Becoming a smart country

Phil Ruthven outlines the challenges facing Australia as it emerges from the mining boom and explains why planning for the future requires more than luck.

Australia’s standard of living is one of the highest in the world; sixth highest of 230 nations and dependencies, and the highest with a population of over 10 million. Four of our capital cities are in the world’s top 10 most liveable cities. And, as the chart shows, our standard of living has risen dramatically in the last several decades of our industrial age up to 1964, and more so in the first 50 years of our new infotronics age of service industries, assisted by information and communications technology, more recently known as the internet and digital era.

Is Australia a lucky country, a smart one, or a bit of both? Luck alone doesn’t explain everything; no nation is lucky for over two centuries. That said, we have had more than our fair share. We have been supported by world powers over that time in terms of capital and know-how inflows and defence: firstly by the British Empire from 1788 to the 1920s; then by the US into the 21st century; and now by Asian giants led by China, mainly in terms of trade and rising capital inflows.

Our economy and population have been boosted by our rich and abundant resources: agriculture and six mining booms. The Gold Boom of the early 1850s saw mining contribute 18 per cent of our GDP in a single year, double the current share of GDP. Our population leapt from 400,000 to a million in that decade. We are now into our sixth mining boom, one that will see rising outputs for well over another decade before declining to a nadir near the middle of the century as the cycle ends. At which time, it will be energy minerals that will dominate outputs.

During the period that will bring us to the middle of the century, it looks like we may see a renaissance in agriculture in response to more liberal trade – via the Trans-Pacific Partnership and Free Trade Agreement with China – and, more importantly in the long term, the Asian food security challenge.

Being part of the Asia Pacific region is truly a boon. It already accounts for three-quarters of our immigrants, inbound tourism and trade. It is the world’s largest economic and most populous region; and the fastest growing. Our population was “Europeanised” in the first two centuries of white settlement and it is now becoming Eurasian in this century, and Asian in the next.

Growing significance

Until relatively recently, Australia was an unknown quantity in our own region. Few knew our land mass was roughly the size of China, but with less than 2 per cent of its population. Modern communication – mobiles and the internet – have removed that ignorance of our nation, its wealth, standard of living and outstanding prospects for growth in population and GDP. Already in the first decade and a half of this new century, our population growth at 1.5 per cent per year has outstripped the world’s 1.3 per cent per year.

We are already a generous nation in terms of immigration and refugee intake as a percentage of our population. This will need to continue well into the 22nd century, by which time there may be a population of more than 150 million, at an achievable rate of under 2 per cent per year; or, if you like, the same average rate as in the 20th century just gone. Well before that time, it is said the world will have its first city of 100 million – in China – so we should not be scared of the exciting challenge ahead, let alone take a dog-in-the-manger stance to restricted and selfish population targets.

Taking up that challenge will make us luckier still; and for those preaching ecological vandalism, it is well to remember it is never the number of people that does damage, but what they do. No matter what the size. Past ecological damage to our land and rivers was done by a population a third of our current population level.

But what about the smarts? Becoming a smart country takes innovation, entrepreneurship, collaboration (with universities and other intellectual resources) and communication skills, and leadership at business and government levels. We had most of these elements in spades in the first 120 years from 1788: with great government leaders, especially our governors, and great entrepreneurs in agriculture, mining and fledgling industrial age industries.

We progressed in the 20th century, but not as well as a lot of other nations. Our standard of living rose, but we dropped from the world’s best in 1901, to being out of the top 20 by the 1980s. We had become a scared nation, embracing protectionism of our industries in 1908, and developing a cultural cringe. Our innovation rate slowed and our national statesmen were fewer in number – just seven in the 20th century compared with 11 from 1788 to 1900. Fortunately, our business people and governments are slowly regaining their mojo.

At the government level, we experienced the reforms of the Hawke-Keating era (13 years) and further reforms and fiscal rectitude under the Howard-Costello era (11 years); almost a quarter of a century that ended with our nation regaining a high place in the top standard of living nations, as mentioned earlier.

More recently, the nation has arguably had the three worst national leaders in living memory – with polls supporting that perception, but we had luck over that period with a mining boom. As we head into 2016, the situation seems to be changing for the better on the political front, with a leader who values our fortunate position and is keen to promote innovation and entrepreneurship; and has appointed an assistant minister to help.

Innovation is returning at the business level, this time mainly in the service industries, where 70 per cent of our GDP lies. We have successes in the IT arena: witness Atlassian. We are having success in the digital disruption era: witness Kogan.com and hundreds of others. We have young entrepreneurs in the apps field taking advantage of the borderless world of software and communications, and succeeding.

We need much more work done in the collaborative component. Our university-business collaboration is one of the poorest in the developed world. Fortunately, many universities are now getting the message and setting out to make up lost ground.

Almost 300,000 new businesses will start up in the 2016 fiscal year and hopefully a significant number of these will be true entrepreneurial businesses, replacing those 270,000 businesses that will close their doors, many of which were chasing overly competitive and crowded markets or didn’t do enough homework. That is likely.

Yes we do need the smarts, not just luck – of which we will continue to have lots. Early signs are that we are on our way with both.