Category: Australia

Australia in the Asian Century – Chapter Seven: Connecting to Asian Markets

How can Australia improve its business, trade and government links with Asian countries?

This post is one of the series of articles on the Australia in the Asian Century report.

The seventh chapter of Australia in the Asian Century looks at how the country’s businesses and governments can engage with markets in Asia. In some ways this is the most effective chapter of the report.

At the beginning of the chapter introduction points out that Asia offers bigger markets than Australia and says “Australian businesses need to build on their existing advantages by developing new capabilities and approaches as they become fully part of the region.”

This is true, but the Chapter never really identifies what Australia business’ existing advantages really are and again this is a weakness in the report.

National objective 17. Australia’s businesses will be recognised globally for their excellence and ability to operate successfully in Asian markets.

How this comes about is difficult to say, and what governments can actually do to help businesses be recognised globally isn’t really identified.

The CPA case study is notable for illustrating the number of Australian expats working in Asia. In many ways these people are the wasted talents that should have been cultivated by domestic businesses through the 1990s and 2000s.

Saying that businesses need to be part of the global supply chain is a statement of the obvious and Chapter 7.3 does discuss the importance of efficient ports, fast customs procedures and reduced barriers to trade. This ties into National Objective 18a.

National objective 18a.The Australian economy will be more open and integrated with Asia, through efforts to improve our domestic arrangements. The flow of goods, services, capital, ideas and people will be easier.

  • Australia’s trade links with Asia will be at least one-third of GDP by 2025, up from one-quarter in 2011.

It’s difficult to argue with this objective, although one wonders what Canberra has been doing for the last twenty years on smoothing the flow of goods, services, capital and ideas. Hopefully this is one of the relatively easy areas where a Gillard, or Abbott, government can deliver.

National objective 18b. The Australian economy will be more open and integrated with Asia, through comprehensive regional agreements, better aligned economic regulations, greater infrastructure connectivity and enhanced understanding of each country’s arrangements. The flow of goods, services, capital, ideas and people will be easier and Australian businesses and investors will have greater access to opportunities in Asia.

This objective focuses around formal trade links and really only describes the current policy – continued from the Howard government – of signing bilateral trade agreements rather than waiting for the cumbersome and possibly never ending global negotiations to actually deliver something.

Most of Chapter Seven is focused on describing the various trade initiatives the Australian government is engaged in through APEC, ASEAN and various other forums.

All of these are good initiatives and these are the brightest spot in the entire report, this is where the Australian political system has delivered bipartisan support for a long term plan and it’s a shame we can’t see more actions similar to this in areas like education, taxes and sustainability.

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Running out of luck

Is Australia’s luck running out in the digital and Asian economy.

Last week I was lucky to get along to Digital Australia and Emergent Asia panel held at PwC’s Sydney office where the panel looked at how Australia’s industries are adapting to the digital economy and evolving Australian markets.

The outlook from the panel was generally downbeat about the ability of Australia’s business leaders and politicians to adapt to the changes in the global economy although there were some optimistic points about the resilience and flexibility of the nation.

I did a write up for it on Technology Spectator which is online at It’s Not Good Enough To Be Clever

The challenge is on for Australia’s business leaders – let’s see if they are up to it.

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Australia in the Asian Century – Chapter Six: Building capabilities

How can Australia build a productive workforce to take advantage of the Asian Century

This post is one of the series of articles on the Australia in the Asian Century report.

Of all the chapters in the Australia in Asian Century discussion paper, Chapter Six has probably attracted the most opprobrium because of the fine words which haven’t been matched by government policy and action.

Parts of this chapter have a strong “school marm” tone as it tries to mandate the composition of company boards or the locations of where students will study. Overall though, most of the objectives are either motherhood statements, impractical or at odds with the actions of both state and Federal governments.

National objective 9. To build the capabilities of Australian students, Australia’s school system will be in the top five schooling systems in the world, delivering excellent outcomes for all students of all backgrounds, and systematically improving performance over time.

  • By 2025, Australia will be ranked as a top five country in the world for the performance of our students in reading, science and mathematics literacy and for providing our children with a high?quality and high?equity education system.
  • By 2015, 90 per cent of young Australians aged 20 to 24 years will have a Year 12 or equivalent qualification, up from 86 per cent in 2010.
While these objectives are worthy, there’s little discussion of exactly how this will be achieved beyond broad statements. Again it’s notable that these aspirations are being laid out at a time when funding is being cut and staff retrenched in both state and Federal government education departments.

