If you always do what you have always done, you will always get what you always got?
Some facts about Australia:
- Manufacturing as a % of GDP: Ranking is 125th (we rank between Ethiopia and Panama) and
- On the Economic Complexity Index, we rank 93rd with Pakistan and Senegal our close neighbours.
- Australia is ranked last among its global peers of ‘developed nations’ when it comes to measuring a nation’s manufacturing self-sufficiency.
- WE RANK AS A THIRD WORLD COUNTRY.
Over the past 29 years, Australia has enjoyed a golden run. We basked in the story that we had over 20 consecutive years of continuous growth, and we had successfully made the transition to a service economy. It was a serious achievement. In reflecting on this, it is evident to me that there are some big unanswered questions. The first was – who decided to move to a service economy and when? I have no recollection of the debate or the conversation about it. I do remember the discussion about Australia being globally competitive -what happened to that? Becoming a service economy- it sneaked up on me!
What was absent from the conversation – two questions:
- What is going to sustain the growth and
- What is the next transition?
It appeared we had reached this exalted status – a service economy – we were there! I found the thinking and conversation both myopic and limited in the extreme.
When Malcolm Turnbull raised innovation as a national issue, it came and went without a blip. No one cared, and after poor results in the election, the suggestion was that innovation did not resonate with the average Australian! Why was that?
My thinking then was that innovation was an essential part of our future – why did it not resonate? I started blogging on innovation during this time and discovered our record of commercialisation was no better than average over time. What also concerned me was the absence of any conversation about the future. The limited debate there was (about the NBN) was simplistic and partisan. We are complacent about the future. “She’ll be right”.
In reflecting on the recent period, it is worth considering that there is no evidence in history that a human system can sustain high levels of performance over long periods. Each system has its time. For now, we must confront some brutal facts. It is over. What we now know is that COVID is the catalyst for a massive tectonic global shift.
- COVID has completely transformed our world at every level
- It is with us for the long journey.
- Australia (the world) is in recession now.
- For us all, it is lifechanging – for some devastating – loss of family – loss of friends – loss of business or livelihoods and income.
We are entering a period of radical adjustment – what will the future hold? COVID is presenting us with multiple issues.
As a nation, we discovered vulnerabilities in our business system. Many to do with our supply chain and our dependence on the international business system to provide us with vital products and services. This issue may have been visible to a few before COVID but in time of ” growth every year” no one cared.
Right now, there is a degree of soul searching about how to manage the economy in this profoundly uncertain and challenging time. The government now is playing a leadership role, and that will continue. What sort of economy do we want going forward and who decides? The business now needs to step up because it is the wealth creation engine in society. In our new future, what role will business play? I have said earlier; we very proudly congratulate ourselves on making the transition to a service economy – so what is the next shift?
From a service economy to what? Do we plan to remain a service economy forever?
What about Industry 4.0 – is that influencing our future?
There are calls for our very modest competence in manufacturing to be enhanced.
When writing my book Innovation in Australia, our inability to commercialise Australian R&D is a significant issue. The absence of a robust manufacturing sector is a part of the problem. Our innovative capability is limited! There are several issues named below:
- Our history of business -industry decision-making
- The low level of manufacturing capacity in Australia
- The absence of robust models of commercialisation
- The number of scientists working in Universities (70%) v Industry (30%)
- Our current government structures
- The absence of a measurement system for commercialising R&D
- Our commitment to lifestyle and recreation (the industrial system)
COVID has magnified the absence of manufacturing in Australia in a way which nothing else could. Some facts which I discovered before COVID but are more critical in the current situation.
- Manufacturing as a % of GDP: Ranking is 125th (we rank between Ethiopia and Panama) and
- On the Economic Complexity Index, we rank 93rd with Pakistan and Senegal our close neighbours.
- Australia is ranked last among its global peers of ‘developed nations’ when it comes to measuring a nation’s manufacturing self-sufficiency
- WE RANK AS A THIRD WORLD COUNTRY.
My question!
Is that the standard we set? Is that our aspiration? Or do we aspire for Australia to be more?
If our Olympic Team came home with results of that standard what would happen? There is a precedent.
- A media frenzy
- National mourning for months
- Calls for heads to roll.
- A Royal Commission
- Possibly the establishment of a Commission – and allocation of resources over a long period.
After the Montreal Games in 1976, what happened? Our performance was below our expectation there was national uproar, and there was action.
In the period of economic restructuring that laid the platform for our recent period of economic growth, there was much conversation about Australia being globally competitive. It did not happen. A quick look at the graph below highlights a small blip upwards in the mid-1990s but then a continuing decline. If Australia was a business, we might plan an exit.
AS a result of COVID, we are discovering that there are areas in our economic system in which we are weak, or we have no position at all. We are now a transparently very dependent on other countries for vital products and services. National Sovereignty is emerging as a national political issue. Discussion about national sovereignty is a new phenomenon in our business or political conversation. There was a time when Australia, global competitiveness was on the agenda. Somehow in the pursuit of low costs, productivity and profit – that issue dropped off the radar – outsourcing to ensure lower costs is still the priority. There was no mention of national sovereignty.
The manufacturing sector graph tells a sad, dramatic story.
In writing Innovation in Australia, it became apparent to me that Australia had deep-seated cultural issues which limited the potential of our becoming AN INNOVATION NATION, one of which was our limited manufacturing capacity. But it was not the only one?
We are a culture committed to lifestyle and recreation!
Future of Manufacturing -where to?
The big question is, does Australia have the will to establish a position as a manufacturing nation. Are we willing to commit to a 50-60-year strategy? The graph highlights the fall in manufacturing for over 60 years. The effort to become globally competitive in the late 80s early ’90s fell into a vacuum for many reasons – lack of will is one. The forces of globalisation with the maniacal pursuit for efficiency, the drive for shareholder value and consumer demand for lower costs has created a system where manufacturing in Australia (and most western countries) is challenging. Manufacturing in Australia dropped off the radar – suffering benign neglect. Left to business,‘ lower costs’ and offshoring’ continues to be the solution?
National Sovereignty – what’s that? And who cares?
Australia, in this scenario, now has to make a choice. There is a school of thought that says, “let the market reign”. Australia’s standard of living has increased significantly over the time manufacturing has declined, so there is no real problem. We are the richest country in the world.
There is an emerging school that says we need to do something – even if it is only to protect our interests.
The government identified several Growth Centres in recent years.
- Advanced Manufacturing
- Cyber Security
- Food and Agribusiness
- Medical Technologies and Pharmaceuticals
- Mining Equipment, Technology and Services
- Oil, gas and energy resources
Also, there appears to be much energy emerging around Space Technology and Defense.
Most of this was in place before COVID, but Australia has significant challenges.
So, what has changed? The COVID – a WAKE-UP call for a complacent nation. And it’s not over.
- Do we have the imagination, foresight, courage?
- Do we have the competence, resilience and mongrel? or
are we so committed to recreation and lifestyle that our Third World achievement is the aspiration?
