Speech to Australia Unlimited 2008 Roundtable, 29 October 2008, Melbourne
29th October 2008
Thank you for the opportunity to be here
This is an important gathering and the Global Foundation does us all a service by helping to link Australia’s public debate to the most important developments around the world.
I do not want to re-tread ground that you have covered during the last two days.
Instead I want to talk about a defining theme that runs across the different challenges and opportunities that you have discussed.
I want to talk about why productivity matters more than ever.
And I want to talk about why taking productivity seriously requires that Australia makes full use of its most precious asset – our people.
The focus of your dialogue shows that Australia’s domestic challenges – of sustaining economic growth, responding to climate change and building an inclusive society - are absolutely bound up with our international outlook and engagement.
Around a million Australians are living and working overseas.
Education is our third largest export industry.
Our producers of minerals and commodities are supplying the transformation, through industrialisation, of many parts of the world, most notably China and India.
But the two most dramatic phenomena that prove our interdependence are the current global financial crisis and climate change.
We are immediately affected by developments in the wider world.
Current circumstances give us a potent reminder of the power of globalisation.
But the recent events have also shown how important it is that we continue to make our own choices and take action here in Australia to keep our economy strong.
Today’s confronting problems mean we face tough and uncertain times.
The emerging challenge is twofold.
The immediate priority is to meet the threat of global downturn brought on by the credit crunch. Then, our priority over time must be to focus on what will strengthen the Australian economy.
We must move towards a low carbon economy, seize the opportunities of a global marketplace and we must recognise that there is no neat divide between economic and social policies. For the Rudd Government our economic actions and social investments are made on the basis that together they will deliver our aspirations for a fair and engaged society.
Our social, environmental and economic performance are directly intertwined.
And we will not succeed in any of these areas unless we harness the talents of all Australians.
Lessons from reform
Though we are not immune from events in the world economy, we are nonetheless in a relatively strong position.
Our banks and financial institutions are sound, well-capitalised and well regulated.
As the Prime Minister has said, we have taken early, decisive action to address the risks caused by financial crisis and to address its possible effects on economic growth.
These events underscore the importance of leadership in extraordinary times.
But they should also make us reflect on the importance of preparedness and resilience.
Australia is in this position in part because of past generations of economic reform.
Reform which opened up our economy, reduced our dependence on tariffs, established an active competition policy framework, built up savings including superannuation and ensured effective regulation of our financial sector.
Our decision to create a strong budget surplus in the 2008 budget has also played a role.
We have cause to be thankful for our history of reform.
Productivity: a new reform challenge
And as we look forward, we should use those lessons to renew our reform efforts in other fields.
Productivity growth will be crucial to our economic performance as we adapt to these changing conditions.
Indeed, last week Reserve Bank Governor Glenn Stevens called for "a renewed focus on the processes in the real economy which generate growth in productivity".
Before recent events took hold, Australian productivity growth had tailed off in a seriously worrying way.
- During the most recent growth cycle from 1998 to 2004, annual growth in labour productivity (output per hour worked) averaged just 2.1 per cent.
- This is 1.2 percentage points below the record average growth of the preceding cycle when Labor was in office.
- And 0.3 per cent behind the long-term average growth rate of 2.4 per cent.
- Since the June quarter of 2004, annual labour productivity growth has been just 0.8 per cent.
- And in 2006-7 market sector multifactor productivity growth declined by 0.6 per cent.
Overall, productivity growth is driven by many different forces in our economy. They include capital deepening from investment in infrastructure, diffusion of new technologies and improved business processes, efficiency driven by regulatory transparency and competition in key markets.
But crucial to productivity growth are the skills and capabilities of our people.
We know that growth will be higher in economies which are successfully applying high level knowledge and skills to economic production and organisation.
More and more, productivity growth will be sustained by the application and diffusion of new ideas, the capacity for complex problem solving and the ability to collaborate.
We need to also acknowledge that the people who are most at risk in hard times are those people who have more limited human capital and the weakest attachment to the labour market.
As we saw when unemployment rose in the early 1990s, the increase in the unemployment rate for those without higher education qualifications was considerably higher than for people with them.
Investing in human capital today will ensure that people are more
resilient to future challenges; that where they are affected by adverse
conditions they are better able to bounce back quickly and seek
opportunities in new areas.
