It is fashionable to think that China and India, with their massive populations, are emerging as a pair of ‘ultimate competitors’ which will knock Australia for six economically.

But that is not how things are turning out, despite China’s great strengths in manufacturing and India’s in information technology services. In both cases rising labour costs and shortages of highly skilled labour show there are limits to their competitiveness that offer opportunity for Australia. High level managers and knowledge workers in Chinese manufacturing and Indian services companies cost just about as much to employ as they do in Australia. The Chinese and Indian advantages remain in lower level, repetitious work which itself has to be directed and guided by more skilled professionals.

There are Australian manufacturers such as GPC Electronics that compete internationally on the good value offered by Australian management skills. And there are local services companies such as Invetech that use Indian expertise to reduce costs while focusing their Australian knowledge workers higher up the value-adding scale.

Of course these are only two examples, but they do suggest that the world is more complex than believed by the ‘we’ll all be ruined’ brigade – those who think all manufacturing will end up in China and all IT work in India. The key to this are a workforce, management and businesses that understand you can compete by creating your own advantages through skills development and innovation.

It is the antithesis of the cargo cult mentality that guides so much Australian thinking – that we can prosper just by digging up more minerals or growing more wheat and shipping it out. Of course in both mining and agriculture there is an increasing skills and innovation component. Australian mining is only competitive because of the advantages in technology that we have created. And making money out of farming in an era of less predictable weather will only get more difficult.

Skills and innovation, not low cost jobs and serendipity, must underpin our future.