“In the ACT we have seen unprecedented devastation. We’ve had the world’s worst air quality for several days, we’ve had a devastating hailstorm causing almost $1 billion in damage to property,” he said.
“We’ve had the largest bushfire we’ve experienced in Territory history with 80 per cent of the Namadgi National Park burned and fully one third of the total land mass of ACT caught by that destructive fire.
“Add to that the coronavirus and the…well documented impacts that is having already on our cities’ two largest export industries, tourism and higher education, and the risk that the travel ban will remain in place for some time now, we are in the most challenging economic circumstances that we have faced I believe since the Global Financial Crisis of more than a decade ago.
“To put some facts on the table, around three quarters of the ANU’s international student intake is still in China. The economic implications of that – around 4000 students, in a city of 425,000 people – is very clear not only in the lost income for the university sector, but of course all of that consumption and expenditure in our economy.
“I know that our universities…are working very hard to minimise the disruption, but clearly the longer this travel ban is in place the more significant the economic impacts are going to be for our region particularly as, on a per capita basis, we are Australia’s greatest service exporters and in the higher education sector in particular on a per capita basis there is a country mile between Canberra’s education service exports and that of any other state or territory, so this is very significant.
“It is still too early to quantify the impacts of these cumulative economic shocks but we will continue of course to actively monitor the situation and adjust our policy settings and lobby for the Commonwealth to do the same as more information becomes available.”
Focusing on the positives, Mr Barr said they have the capacity with assistance from the Commonwealth to continue the program of public investment to build the infrastructure the growing cities need to address some of the productivity challenges.
“The ACT economy now generates $42 billion in economic output,” he said.
“Now is the time for a bit of a push along from the Territory Government and we hope from the Commonwealth.
“As we look to where our economy will grow over the coming years, I’ve been encouraged by the fact that 18 of the 19 industry sectors in the ACT grew in the last 12 months – the only one that didn’t was our mining industry.
“Growth has been diverse, 60 per cent of all the new jobs created have been outside the public sector.”
Mr Barr also highlighted population, the delivery of efficient government services including health and education, and infrastructure as other areas of growth.
Local and global economic opportunities
Commonwealth Bank Managing Director and Chief Economist Michael Blythe spoke on Australia’s economic outlook for 2020 and said that the one word that summed up the last 12 months was ‘uncertainty’.
Mr Blythe said that with the US-China phase one trade deal and Brexit moving forward, some uncertainty had eased at the end of 2019, the impact of ‘near biblical events’ including the spread and threat of coronavirus as well as bushfires and floods had seen uncertainty on the rise again.
“Those major bushfire-affected regions account for around about 3.5 per cent of the Australian economy or getting close towards 4 per cent of employment,” he said.
“The rough rule of thumb here is well 10 per cent drop in activity in those regions is going to knock 0.3 per cent off GDP growth as it occurs.
“That’s a reasonable impact to absorb and the economy is only growing at a fairly modest pace anyway.
“What you find though is that is where the analysis ends.”
Mr Blythe said that the usual forecasting rule is that whatever you lose on the way down you do tend to regain on the way up.
“When you dig below the surface of these numbers as well, the structure of the economy in these regions will work in a way that helps to reduce the potential impact on the broader economy,” he said.
“Roughly one third of employment in those regions is in the public sector related. Those people their jobs will continue, their incomes will continue, they will probably be busier than ever.
“Ten per cent of jobs in those regions are in construction and clearly, they are going to be very busy from here during the rebuilding phase of things.
“What you’re left with is the area left most exposed, what you could call the tourism side of the story – so parts of retail and the direct tourism aspect of it and that’s about 20 per cent of the economy in these regions.”
Focusing on tourism, Mr Blythe turned to coronavirus and said that in comparison to other epidemics, social media is much more pervasive and “is magnifying the impact in a negative way.”
“When you’re thinking of the impact on Australia, the focus is right now what sort of reduction are we going to see of foreign tourists coming to Australia for a holiday particularly from China given how important it is for that part of the market.
“We are going to see a negative impact on tourism no doubt about it.
“The reality is far more Australians go overseas for a holiday than foreign tourists come here and Australian appetite to travel overseas is also going to take a hit from these events.
“All those people who were going to take a holiday, they’re not just going to give up, they’re not going to sit at home, they’re most likely to go on a domestic holiday and that additional spending I think will be a very powerful offset to the fewer arrivals we’re going to see coming in from the rest of the world.”