National objective 10. Every Australian student will have significant exposure to studies of Asia across the curriculum to increase their cultural knowledge and skills and enable them to be active in the region. All schools will engage with at least one school in Asia to support the teaching of a priority Asian language, including through increased use of the National Broadband Network.

Says who? Who exactly is going to force a school to engage with at least one school in Asia? These are the sort of broad brush statements that detract from the report.

These kind of statements are the “thought bubble” approach to policy that marks much of what passes for governance in Australia today and such poorly thought out programs end up at best wasting money. At worst, the unintended consequences of a ‘policy’ thought up on the back of beer mat end up causing more damage than good.

Such a program could work well if properly thought out and integrated properly into the long term curriculum of the students but it would take proper leadership from state and Federal education ministers.

National objective 12. All students will have access to at least one priority Asian language; these will be Chinese (Mandarin), Hindi, Indonesian and Japanese.

This is good and fair, but is something that was supposed to have been put in place thirty years ago. Instead the proportions of students studying Asian languages has steadily dropped.

As newspapers have reported there are barely a dozen Hindi language teachers in New South Wales, so the priority needs to be training teachers to deliver the courses.

Such inconvenient logistical problems are an excellent example of those well meaning but poorly thought through “thought bubbles.”

National objective 12. Australia will remain among the world’s best for research and teaching in universities, delivering excellent outcomes for a larger number of Australian students, attracting the best academics and students from around the world and strengthening links between Australia and the region.

  • By 2020, 20 per cent of undergraduate higher education enrolments will be people from low socioeconomic backgrounds, up from 17 per cent in 2011.
  • By 2025, 40 per cent of all 25 to 34?year?olds will hold a qualification at bachelor level or above, up from 35 per cent in 2011.
  • By 2025, 10 of Australia’s universities will be in the world’s top 100.
  • A larger number of Australian university students will be studying overseas and a greater proportion will be undertaking part of their degree in Asia.
This objective really smacks of poorly thought out ideas on the run and illustrates starkly the differences between the well meaning objectives and the behaviour of governments.
It’s almost impossible for ten of Australia’s universities to make it into the more reputable measure of top 100 universities when for the last three decades research and post graduate programs have been slowly strangled by falling government funding.
Even if a Gillard government were to change that trend, it’s unlikely Australian universities could make up the lost ground in 13 years.
Mandating that “a larger number of Australian university students will be studying overseas and a greater proportion will be undertaking part of their degree in Asia” is nice but who is going to force students to study overseas and specifically in Asia?
More to the point, what are notoriously conservative Australian employers going to do with all these graduates of Asian universities?

National objective 13. Australia will have vocational education and training systems that are among the world’s best, building capability in the region and supporting a highly skilled Australian workforce able to continuously develop its capabilities.

  • By 2020, more than three?quarters of working?age Australians will have an entry?level qualification (at Certificate III level or higher), up from just under half in 2009.
  • Australia’s vocational education and training institutions will have substantially expanded services in more nations in the region, building the productive capacity of the workforce of these nations and supporting Australian businesses and workers to have a greater presence in Asian markets.
Given the week before the Gillard government cut apprenticeship funding and the NSW government announced it was further emasculating its state TAFE system a few days after the report was released, this objective can be treated purely empty words.

Business capacity

One of the reasons why Australia engaged so little with Asia over the last twenty five years is because the business community became focused inwards rather looking for opportunities in foreign markets. So the idea of getting more Asian experience into boardrooms is laudable but the solutions proposed impractical.

National objective 14. Decision makers in Australian businesses, parliaments, national institutions (including the Australian Public Service and national cultural institutions) and advisory forums across the community will have deeper knowledge and expertise of countries in our region and have a greater capacity to integrate domestic and international issues.

