A Vision for Australia – Part 1
Global Access Partners (GAP) is developing a ‘big picture’ vision and roadmap for Australia. In this first of three blogs Peter Fritz, Chairman of GAP, stresses the importance of incentives and innovation.
For good or ill, we must accept the economic reality of Australia as it stands today as the starting point of our journey towards the better society and stronger economy of tomorrow.
Although we can learn from the measures pursued by other nations, we must develop our own approach, in keeping with our national character, to have hope of acceptance and success. In an ever more competitive world, we need our own unique selling point to secure a prosperous niche.
It is difficult to find such an idea, but history is rife with examples that prove that a nation needs only a few major ideas to succeed.
The Importance of Incentives
The seeds of such ideas may need care and encouragement to blossom. All activities are driven by incentives, and so the selection of the right incentives may encourage positive behaviours more effectively than simply rooting them in supposedly Australian values.
As Dr Neil Byron has observed, Australia is not short of views, but all too often they conflict or offer little direction. If Australia already has ‘a grab bag of confused objectives’, then yet another set will only add to the confusion. To offer a more focused direction, the Vision for Australia must be more prescriptive in its objectives and offer a set of clear incentives to encourage people to achieve them in their own interest, as well as for the national good.
Australia no longer hosts the regional head offices of major tech and IT companies, for example, and so is marginalised when important commercial decisions are taken to shape the future economy. If we want to move decisively to a position of advantage in the modern world, we must make those decisions ourselves.
Fostering Innovation
Businesses make rational decisions in pursuit of their own objectives of profit and market share. If businesses do not invest in innovation because the risk to reward ratio is poorer than other avenues, then no amount of exhortation will change the logic of their position. Even the people who habitually extoll innovation as the solution to all problems seldom do it themselves. Heads of departments and company bosses constantly call for others to innovate, but few could point to any innovations they had instigated themselves. They are happy to talk on behalf of other people’s cheque books, but never their own. As in other areas of life, we advocate virtue for others on grand moral principles, but exempt ourselves from our own prescription because of whatever circumstance we happen to find.
Easing Transitions
There has to be a transition from the past into the future, but large organisations find it very difficult to transition successfully themselves, because the very essence of their continued success has been to endlessly repeat whatever made them successful in the first place. Institutional inertia generates far more economic friction than starting afresh, with all the experience of the status quo, but none of its legacy infrastructure. It requires much less energy to transform a business by starting its replacement alongside the existing operation, until it is in a position to replace it. We must recognise the need for internal stability within today’s businesses and establish side projects to create a successor for tomorrow. This may offer the only means to achieve both the breadth and speed required to transition wide swathes of the economy in time to save it.
Managing Immigration
Immigration is another issue which affects much of the developed world, and it is interesting to note how different counties tackle the same problem. Germany is welcoming a larger number of immigrants because it aims to reduce the rising average age of its population. One of the issues often highlighted in first-world countries is that they have too few tax payers to support the welfare needs of their growing numbers of older people. However, this ignores the fact that older people are healthier into later life and retain both the ability and desire to continue working. As physical labour becomes less relevant to adding value as knowledge based industries grow, older people can offer benefits, rather than be seen as a burden.
If a nation starts to invite ever larger numbers of immigrants into the country to inflate its working population, it runs the risk of creating socially divisive ghettos as individuals will always gravitate towards communities which share their cultural background. Australia must take care to consider whether it can integrate larger numbers of future immigrants properly and must speed up the process of integration.
Read the other blogs in this series:
A Vision for Australia – Part 2
A Vision for Australia – Part 3
Peter Fritz AO is Chairman of Global Access Partners and Group Managing Director of TCG. He chairs a number of influential government and private enterprise boards and represented Australia on the OECD Small and Medium Size Enterprise Committee.
Max Thomas
September 25, 2015 at 11:07 am
Peter Fritz’s Vision for Australia
"All activities are driven by incentives?" That seems a fairly narrow view of what it is to be human. To gain status or to derive pleasure from some activity may be incentives; or to become wealthy, to serve or gain privileges, advantage or power over others. Scientific endeavour, for instance, often arises from curiosity, pure and simple. What incentive drives instantaneous, spontaneous altruism? What incentive explains an act of heroism that results in a VC being awarded? Peter says that our economic development must be in keeping with the 'national character'. However, we are a nation built on immigration so it is self-evident that the 'national character' is continually evolving, especially since non-Europeans have entered the mix in greater numbers. By taking larger numbers of migrants, Peter thinks we run the risk of creating socially divisive cultural 'ghettos' as migrants gravitate towards communities which share their cultural background. The idea of 'speeding up' integration as though it were some kind of industrial process churning out automatons, is worrying. The 'Vision for Australia' that might be discerned from this is perhaps best left for others to contemplate. I am certainly not advocating unlimited immigration, but selective immigration has been crucial to our economic development in the past. As illustrated by the present visa controversy, immigration is likely to remain important to our future economic development, with an increasing emphasis on Asia. If "history is rife with examples that prove that a nation needs only a few major ideas to succeed", what are the major ideas that will drive our future prosperity? No longer can we depend upon the traditional ideas that once drove our economic success. Predicting the future is a precarious business, but embracing diversity, encouraging the young and being open to fresh ideas from any direction must be preferable to isolation. Either we engage with the outside world wholeheartedly or we risk a long decline into mediocrity or worse. Allowing older people to continue making an economic contribution is reasonable, but it is unrealistic to expect them to compensate for the revenue shortfall brought about by tax avoidance, narrowing of the population age distribution and more limited immigration. Productivity Commission data show that healthcare costs increase steeply with age. Common sense suggests that involuntary deferment of retirement might well exacerbate this tendency. Economics, in a broad sense, encompasses the cultural and social means by which people acquire their essential needs, as distinct from their 'wants'. Before the invention of money as a means of exchange, people managed to sustain themselves, as some indigenous peoples still do. In accepting the economic reality of Australia today we have to also accept that 'the economy' is a means to an end and not an end in itself. The notion of a "prescriptive" vision for Australia with incentives to mobilise self-interest as a way to national prosperity reeks of managerialism which, at least in part, brought about the downfall of former PM Mr Abbott. Certainly his colleagues perceived that public opinion is opposed to any form of authoritarianism. Leadership and persuasion, based on a sound foundation of policies is what I hope Mr Turnbull will bring to Australian politics. I think a lot of people wish him well because they no longer care from which political direction comes good government. Time is too short for more party politics, we need to act on reforming the federation and to re-align mismatches in our political economy introducing, dare I say, elements of what might be termed 'political-environmental-economics'.