “commit to rapid innovation in capital-light, labour-heavy service industries”.
Deglobalisation and other global challenges are also hugely important and represent opportunities for Australia to solidify its future path, but this will require investment.
Between $7 trillion and $9 trillion is required for Australia’s net-zero transition, the report noted; in addition, almost 380,000 people are in need of social and affordable housing, there is a $237 billion five-year pipeline of major public infrastructure projects, and $410 billion is needed for smaller infrastructure products.
Big shifts needed
To stay competitive Australia needs to a more diversified and resilient economic base, shifting from an economy defined by a “narrow industrial base with too many eggs in one basket” to a resilient and diversified economy, the report stated.
And Australia must be more productive, shifting from “woeful productivity growth” and a nearly 30-year-low in business investment to an economy that “incentivises business investment, makes it easier to do business, encourages innovation and has a competitive tax system”, the report stated.
The report also suggested 10 levers for putting its ideas into action, including introducing a “reinvigorated and contemporary industry policy that strikes the balance between getting the fundamentals right, driving industries where we have a comparative advantage and building the cross-economy capabilities needed to tap into the world’s supply chains”.
Other levers include harnessing economic, trade and investment benefits from Australia’s deepening strategic ties, undertaking broad-based tax reform establishing a five-year ‘ease of doing business’ agenda along with incremental reforms.
“We need a coordinated, national plan to strengthen our economic resilience and ensure we turn these challenges into the opportunities that will deliver greater prosperity, higher wages and improved living standards,” BCA chief executive Jennifer Westacott (pictured) said.
“We cannot continue to experience record low levels of business investment as a share of GDP where more money leaves the country than comes in. Investment drives innovation, which drives productivity and drives higher wages.”
