In the post mining-boom environment, Australia's economy will face significant challenges to remain competitive, particularly internationally. However, with the right economic reform and a long-term bipartisan plan and approach, our economy can reduce the impact of the shift occurring.
One of the keys will be through improving productivity, particularly in the short to medium term, an area that has been talked about a lot in recent years but has had little momentum during the mining boom. The productivity agenda is too important to simply come up with short-term thought bubbles; we need a focused long-term reform agenda.
CEDA has undertaken a major research report - Australia Adjusting: Optimising National Prosperity - due out in November, which looks at this very area.
What this work has found is that to improve productivity, we need to look at three key areas - creating economic flexibility, incentivising innovation and building the capability of our workforce.
Looking at economic flexibility in particular, we know from our research that two key areas that need to be examined if we are to make progress is reforms to our taxation system and making infrastructure investment more efficient.
Micro-economic reforms around our taxation system will make us more internationally competitive. This is vital because we can't forget that a significant amount of the capital we source for major private-sector projects comes from outside Australia, so we need to be seen to be a good investment option.
Reforms should also focus on the balance between ensuring our government has the revenue base to deliver the services needed by the community for the long term, while making sure the system is still efficient and fair.
Infrastructure investment of government is another key area that needs a significant focus.
We need a long-term plan with bipartisan agreement of the major infrastructure projects needed for Australia's future.
That does not mean promises for the never-never, such as a fast train between Melbourne and Sydney in 40 years. What it does mean is more significant infrastructure projects, such as the second airport for Sydney at Badgerys Creek, need to be a priority.
The second airport at Sydney is a prime example of the issues with major infrastructure projects in Australia. The economic benefits to people in the Western suburbs, and to the economy more generally, should outweigh the concerns, and both the federal and state government should stop dithering and make firm commitments.
Creating efficient access to our cities should be a key priority in determining projects, but what we need is genuine commitment, including funding, to long-term projects that also have realistic and reasonable time frames attached.
Currently, public infrastructure investment is still too much the play toy of politics, with plans and priorities such as roads versus trains changing with the political cycle, or trapped in protracted federal/state negotiations.
Infrastructure is too critical to play politics with, particularly now, as it has significant potential to replace some of the investment as mining drops away. But given the time required to deliver major infrastructure projects - something that also needs to be examined, given the speed at which projects seem to be able to be executed in neighbouring countries - the reality is we need to be signing up to major projects now.
The other important part these projects will play is ensuring that we make the most of the mining activity still being undertaken. The right investments can deliver large productivity gains by delivering our resources efficiently to our ports and our ports being able to efficiently handle the volume of resources coming through.
How these projects are funded also needs to be a key consideration, with public-private partnerships likely to be critical. Of course, they need to be executed well, something that has not always been the case.
With the federal election nearing, genuine and clear commitments to the economic reforms we need to improve productivity and protect the strength of our economy have been light.
If the major parties want to prove they are fit to lead this country prosperously into the future, then they should be making a commitment to implementing the changes necessary to improve the flexibility of our economy.
This opinion piece by CEDA, Chief Executive, Professor the Hon. Stephen Martin was published online by The Australian Financial Review on 6 eptember, 2013.