Easy miles may be behind us – comment by CEO Craig Robertson

The Prime Minister last week raised the prospect of the other side. He was not proselytising his faith but more the task facing Australia in recovering from the massive economic impact from the COVID-19 hibernation strategy.

Government ministers are talking about growing economic activity to generate jobs and revenue, but raising personal or corporate taxes to help pay down the debt seem to be off the cards. It appears to be a pro-business, low-tax strategy.

There are some complications on this front. I am not an economist (as you no doubt realise) but for the past decade or so our economic strategy has rested on population growth and export, both of which are strangely intertwined.

Michael Janda, the ABCs business correspondent pointed out in October last year that Australia’s economic growth for the year to June 2019 was 1.4 per cent and population growth was 1.6 per cent. As he said, “it doesn’t take a mathematician to work out that if the population hadn’t grown that strongly Australia’s economy would have gone backward because every person you add to the economy consumes more, works (and) adds to the overall pie”[1]

Skilled and temporary migrants, including the ever-increasing rate of international students form a substantial part of our growth. Average population growth in Australia over the last few years has been about 1.6 per cent per annum, or around 400,000 people, with migration making about 60 per cent and births forty per cent.

Of our top four exports – iron ore, coal, education and gas – two are in jeopardy. Coal exports are under pressure over the longer term as concern for global warming rises and the virus may limit travel of temporary visa holders to Australia for at least the remainder of 2020 and 2021, if our treatment of current temporary visa holders here in Australia doesn’t scare them off. Spot the problem?

Last September, the Centre for International Development at Harvard University released its Atlas of Economic complexity which ranked Australia 93^rd in the world, between Senegal and Pakistan. The rank is based on the value-add of exports. As Aaron Patrick of the Australian Financial Review said at the time, the “enormous wealth generated by iron ore, coal, oil and gas masks, and probably contributes to, an economy that has failed to develop the industries needed to sustain its position among the top ranks of the developed world.”[2]

The Centre concludes that a country’s productive structure can be understood as a combination of two processes (i) that by which countries find new products as yet unexplored combinations of capabilities they already have, and (ii) the process by which countries accumulate new capabilities and combine them with other previously available capabilities to develop yet more products.[3]

Where does that leave the pro-business strategy? Australia ranks poorly on innovation, and higher education ranks one of the lowest OECD countries in its engagement with industry.

There’s a good starting point though. TAFEs have a rich history of engagement with industry and businesses, across the nation. Their role is far more than the inert delivery arm for training packages.

National Cabinet was told by the Governor of the Reserve Bank and head of the Commonwealth Treasury that it cannot be business as usual on the other side. A normative view would have vocational education, just like higher education, as the means of acquiring new capabilities (new knowledge and skills) to combine with available capabilities to develop yet more knowledge and skills – in the mind and hands of individuals. That’s where product and service sophistication comes from.

While it may be hard miles, the sector cannot return to business as usual beyond COVID-19.

I am now proselytising, with a faith based on what I have seen  – TAFEs adapting with new models of delivery in this present crisis, just as one example – and they can be a key agent for a pro-growth strategy, with a human side!

I will return to the tax issues in weeks to come.