  • One?third of board members of Australia’s top 200 publicly listed companies and Commonwealth bodies (including companies, authorities, agencies and commissions) will have deep experience in and knowledge of Asia.
  • One?third of the senior leadership of the Australian Public Service (APS 200) will have deep experience in and knowledge of Asia.
This objective has drawn a lot of scorn from the business community and for good reason – how is a Federal government going to mandate that a third of the ASX200 will have “deep experience and knowledge of Asia”?
While the aim of having a third of the senior public service possessing Asian experience is worthy, this is almost impossible given the deadline for this is thirteen years away, any bureaucrat hoping to have “deep experience and knowledge of Asia” would have had to have been working on it for the last five or ten years. If this program isn’t in place now, it isn’t going to happen.

Society

Probably the biggest strength of Australia as a nation is in its diverse and relatively tolerant society so this section of the report is notable for what it misses in opportunities.

National objective 15. Australian communities and regions will benefit from structural changes in the economy and seize the new opportunities emerging in the Asian century.

Another worthy aim and its notable that the region cited in the case study is Darwin, a city whose economy is being wildly distorted by the LNG boom which is driving up prices and labour costs. If anything Darwin is an example of Australia turning its back on opportunities and focusing on a quick, resources driven buck.

National objective 16. By preserving and building on our social foundations, Australia will be a higher skill, higher wage economy with a fair, multicultural and cohesive society and a growing population, and all Australians will be able to benefit from, and participate in, Australia’s growing prosperity and engagement in Asia.

Cant and motherhood statements as one would hope all government seek to build a fair and cohesive society on our social foundations. It’s interesting that much of the poorly thought out, short term tactics by publicity hungry politicians probably does more to damage Australia’s institutions than other factors.

Overall this chapter deserves to have drawn the most criticism with its motherhood statements and wholly unachievable aims.

Most disappointingly, it skates over Australia’s diverse workforce and provides no ideas on how to harness the talents of the country’s ethnic groups in building ties and improving the nation’s skills.

Image of the Harbin Snow and Ice Festival from EmmaJG on Flickr

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Australia in the Asian Century – Chapter Five: A productive and resilient Australian economy

Is Australia’s economy as strong as we think in the Asian Century?

This post is one of the series of articles on the Australia in the Asian Century report.

Chapter five of Australia in the Asian Century looks at the domestic settings the nation needs to achieve the “2025 apirations” described in Chapter Four.

To do this lays out a number of national objectives to achieve Australia’s 2025 Aspirations which are at least ambitious. These include education, innovation, infrastructure, communications and tax.

Education

National objective 1: All Australians will have the opportunity to acquire the skills and education they need to participate fully in a strong economy and a fairer society.

Probably the most worthy of the report’s objectives is to improve the nation’s already good level of education. Unfortunately the detail in the report is lacking beyond rehashing existing programs.

These programs do cover important initiatives such as improving literacy rates amongst the disadvantaged which is essential if Australia is going to address its poor participation rates which are going to be one of the major domestic challenges for the country in the 21st Century.

At the other end of education though there is little more than empty words as the discussion of workforce training is rendered hollow by the decision to further cut back apprenticeship training and universities find their funding continually reduced making it less likely they can get into the world’s top rankings.

Most importantly, there is little space given to addressing Australia’s poor performance in the STEM – Science, Technology, Engineering and Mathematics – subjects.

Innovation

National objective 2: Australia will have an innovation system, in the top 10 globally, that supports excellence and dynamism in business with a creative problem-solving culture that enhances our evolving areas of strength and attracts top researchers, companies and global partnerships.

More fine words but this commitment to ‘innovation’ is again hollow when the Federal government cuts commercialisation incentives and export program.

Any talk of encouraging innovation is pointless anyway without reforming the nation’s tax system which currently favours asset speculation over building productive businesses and products – we’ll come to the tax impasse later.

Infrastructure

National objective 3. Australia will implement a systematic national framework for developing, financing and maintaining nationally significant infrastructure that will assist governments and the private sector to plan and prioritise infrastructure needs at least 20 years ahead.

This section is a sour sick joke which illustrates all that is wrong with Australian governments at all levels. Infrastructure planning for the next 20 years should largely be in place now and the fact it seen as being a national objective by the authors of this report

At best this section of the report reads like an ode to the corporatist ideologies of the 1980s and in fact illustrates exactly where Australia lost its way in the 1990s as the country’s business leaders realised that Asia was too hard when there were easy pickings in convincing gullible Liberal and Labor governments into selling assets cheaply and exploiting the resultant monopolies.