The long term importance of productivity
That is why, after a long period of neglect, we have set out to build a new era of investment in Australia’s human capital.
Our vision is of a country in which knowledge and learning are pervasive in every community, used continuously to improve not just economic performance but also social wellbeing and sustainability.
A country in which there are many different ways to be educated and every Australian can find a pathway into learning which enriches their experience and life opportunities.
We have a long way to go before we achieve this.
But we are investing at every stage of the lifecycle.
From early years
Through quality schooling
To youth transitions and vocational skills
And reform of higher education.
Let me focus on the core of the challenge that is implied by this vision.
In every one of those areas, we are putting forward a new proposition – that a fairer, stronger Australia cannot afford to choose between investing in excellence or investing in equity.
Our vision is of a society which becomes more productive and more inclusive through the same investments.
Let me illustrate what I mean in the case of higher education.
Have a look at this slide.
It shows the distribution of post-school destinations by socio-economic background in Australia.
It shows that more than twice as many young people from families enjoying high socio-economic status go to university than those coming from low socioeconomic status families.
Just as it shows that more than a quarter of our young people from low SES families are not progressing from school into any kind of study or learning.
The recent report on “How our Young People are Faring”, published by the Foundation for Young Australians, makes a similar point, that teenagers living in well-off neighbourhoods are almost twice as likely to be in full time study as those living in disadvantaged local areas.
In changing times, we cannot afford for our strategy for the future to leave behind a significant proportion of our population. That means we must not accept the prevailing distribution of opportunity offered up by our education and labour market institutions.
That is why we are working to implement an approach which
simultaneously expands the ‘room at the top’ and improves everybody’s
chance of getting there.
A shared strategy
In short, our strategy is to:
- Invest in people’s skills and learning across the lifecycle, from the early years to post-retirement.
- Empower Australians to aspire to more and contribute more, making meaningful choices about their own pathways through work and learning and accessing the resources which allow them to pursue those choices over time.
- Reform the institutional frameworks through which education and training services are delivered, to create higher capacity, higher expectations and higher performance.
- Incentivise collaboration between governments, employers, and others with a stake in improving productivity growth.
- Stimulate innovation to develop new ways of supporting participation and productivity.
- Share the proceeds of productivity growth equitably to ensure re-investment in sustainable, long term growth.
For example, we are taking action through our Productivity Places Program to train people who both in and currently out of work. As part of our Economic Security Strategy we have increased again the number of training places we will fund to 700,000, responding to the likely need for reskilling and to the extraordinary demand from Australians for access to new skills.
More broadly, we are working through a collaborative national reform process with the State and Territory Governments to invest for the long term in early childhood, schools, skills and workforce development.
We have committed to radically improving the achievements of indigenous Australians in learning and work, as part of our national commitment to Closing the Gap.
And to achieve all of these goals we are investing in new partnerships.
For example, my Department has recently appointed a senior coordinating manager in the Kimberley to help strengthen the growing range of partnerships between employers, communities and governments in that region and ensure that increasing investment creates shared, lasting benefit...
Or take our Workplace Innovation Program with the South West
Corridor Development Foundation in Western Australia, which includes
the Cities of Cockburn, Fremantle, Melville, and Rockingham, is
developing a Workforce Development Plan for the South West Corridor of
Metropolitan Perth. This includes developing tools that help assess
skills requirements more rapidly and accurately and expanding labour
participation through part time work, job sharing and flexible
employment options.
Our shared challenge
Our ambition is to build on existing excellence in Australian education and employment and make it part of a far stronger and more comprehensive framework for learning throughout the lifecycle.
It is a framework that will be more systematic about investing in every Australian and more responsive to the changing needs of the economy and the Australian community.
It means working through careful, evidence-based review and reform, just as the Bradley Review is currently doing for Higher Education.
But crucially, it is not just a matter for Government.
Rather, we are embracing innovation and partnership across sectors and across countries.
We cannot afford for a period of economic turbulence to leave some further behind or to make disadvantage harder to shift.
Instead, we must combine the unlimited potential of Australia’s people with a hard-headed approach to navigating the tides of global change.
This event and the wider work of the Global Foundation are helping us in that effort. I thank you all for your involvement.