At the CEDA Board of Governors meeting on October 25, Governors discussed significant issues affecting Australia's economy today. The Board of Governors meet biannually to discuss significant issues confronting Australia. They drive CEDA's agenda and highlight key economic issues.
The issues mentioned were:
- The current nature of Federal Government, the hung Parliament and implications for long-term policy reform
- Implications of the current resources boom, its longevity and the desirability of a sovereign wealth fund, as well as the need to develop policies to value-add prior to exporting
- Current international political/economic conditions, particularly in the US and Europe and the implications for Australian banks and the economy generally
- Dearth of political leadership in Australia, the need to revisit how Australia structures and recruits its future leaders and the role of government in a differently evolved global economy
- Australia's infrastructure requirements, in cities or for resource projects, and potential funding options including better structured Private-public partnerships
- Energy white paper, to be released in late 2011 and its implications
- Future energy strategy for Australia explicitly excludes any reference to nuclear power. Treasury officials are getting others to deliver by the middle of the century an outcome that the Government can live with that requires an assumption that emerging technologies such as geothermal, solar, thermal, carbon capture and storage will collectively contribute more than enough of Australia's energy needs by the 2050s. None of them are viable today.
- Rise of the developing world and the lack of leadership from the developed world.
- Implications of domestic economic conditions, including a household sector that is saving and a business sector that is investing
- For national resource projects any successful campaign to buy Australian-made products has to rely on a market that is competitive, otherwise it will see a "dumbing-down" of the Australian economy.
- Australia is not training enough innovators - scientists and engineers - who are needed to meet the country's infrastructure needs. Only eight per cent of university graduates are engineers or a similar degree. However, in South Korea and China the percentage is between 35-50 per cent.
- There is a lack of trust between the business and Government which spreads to the public service.
- A five-year plan needs to be articulated with key priorities including, infrastructure, productivity, comprehensive review of tax, major drive to reduce compliance and red tape, skills training and development and workplace flexibility.
- Australia is on a path of complacency. The country needs to make hard decisions to improve its competitiveness. The only thing that can make Australia strong in the future is to be competitive.
- Implications of the Carbon Tax on Australian industry- no more smelters will be built in Australia.
Rise of China and its implications for Australia was also discussed, with the following points made:
- China and Australia's interdependency is tightly linked
- After the death of Mao the Chinese wanted to make China great again
- China has a great history, on the world scale it is very significant and it wants to rejuvenate its position again. It is still suffering the psychological wounds of its colonial past
- It is very pragmatic - what the Chinese wanted was clearly defined and they went out to get it. China realises that its goals will come to fruition later rather than sooner
- China does not have the capacity to challenge the US militarily, mainly due to an inferior navy. Instead it is making its way via economic means.
- In another decade the Chinese economy will be equal to that of the United States
- Companies can make money in China. Retail and the services sector can do well as long as people understand the Chinese mass market which is the growing middle class
- Even though China is currently an important market for Australia now, in a few years India could surpass this
- The Chinese are now doing in Africa what the European colonial powers did in the nineteenth century - ensuring for themselves the supply of raw materials which they need in absolute terms and to keep the BHPBs and Rio Tintos of the world honest
- Australia should welcome Chinese investment as it expects the Chinese to welcome Australian investment in China.
For CEDA member access to meeting notes click here.