Communications infrastructure

National objective 4. Australia’s communications infrastructure and markets will be world leading and support the rapid exchange and spread of ideas and commerce in the Asian region.

This is a fine objective and may be achievable if the National Broadband Network is rolled out on time and isn’t affected by poor management decisions or gutted in an act of political bastardry by a future Liberal government.

Hopefully this is one are where actions will meet the the report’s words.

Taxation

National objective 5. Australia’s tax and transfer system will be efficient and fair, encouraging continued investment in the capital base and greater participation in the workforce, while delivering sustainable revenues to support economic growth by meeting public and social needs.

In 2007 the then Labor Prime Minister Kevin Rudd appointed Ken Henry to review the Australian tax system. That report was comprehensively ignored and the effects of the political bumbling around that lead to Rudd’s axing as Prime Minister and Gillard’s incompetent half-baked Mining Tax.

To have an efficient and fair tax system which encourages investors and workers should be a given. That it has to be spelt out, and then ignored, probably illustrates the greatest failure of Australia’s political and business leaders.

Australia’s current tax system is probably the economy’s greatest weakness as much of the resilience boasted of in the report is based around stimulating the housing market, the wealth effect in turn is reflected in the country’s affluence measures.

Reforming the Australian tax system to favour workers and investors over property speculators is going to require great strength by the politicians who attempt to do it and they’ll need the reform of business leaders and the financial media. None of these three groups have the courage or integrity to be trusted to carry this out in the next 15 years.

Reforming regulation

National objective 6. Australia will be among the most efficiently regulated places in the world, in the top five globally, reducing business costs by billions of dollars a year.

Possibly the greatest hubris in today’s Australia is about the efficiency of the nation’s regulators. In reality Australia is a country that’s quick to legislate but slow to regulate.

We’re very good at passing laws and regulations, not to mention building bureaucracies of thousands of memo writers to oversee these rules, but we aren’t very good at actually enforcing them.

Real reform in regulation is essential to a resilient Australian economy, but like taxation reform this is a complex and thankless task for any politician who attempts it.

Sustainability

National objective 7. The Australian economy and our environmental assets will be managed sustainably to ensure the wellbeing of future generations of Australians.

A worthy objective – unfortunately the ideological war that saving the Murray-Darling has become, the bitter argument over the carbon tax and Australia’s rejection of clean tech entrepreneurs makes one wonder exactly where the country can have a competitive advantage in this area.

One rare note of warning with this report identifies sustainability issues as affecting Australia’s ability to supply food to the growing Asian economies. This is a fair warning but its unlikely opportunistic politicians at all levels care too much to distract them from politicising discussion on the sustainability of various Australian communities and industries.

Sound economic policies

National objective 8. Australia’s macroeconomic and financial frameworks will remain among the world’s best through this period of change.

Approaching this section fills one with dread at the prospect with being served up with more hubris wrapped around Australian exceptionalism.

While the section doesn’t disappoint in this aspect, the writers have identified serious weaknesses in the funding structures and regulation in the capital markets. This probably reflects Ken Henry’s background in the Treasury.

The not unexpected emphasis on AAA credit ratings and the size of the Australian superannuation industry make one wonder why we bother with restrictive economic policies when we clearly have the capacity to fund productive national investment.

All the criticisms of the earlier parts of this chapter flow from this bizarre form of Australian Austerity that has crippled investment in education and infrastructure over the last thirty years and ditching that mentality could be the greatest reform of all.

Every objective objective in the chapter is worthy and true, but state and Federal government actions are acting directly in the opposite direction to the stated intentions of the chapter. The introduction says;

We have made substantial reforms and investments across the five pillars of productivity—skills and education, innovation, infrastructure, tax reform and regulatory reform—and these efforts will continue.

This is not true – in almost every single one of these areas, Australia has been at best treading water. Just in the weeks before this report was released the Federal government’s mini-budget further cut innovation incentives.

The New South Wales government announced in the week the report was released that it would de-skill the state’s workforce even further by following the TAFE “reforms” introduced by Victoria and Queensland which have seen industry training reduced to churing out pointless barista and nail grooming certificates.

At the same time, the regulation “reforms” introduced by successive Liberal and Labor governments at state and Federal levels have followed the 1980s ideologies of gifting assets to ticket clipping managerial and banking classes. Nowhere is this more apparent in the debacle of Australia’s soaring power bills which are becoming a real competitive disadvantage to the nation.

