Never forget Asia is site of our future prosperity
If Australian businesses are to create wealth and generate new jobs, now and in the future, then we must be internationally competitive. Governments have a key role to play by providing the policy settings that set the rules of the game.
The Group of 20 meeting in Mexico this week will focus on policy reforms to improve competitiveness and support stronger economies. It has rightly identified the need for governments to share ideas and encourage each other to boost confidence and encourage growth.
The kind of reforms that will be discussed include workplace relations, taxation reform and education and skills, as well as reducing barriers to cross-border trade and investment.
Importantly, business will have a voice in the broader G20 discussions through the parallel business summit, known as B20. Australia is represented by John Denton, a member of the Business Council of Australia's board and a partner and chief executive of Corrs Chambers Westgarth.
Australian businesses recognise that when it comes to the G20, we have to balance our traditional links to Europe with our emerging economic and broader relationships in Asia and the Asia-Pacific. We can look to Europe and recognise that we have performed well in comparison, and that many of the policy reforms we should be starting to address here are those that were neglected for too long in Europe.
The danger is that we can be lulled into thinking we are an example for others to follow, and can use the G20 to teach rather than learn. But as we pat ourselves on the back for doing so much better than poorly performing economies, our real competitors are focusing on the main game and threaten to overtake us.
The only real choice Australia has is to look to the Asia-Pacific and recognise that this is the region in which we have to compete. It is here that our point of reference should be when it comes to international comparisons.
While our most recent headline growth figures are good, our productivity and relative competitiveness results over recent years have been disappointing. The high dollar has brought previously papered-over structural weaknesses in our economy into sharp relief. It is increasingly apparent that these weaknesses are eroding our competitiveness.
These weaknesses include:
Our high cost structure and low productivity.
Many industries, including those in the manufacturing and services sectors, are finding it difficult to attract investment.
The new competitive landscape in Asia, and the Asia-Pacific more broadly, involves rapidly growing economies undergoing structural change, driven in large part by the emergence of a dynamic new middle class. We need to recognise that we are part of this changing competitive landscape.
Seven of Australia's 10 biggest trading partners are in Asia.
These changes have taken place over a long period of time, but have accelerated in recent times.
Being a stable democracy is certainly helpful but its advantages only take us so far.
The Business Council wants Australia to continue to be a high-wage economy, but this can only be achieved through higher productivity. This requires leadership by government, business, unions and others that emphasises a longer-term focus on policy settings. It requires us to learn from what other governments, especially those in the Asia-Pacific, are doing.
We need a practical strategy to enable growth and diversity in our engagement. First, and most importantly, our focus has to be on our domestic competitiveness and how we shape up against our competitor countries.
For all economic sectors, this means pursuing difficult, longer-term reforms, including:
Effective policies for national infrastructure planning and delivery, including proper cost-benefit analyses.
An efficient taxation system, with tax rates that compare well with our competitors.
A flexible workplace relations system.
Access to skilled labour through effective training and workforce development, in combination with flexible and responsive skilled migration policies.
Making sure that regulations are properly developed, with regulatory impacts considered.
Improving our international competitiveness also means looking at our external priorities.
We need to continue pressing foreign governments to remove or lower trade and investment barriers.
There is a need for the G20 to give a higher priority to requiring genuine progress with trade liberalisation, especially the global trade negotiations where the Minister for Trade, Craig Emerson, has led trade ministers in overcoming an enormous impasse.
If we are to make genuine inroads into improving competitiveness, we must approach the G20 with a genuine commitment to reform our domestic and international trade and investment policies.
We need to make sure we avoid the temptation to approach the G20 with a sense of national self-satisfaction. Australia should always be mindful of where we can improve. Past generations of Australians have always taken that approach and future generations would expect nothing less.
This is the right time to move on structural reform and to work with other countries to do the same.
Tony Shepherd is president of the Business Council of Australia.