Over the past few decades, Australia has fallen significantly in global rankings that gauge economic complexity and innovation.
You guessed it: the Growth Lab at Harvard University created the Atlas of Economic Complexity, which quantifies the complexity of economies worldwide. Australia was ranked an awful 93rd out of 133 countries by the study. Because of this, our economy is less complex than Uganda's, which is ranked 92. Australia came in much higher (rank 60) in the 2000 edition of this list.
Additionally, we kept falling behind on the World Intellectual Property Organization's Global Innovation Index. Australia was ranked as the 17th most innovative economy when the report was first released in 2007. Our economy is currently rated as the 24th most creative. We should be able to invest more in innovation than we have in the past given our high GDP.
Australia has grown complacent and lazy. We have been sitting on our laurels too long.
Australia's straightforward business strategy made it possible for us to drop in these rankings without suffering any immediate consequences.
A brief summary of the true nature of our national business model. We sell agricultural and raw mining goods all over the world, mostly to countries in Asia. In addition, we provide entertainment for foreign visitors and teach foreign students. That is all. That is the only thing we do as a country that the rest of the world finds concerning.
Selling a few basic raw materials was sufficient to expand our economy throughout the previous 20 years, thanks to China's rising economy. Not only did we not succeed in diversifying our economy, but we actually made it less varied. Now that China has begun its unavoidable demographic decline, this is an issue. As I explained in a previous column, we respond to this by expanding the number of nations to which we sell our products.
We need to have a fast conversation about whether economic diversification is worth the effort before we look at what could be done to diversify our national economy. Undoubtedly, nations ought to focus on their areas of strength.
Any new economic activity needs to be competitive on a global scale or, at the very least, strengthen national sovereignty. We advocate for increased pharmaceutical manufacture in Australia as a safeguard against the next global supply chain upheaval, not because it is less expensive to produce here than in China. A little more expensive medication is preferable to none at all.
Any issues with any of our four economic pillars could put us in serious danger if we do not diversify. In addition, this is the reason I am certain that neither a Liberal nor a Labor government will drastically reduce the number of international students admitted. However, in the Australian context, economic diversification must make sense. We have to play to our advantages.
Value-added manufacturing in mining and agriculture is the lowest hanging fruit. Selling steel instead of iron ore or bread instead of wheat ensures that we advance up the value chain and increase the flow of foreign exchange into Australia. Due to our high labor and energy expenses, Australian goods get their value-added abroad rather than domestically.
Cheaper energy is essential if value-added manufacturing is to succeed in Australia. Investing in automation and robotics can reduce labor expenses.
In light of this, the Made in Australia program is a positive move since it seeks to enhance our two main exports, mining and agriculture. One legitimate critique of this Labor policy is that it favors renewable energy projects so much that the government is picking winners.
Regretfully, the Liberal Party, which believes that we can suddenly create a whole new nuclear energy industry at competitive prices, is the source of this criticism. It makes more sense to choose renewables as the winner because Australia has a well-established research network.
From an environmental point of view, if value-added manufacturing can be done in Australia with a smaller carbon footprint, it should be done there rather than abroad.
I would contend that more manufacturing in Australia would ease the suffering in a number of places.
Australia is seeing significant changes in its population. The healthcare system is clearly impacted by the aging of society, but Australia's geography is also negatively impacted. The majority of small regional towns are basically utilitarian communities designed to aid with area farming.
The population of these locations is and will continue to decline. Thanks to technology advancements and farm aggregations, fewer workers are required to produce the same or even higher yields.
As a result, fewer employment are required in regional areas. Small communities' services become unprofitable as they get smaller. The local supermarket closes, doctors depart, and the local football team must combine with their fierce rivals from the nearby town.
These communities gradually lose their vitality. There are no nations in the world where so many people live in five cities. Our five biggest cities are home to more than two-thirds of all Australians.
As a result, home prices continue to rise, making Australia one of the least affordable housing markets in the world.
Growth in regional Australia is required, as is population decentralization. In addition to harming society in numerous ways, our excessively high housing costs divert private household investments from the stock market to the housing system. Economic diversity is also less likely when there is less money in the stock market.
Australia's middle class has been rapidly declining over the last 50 years. Instead of making up the largest portion of the workforce, the middle class is currently the smallest. Instead of a bell curve, Australia's wealth structure is starting to resemble a letter U. In a previous essay, I questioned whether Australia has too many educated people for the kind of economy we are operating.
The middle class in Australia would be strengthened by value-added manufacturing jobs. Value-added manufacturing actually aids in the resolution of each of the aforementioned issues.
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