Infrastructure is probably the biggest failure of successive governments, the same corporatist ideologies of the Liberal and Labor Parties of the last 30 years have prevented the construction of infrastructure beyond toll roads which favour the same ticket clipping bankers.

Much of Australia’s core transport infrastructure such as power companies, railways and ports have been sold off to the ticket clippers who have in turn “sweated” these assets by charging monopoly prices while spending the bare minimum to keep them running.

At present Australia has a resilient and productive economy, as did Ireland and Spain before the economic winds turned against them. It’s hard not to think that if a similar report had been written in Madrid or Dublin five years ago the same chapter would have read much the same as Australia’s today.

The big challenge will come for Australia when China, India, South Korea or Japan hit a tough spot.

Even with the rose glass projections of the previous three chapters of Australia in the Asian Century, it’s at least reassuring there are a few notes of warning in this section of the report.

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Australia in the Asian Century – Chapter Four: The outlook for Australia to 2025

Chapter Four of Australia in the Asian Century charts where the economies will be engaging over the next decade.

This post is one of the series of articles on the Australia in the Asian Century report.

Chapter four of Australia in the Asian Century is the critical part of the white paper, describing where the opportunities and risks are for the nation as Asian societies become more prosperous.

In the introduction to the chapter, “Australia’s 2025 Aspiration” is set out as raising per person income to $73,000 by 2025 and the nation’s living standards in the world’s top ten.

While this is a noble target, the underpinning of that good fortune are more of the same;

What will emerge as a result of these opportunities is that Australia’s trade patterns will change, urbanisation will continue to drive demand for resources and energy, and new opportunities will emerge in manufacturing and in high-quality food production. Rising incomes will also provide opportunities for the education and tourism sectors, and for services more broadly.

Iron ore, coal and Liquid Natural Gas (LNG) are the basis of the projections in this chapter which, as discussed in the previous chapter, ignores alternative supplies from Africa, Mongolia and Central Asia along with the efforts of China to reduce energy density while expanding renewable power sources.

Agriculture also has a role as does tourism and education but all of the projections are more of the same 1980s thinking we read in the previous chapter. There’s little that identifies new industries or the evolution of existing export agricultural industries such meat exports.

The identification of risks to this rose coloured outlook skims over any internal issues such as drought, industrial disruption, a continued high exchange rate or any external factors.

While the chapter does note the risk of commodity prices could fall further than expected, the consequences of this are dismissed with an airy reference to Australia’s fiscal position.

While the chapter focuses on motherhood statements about innovation, research and development and ‘complex problem solving’ when looking at the opportunities there are some identifications of the real advantages Australia offers;

Australian society reflects our multiculturalism. Australia’s socially cohesive and diverse nation is one of our enduring strengths. Our nation brings the values of fairness and tolerance to all its dealings in the region and the world.

It’s a shame there isn’t more emphasis on this aspect as this is one of the areas where Australia can add value and has real competitive advantage.

Overall, the Outlook described in Chapter Four of Australia in the Asian Century suffers from the same problem as the previous chapter of applying the 1970s and 80s experience with Japan and South Korea onto the development of China and India.

What’s even more frustrating is the only specific projections are for more mineral and agricultural exports, everything else is wrapped in motherhood statements.

The following chapters look at the specifics of Australia’s development and engagement with Asia over the next decade.

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Australia in the Asian Century – Chapter Three: Australia in Asia

Chapter two of Australia in the Asian Century attempts to predict the development of the region’s economies over the next decade

This post is one of the series of articles on the Australia in the Asian Century report. An initial overview of the report is at Australian Hubris in the Asian Century.

The third Chapter of the Australia in the Asian Century report, “Australia in Asia” attempts to define the role the country currently plays in the region. In some ways this is the most constructive part of the paper in that it describes the lost opportunities of the last 25 years.

Much of the early part of the chapter traces the development of Australia’s engagement with Asia after World War II; Chifley’s post war efforts with the United Nations, Menzies’ engagement with Japan, Whitlam’s going to China, Fraser’s opening to Vietnamese immigration and Hawke’s work on building the APEC agreement are all noted.