Speaking on the impact of the US-China trade war and phase one deal, Asialink Business Chief Executive Officer, Mukund Narayanamurti, said there are some very significant impacts on Australia’s trade outlook which should be recognised.
“As part of the phase one deal many of you will be aware, China has about 105 commitments, there are about 85 joint commitments and there are five commitments that the US has committed to,” he said.
“The phase one deal is structured across eight chapters and unsurprisingly the first few chapters are what everyone has known the trade war was all about which was about technology and intellectual property.
“But it’s chapter six on expanding trade that gives us the impact that the trade war is actually going to have on Australia over the next 12-24 months.
“What we know is China has committed to grow its imports from the US in energy products, in agricultural products, in manufacturing goods, and in certain areas of the services sector from $92 billion to $200 billion over the next two years.
“In LNG, in coal, in cotton, in cereal, areas in which Australia is a major supplier to China, there could be potential impacts.”
Mr Narayanamurti also discussed Australia’s relationship with India, stating that “India is not the next China, India is the next India” and therefore should not be looked at as a diversification strategy from China but as part of a separate growth strategy.
Mr Narayanamurti said that Australia needs its own economic strategy for India as well as free trade agreement and highlighted the work offered by Peter Varghese AO on the Australia-India economic strategy.
“This provided the narrative and set of long-term opportunities for Australia to consider in the context of that market he said.
“A trade agreement…will enable certain elements of that strategy but it is not a strategy.”
IMD Business School Professor of Finance Arturo Bris discussed the concept of economic competitiveness.
“At the core of the concept of competitiveness lies the idea of productivity. We need to be a productive economy.
“Competitiveness is the ability of a nation to generate prosperity through productivity.
“Over the last 70 years the world has achieved amazing levels of productivity.”
Mr Bris said this was due to advancements in technology and innovation.
“We live in the best of our times. But productivity has not increased almost at all in the last 10 years,” he said.
“If you look at any country, developed market or not…increases in productivity per decade have been declining.
“This means that in the last 10 years where we have had the most intense and impressive round of technological innovation, our productivity has not increased.
“This is really shocking, because in a world where we can produce more with less – at least this is what technology should help us do – in fact productivity has not increased.
“This may not be a problem if our prosperity has increased.
“Productivity determines salary levels. This is the beginning of prosperity.
“In Australia because productivity has not increased salaries have not increased either. In the last five years, salaries in Australia have grown by an annual rate of 0.2 per cent in real terms.
“This basically means that the average Australia lives today as well off as they were living five years ago.
“This means your competitiveness has not increased.”
Mr Bris said the risks Australia faces is trade concentration on a single partner, weaknesses in the private sector including entrepreneurship and the lack of agility that facilitates digital transformation. Mr Bris also said that Australia should focus on the attraction of talent and people to the country and building partnerships between the private and public sector.
Education panel: meeting the needs of the future workforce
In discussing what skills are needed to equip students for future career prospects, Universities Australia, Chief Executive Officer, Catriona Jackson said it’s important to not “throw the baby out with the bathwater” in this discussion.
“I think the system we have now is not doing a bad job at all of providing loads of options, it doesn’t mean we can’t move and change and get better, but I think it is a furphy to think there is some sort of inherit rigidity in the system currently because that’s not true,” she said.
“I think universities and I would say this about other forms education as well are actually pretty good at disrupting things.
“Our leading academics really push the envelope and they are the people setting the standards inside institutions that teach students how to think as well as fill them up with a whole lot of facts. I think that sets young people up with an extremely good toolbox to draw from.
“I think there are some structural things we can do to transition between bits of education better and easier but it’s very important to be careful about the way you do that, so that you don’t underestimate the importance of long, hard contemplative study…for really gaining sustained knowledge – the kind of knowledge employers want, the creative thought, the sort of elastic brain sort of adaptability, the sort of resilience we need.”
ACT Education Directorate Director General Katy Haire discussed the role of professional development for teachers in equipping students for future requirements.
“The things that makes a difference in a child’s educational outcomes – 50 per cent of them are in the home and the other 50 per cent are in the school and the majority of the school factors relate directly to the teaching in the classroom,” she said.
“Those professionals are the most important part of how we can improve educational outcomes.
