The next great reform agenda?
Now that the mining boom is over there is no place to hide. The inevitable bust arising from the collapse of commodity prices and the trail of industrial destruction left by the rise of the Australian dollar has left great economic scars and a legacy of sustained job losses in manufacturing and now mining. Over the last year or so, the unemployment rate has been edging up – it is now 8.1 percent. If it continues on its current trajectory, it will reach nine percent early in the New Year. The male unemployment rate is at an alarmingly high 8.8 percent. is is only half the story. If you add underemployment (the proportion of people working part-time who would prefer to work more hours) to these figures, you can see that South Australia has very high labour underutilisation rates – around 14 percent for men and 19 percent for women. Unemployment in South Australia is set to get much worse in 2016-17 unless additional major investment projects like the Northern Connector are given the green light. The short-term problem is that engineering, construction and housing sector investment is set to decline sharply over 2016-17, coinciding with the closure of the automotive manufacturing sector. is trend won’t be reversed unless we bring forward major infrastructure and urban renewal projects. Over the medium- to longer-term, the challenge is much more complex. Industrial transformation and diversi fication takes time. No amount of tinkering around the edges will avert escalating unemployment in South Australia. Lowering business taxes and reducing ‘red tape’ is a sideshow to the main game – industrial transformation and sustained investment in sophisticated social and physical infrastructure. We need more than a series of project announcements designed to shore up flagging political support. A di fferent way of viewing the world we operate in is needed, one firmly rooted in the 21st, rather than the 20th, century. The great riches made during the mining boom were largely squandered. Some portion should have been invested in diversi fication of the Australian economy – in high growth-potential industries of the future like medical devices and assistive technologies, premium horticulture, environmental services and products, health and education services. National policymakers have been preoccupied with commodity quick xes rather than fundamental industrial transformation supported by enlightened and well-funded strategies. South Australia has been more vulnerable than other parts of the nation to the negative consequences of the boom/bust cycle in our minerals sector. Our manufacturing was made less competitive in global markets and too little was done nationally to address this. Some policymakers wrote off manufacturing as yesterday’s industry when it should have been the focus of intensive e fforts to transform it. Meanwhile, enlightened competitor nations are investing billions of dollars to accelerated growth in the industries of the future, notably advanced manufacturing. Much needs to be done. The substantial commitment from the Federal Government to the Northern Connector road is very welcome but we need a coherent infrastructure investment strategy that delivers a full pipeline of projects over the next five years. We also need an urgent commitment to building the national submarine fleet in Adelaide to help bolster our prospects of building a robust, advanced manufacturing industry in South Australia. Defence projects of the scale of the submarine project help lay the foundation for the growth of knowledge intensive industries in the wider economy, generating high skill and high wage jobs that are less vulnerable to technological displacement. High levels of investment in research and development must be sustained and much more of it successfully commercialised. Our universities must not only do world-class teaching and research but also engage much more deeply with industry and the community in social and economic development – and be adequately funded and encouraged to do so. Our new Prime Minister has joined with the Opposition Leader to talk about the importance of the industries and jobs of the future and champion innovation – a term that seemed to disappear from the national policy lexicon over the last few years. It is extraordinary how myopic the economic policy debate in Australia became, limited largely to a narrow and self-interested debate on tax. Changing the narrative is easier than changing policy. A national industries and jobs of the future policy agenda is urgently needed to ensure that Australia moves from being an economic policy laggard to a leader. This is the great reform challenge of the future. Associate Professor John Spoehr is the Executive Director of the Australian Workplace Innovation and Social Research Centre at the University of Adelaide @johnspoehr