Innovation needs a competitive economy to thrive

July 30, 2018
The AFR View
The first day of The Australian Financial Review Innovation Summit held in Sydney yesterday reinforced the logic behind the Turnbull government’s economic plan to make Australia more competitive by cutting company tax rates and sharpening the incentives to work, save, invest and hire. The world is changing, the pace of that change is accelerating changes in the way we work, and in the jobs market, as competition can now come from literally anywhere, not just traditional competitors. Old supply chains are being reshaped as artificial intelligence and robots replace employees in workplaces such as Amazon fulfilment centres. Australia Post is trialling robots to deliver parcels when its posties aren’t working. Low-skill work is being redefined to require, well, different skills. And competitor countries around the world are slashing company taxes to win their share of footloose global capital. That’s why the pace of economic reform must be accelerated: to place Australia in the best possible position to take advantage of the technological change wrought by innovation, and minimise the disruption as the economy changes.
Yet an immediate political danger is now being posed to the Turnbull government’s positive, if modest, reform agenda. Saturday’s byelection result, particularly in the south-east Queensland seat of Longman – a former stronghold seat for Howard battlers – saw the Liberal Party bleed votes to One Nation on the right and Labor on the left. Now voices are emerging, including from former prime minister Tony Abbott, that the government should give up on its company tax cuts, because the result showed that voters don’t like them
But Longman is not a typical seat, as documented in full colour by Aaron Patrick in AFR Weekend. Its largest centre, Caboolture, is underpinned by welfare, disability cheques and a Trumpian disdain for political elites that many locals feel have left them behind. Even the local newspaper called Caboolture a “dole bludger capital” on account of having the worst record of unemployment recipients turning up to job interviews or work-for-the-dole appointments. In this One Nation stronghold Malcolm Turnbull, Sydney lawyer, sophisticate, multimillionaire merchant banker and cosmopolitan social liberal, represents all that many locals simply hate. Mr Turnbull inadvertently exacerbated that general view in the lead up to the July 2016 election by proclaiming that “disruption is our friend” and should be embraced because “the Australia of the future has to be a nation that is agile, that is innovative, that is creative. We can’t be defensive, we can’t future-proof ourselves”. When he said that, all voters in seats such as Longman heard was “job losses” and the promise of an Australia they didn’t know and didn’t like. To date, Mr Turnbull has never been able to connect with these sorts of voters.
Yet an economy that can generate new jobs is the best guarantee of social continuity amid a changing world. Minister for Jobs and Innovation Michaelia Cash told the Summit that despite the predictions of mass unemployment when the car industry in Australia finally closed in late 2017, 80 per cent of workers affected have either found new jobs, are studying or took the opportunity to retire. One reason for this relatively smooth transition is that the Australian economy generated more than 400,000 new jobs last year, over three-quarters of which were full-time. Artificial intelligence might be coming, but it is not going to simply take Australian jobs. But the jobs will be different.
And a complacency and even sense of entitlement among Australians remain. Tim Reed, CEO of MYOB, cited figures showing that although most workers think they need to upskill, half of workers said they were not prepared to spend their own money to do so. Small wonder that Bill Shorten has found fertile ground for his redistributionist and fairness agenda, if half the working population are not prepared to invest in their own income-generating capacity.
Yet the picture remains complex, and change is never as linear as expected. So, just opposite the Summit in the Sydney CBD, internet giant Facebook was running ads on bus stop hoardings explaining why it isn’t a purveyor of “fake news”. Not exactly a disruptive, artificial intelligence-led marketing campaign.