“What we know from the best systems in the world is there are three things that are required to have a professional teaching workforce that has the capacity and opportunity to change and continue to grow.
“One is a focus on enquiry so constantly looking and examining their practice. The second is an approach to collaboration and the third which underpins it, is what’s called an open to learning approach.”
Ms Haire shared an example where groups of teachers observe each other working and provide constructive feedback on how the teaching and learning is occurring in the classroom.
“To do that you need high levels of trust and you also need to give professionals the time to build the models and the skills to undertake that really complex professional practice together. And I think that’s where the role of policy makers comes in, providing those constructs and here in the ACT for example, we’re also from June this year, going to ensure that all primary teachers have an additional 30 minutes of planning time which they can spend together doing that kind of deep professional enquiry and collaboration.
“That’s where the system comes in, really enabling what we know professionals need to make a difference.”
Speaking on the role of vocational education training, Canberra Institute of Technology, Chief Executive Officer, Leanne Cover said the system operates as an ecosystem and said that the connections are critical.
“We take our responsibility with the institutions that are our colleagues and with the industry that we are serving, as an ecosystem. We don’t isolate and categorise, wherever we can we think about those connections between the sector,” she said.
“You may not know that the curriculum if you like that CIT teaches that all VET institutions deliver that curriculum is developed by industry. It’s called a training package. That training package, the units of competency that are in those training packages are formulated by many of you in the room through your various advocacy and lobby spaces that you contribute into.
“You absolutely dictate what happens in the classroom everyday although you may not realise that.
“If we’re not of value to you then we’re not of value to individual students, and we are not of value to the community we serve.”
Speaking on the NDIS, recently appointed Chief Executive Officer Martin Hoffman said, “the Productivity Commission estimates that the scheme will be responsible for about 90,000 new jobs in the disability sector over the next five years.”
“That means the number of people employed in the sector will almost double, from 100,000 to 190,000.
“This represents one in five of all new jobs created in Australia over the next five years.
“As the purchasing power shifts from block funding by governments to individuals, new and innovative businesses are being created. The opportunity is perhaps the largest in remote and rural areas of Australia where the market for disability services has traditionally been thin.
“Since the start of the Scheme, 13,986 providers have supported participants.
“For example, there have been a range of new providers who have entered the disability market including platforms to match NDIS participants with support workers such as HireUp, Mable, Home Care Heroes and CareSeekers.
“These different platforms engage support workers in different ways, some employ support workers directly and others provide access to workers who have set themselves up as independent contractors.
“In many cases, supports engaged via online platforms are at a discount to the standard NDIS price guide, because the online platform provides savings to the service provider from reduced overhead costs and advantages from technology. This means more support hours for less money for the NDIS participant.
“We are also working hard to ensure better access to employment for participants.
“Today, 83 per cent of all people with disability in Australia are not in the workforce.
“That places us at number 21 out of 29 OECD counties for employment of people with disability.
“This is not good enough.
“But we also know that for individuals, economic participation means so much more than just getting a job. It becomes part of our identity and gives us a sense of belonging. Working can unlock the door to becoming truly independent and we all have a right to seek independence through work. It also has major consequences for the health of the economy.
“Participation, alongside population and productivity, is one of the three P’s of economic growth.
“As part of our Participant Employment Strategy, we are committed to increasing the number of working-age NDIS participants in meaningful work from 24 per cent to 30 per cent by 2023.
“We have developed an implementation plan to support participants to enter the workforce and find employment that suits them.
“The strategy also sets about increasing market innovations that improve the path to paid work and improving confidence of employers to employ NDIS participants.
“The NDIA also takes a strong leadership role by leading by example as an employer of choice for people with disability. At the NDIA we have 12 per cent of staff who identify as having a disability, this is more than the public service average but again we need to do better.”
Economic and Political Overview
The event was part of the national series to launch the Economic and Political Overview report. Read and download the report here.
World Competitiveness Yearbook
Each year CEDA partners with the IMD Business School as the Australian partner for the World Competitiveness Survey and release of the World Competitiveness Yearbook. Take a look at the 2019 results here.
Australia-India economic strategy
As mentioned Australia-India economic strategy in Mukund Narayanamurti’s address which was launched at CEDA’s 2018 event. View more about the strategy from Peter Varghese AO here.
Published 20 February 2020