Opinion article

State of the Nation: The new economy - how do we get there from here?

In this piece originally published on The Conversation, Professor Mardi Dungey discusses transitioning to the new economy after discussions at CEDA's State of the Nation conference.

The 2015 CEDA State of the Nation Old Economy/New Economy conference posed the question to delegates of what the new economy might look like and the challenges in getting to it.

The real answer to what the economy might look like in 30-50 years is that none of us really know. However, that doesn’t mean that we shouldn’t address the challenges facing the economy and society in locating ourselves as well as possible to take advantage of the opportunities that will invariably arise.

In my comments to the State of Nation conference I decided to use one word to sum up the necessary features of the future, and that is “nimble”. Throughout history our economy has been refocused by a global environment which is largely outside our capacity to control – rapid shifts in terms of trade are not a new feature. What we need is the ability to respond quickly and adroitly.

This has quite a few implications. First, when we talk about labour productivity perhaps we should be thinking about the ability of labour to re-purpose quickly, to be able to actively transfer skills from one problem to another without serious damage to either the individuals and families caught in transitions, and without threatening our fiscal sustainability with long term support for unemployment or industry assistance through periods of adjustment.

This requires significant thought as to what the future worker might look like and how we might actively invest in skills development through our education sector.

The education system is one of the most important levers we have in adjusting our productivity. The CEDA conference delegates spoke repeatedly about the need for more investment in STEM-based (science, technology, engineering, mathematics) skills for all levels of education.

I would like to push further in this direction by suggesting that we need the future workforce to be skilled in both the evidence-based decision making and technical development skills that STEM promotes, and equivalently to recognise that these need to be coupled with skills for understanding and promoting decisions in a social context. Also, that innovation requires creative skills that are lurking in unopened corners.

Encouraging both the creative and technical aspects of education will allow Australians to be the leaders in the development of new ideas, rather than the followers. Think for example of the great merits of; the engineer who is fluent in Chinese; the biochemist who understands patent law; the mathematician who communicates with the fluency of an actor; the economist who understands marine ecology; the visualisation skills of an artist combined with physiotherapy.

And these are people who already exist – but they are the exceptions not the rule, and often did not acquire all of their distinct skill sets within the formal education sector.

While the education sector, including tertiary education, are making steps in this direction with breadth units and combined degrees, this needs to become the norm. Specialisation by division into STEM and other areas will result in missed opportunities.

My advice to those seeking to obtain an education to set themselves up for a productive, job-ready life of varied employment and opportunities, is to get skills in STEM areas and something else.

Addressing opportunities for education remain key in addressing inequality. We face decisions about income inequality, wealth inequality and intergenerational inequality. We can address these issues, but we need to decide on our priorities and communicate clearly to the politicians how much we value them.

Reform of the tax system should be undertaken with this in mind. A good example is the discussion on land taxes, which is a relatively “good” tax in terms of its efficiency. The biggest problem it faces is that it is politically scary.

However, if we wish to provide even a reduced menu of the current government services on offer in a fiscally sustainable manner, while promoting a competitive environment for the companies which drive employment, we must broaden the tax base at the same time as we consolidate spending.

And while there are undoubtedly more savings which can be made in the fiscal sector, it is almost inevitable that we will wish to pursue projects such as education, infrastructure, environmental issues, health and aged care. Tax reform and the widening of the tax base are necessary. We need to decide to get on with it.

By sending a strong message to politicians that Australians care about our long term goals, even in the short term, we can encourage our politicians to have courage. We require our political leaders to shape and progress our agenda beyond the individual electoral cycle. Solely short-term behaviour should result in short-term political tenure.

Professor Mardi Dungey was a keynote speaker at the CEDA State of the Nation conference, held on June 22 in Canberra. For more news from State of the Nation, click here.

This article was originally published on The Conversation. Read the original article.

About the authors

Mardi Dungey

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Mardi Dungey is Professor of Economics and Finance at the University of Tasmania, a Senior Research Associate at the Centre for Financial Analysis and Policy at the University of Cambridge and Adjunct Professor at the Centre for Applied Macroeconomic Policy at the Australian National University.

Mardi is currently a co-editor of the Economic Record and an Associate Editor of the Journal of Applied Econometrics and the Journal of Asian Economics.

Mardi is a member of CEDA's Council on Economic Policy. Click here to read Mardi's full biography.

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