Again are the major wars that also formed Australia’s current position in East Asia – World War II, the Malayan Emergency, the Korean and Vietnamese wars – are barely mentioned. This trivialises some of the major influences in today’s complex tapestry of relationships

Of Australia’s closest Asian neighbour, the fall of Sukarno gets a brief nod but Suharto’s removal, the rise of Indonesian democracy and East Timor are all removed from the narrative. There is also no mention of other internal dislocations like the Cultural Revolution or the Indian Partition, all which still have echos today.

In the introduction the Colombo Plan gets a mention and it’s worth reflecting upon its effects.

When I worked in Bangkok in the early 1990s there were a number of business leaders who had been educated in Australia under Colombo Plan scholarships.

That investment by Australia paid dividends through the 1980s and 90s as many of those scholarship students were ardent supporters of Australian businesses and government.

One wonders how today’s students who’ve been treated as milk cows by Australian governments and “seats on bums” to education institutions will feel about the country when they enter business and political leadership positions over the next decade?

The examples of Australian business engagement in Asia are interesting – Blundstone’s is a straight out manufacturing outsourcing story which doesn’t really describe anything not being done by thousands of other businesses while Tangalooma Island Resort is a light of hope in the distressed Australian tourism industry.

A notable omission is how digital media, apps developers and service businesses are faring in Asia. There are many good case studies in those sectors but the writers seem to be, once again, fixated on the trade patterns of the 1980s and 90s rather than success stories in new fields and emerging technologies.

Generally though the description of the Australian economy is again more of the same; a combination of self congratulations on having a government AAA credit rating, hubris over avoiding a GFC induced recession and stating how the services sector has risen to replace the manufacturing that’s been outsourced by companies like Blundstone.

Overall Chapter Three of the Australia in the Asian Century report illustrates the opportunities missed in the last 25 years. Had this report been written twenty years ago it could have forecast a booming relationship in the services and advanced manufacturing sectors. It almost certainly would have included an observation that the days of the Australian economy depending upon minerals exports is over.

What a difference a couple of decades make.

The engagement of Australia with Asia concludes with a look at the changes to the nation’s immigration intakes and demographic composition. This point is, quite rightly, identified as an area of opportunity.

Having Thai restaurants in every suburb and Indian doctors in most country town isn’t really taking advantage of the opportunities presented by having a diverse population and workforce. Chapter Four attempts to look at how these factors, and others, can help Australia’s engagement with the Asian economies.

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Being careful what you wish for

Sometimes its best our wishes don’t come true

Economist Yanis Varoufakis posted the conclusion of his speech to British Euroceptics this week with the warning “the cruellest God is the one who grants us our wishes”.

In a time of austerity this is something we all should carefully consider. Some of these people need to be careful about their wishes;

  • Those renters hoping for property prices to drop 40% may get their wish, but such a crash will leave the economy in ruins and the renters themselves without a job to service their mortgage.
  • Landlords who fantasise about rents tripling, not realising that ripping disposable income out of their tenants’ wallets will also push the economy into recession and hurt their property values.
  • Politicians obsessing about AAA credit ratings without understanding that this locks a government into the narrow, failed ideologies of the ratings agencies – the world’s most incompetent and corrupt organisations.
  • Business leaders demanding that workers be thankful for getting $1 a hour, forgetting that Henry Ford started paying his workers so they could buy his cars and pay executive bonuses.
  • Retired folk reducing their assets to get pensions because “they’ve paid their taxes” who then find life on the aged pension isn’t so great after all.
  • Middle classes urging the government to subsidise their private school fees and medical insurance because “they pay their taxes” and end up paying even more taxes.

Yanis himself is an interesting guy, having amongst other things taught economics in Sydney for 12 years before returning to Greece;

In 2000 a combination of nostalgia and abhorrence of the conservative turn of the land down under (under the government of that awful little man, John Howard) led me to return to Greece.

John Howard himself wished for Australia to return to the “white picket fence” conservative, insular nation of the 1950s. He got his wish and Australians decided they liked the past so much they decided to take the economy back to an 1850s structure of living off the sheep’s iron ore train’s back.

Today Australia’s inward looking and insular with an economy increasingly based upon mineral exports and property speculation. With both the export markets and property prices now wobbling we might be about to find the cost of our wishes being granted.

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