Print this pageThe future of the Australian economy
Today big challenges confront the Australian economy: the reality of ongoing economic change and competition, the ageing of our population, climate change and the continued projected expansion of China and India among them. We must be ready, and must devise ways to grasp the opportunities presented in a way that reinforces our national values of opportunity and fairness.
The answers lie in fresh ideas that can make our economy more flexible, productive and participative, allied to a macro-economic framework that can sustain strong growth without fuelling inflationary pressures.
The need for these ideas is becoming more obvious with every passing day. In an integrated world where economic opportunities and problems flow freely from one hemisphere to the next, the need to build a robust, resilient and flexible economy is more pressing than ever before.
We therefore need to ask:
- How do we harness our existing talents and build a more modern, productive and flexible economy capable of meeting future challenges?
- What new economic opportunities loom on the horizon – and how do we seize them?
Specific ideas will be needed to help raise Australia’s human capital. In a world where human capital, participation and productivity are crucial, our workforce participation rate is only in the middle of OECD rankings and the pace of productivity improvements has been slowing over recent years.
Other new ideas will be needed to direct investment into infrastructure, especially where it is constraining capacity. The challenges are all too obvious. In Australia the proportion of GDP devoted to infrastructure investment has fallen from around 8 percent in the 1970s and ‘80s to around 4 percent today, leading to massive shortfalls in areas like road, rail, water, gas and electricity, totalling an estimated $25 billion. Inadequate port capacity especially is leading to export bottlenecks.
Such problems will only potentially be made worse by significant projected increases in traffic congestion, electricity demand and freight haulage.
A big question for the Summit is therefore how to get both new and existing infrastructure to work harder. How do we remove barriers to investing in infrastructure? How can we best harmonise the quality infrastructure we already have?
The good news is that necessity can be the mother of invention and opportunity, especially when it comes to key economic challenges like responding to climate change and the digital economy’s continuing growth.
Simply put, our current energy mix is too carbon intensive for the era of global warming. For instance, hydro and other forms of renewable power make up only around one-tenth of our energy use. Despite this, we are well positioned to succeed in areas where demand is set to increase through the introduction of an emissions trading system. So new ideas will be needed to exploit our potential in areas like: carbon capture and storage; geothermal, solar and other renewable energy sources; and eco-system services – all of which have huge export and job creation potential that can benefit every Australian.
In the digital economy, our broadband penetration is ahead of the OECD average, but our download speeds are well below it. New, clean export industries and jobs beckon if we can increase connectivity, develop everyone’s ICT skills, boost confidence in our E-networks and rapidly expand our content creation industries. These are key issues for us.
Australia ’s genius has always been our ability to grow and prosper fairly. The challenge is to continue this by creating an economic future that allows more people to both participate in wealth creation and share in its benefits.
Background paper
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