Investment in Smart Growth the Key

South Australia must compete on quality rather than cost in order to drive high living standards for all in the 21st century.

South Australia must compete on quality rather than cost in order to drive high living standards for all in the 21st century. We must continue to move up the goods and services value chain where economic activity is characterised by high levels of knowledge intensity that underpin the generation of creative well-paid jobs. This can drive much needed value, adding to our abundant natural resources and food industries, an outcome that requires a sophisticated manufacturing sector and smart procurement policies. There is nothing to be gained from trying to revive the low-cost model of South Australian economic development that must finally be laid to rest. Those days are over. In a rapidly industrialising region where the great nations of India, China, Thailand, Korea and Malaysia have become global centres for low-cost manufacturing, Australia has no choice but to choose another growth path, one firmly grounded in a deep commitment to higher levels of public and private investment in education, research and development, innovation and commercialisation. There is no place for a radical program of public sector cuts in this. Austerity programs have been a spectacular failure internationally, offering despair where hope is much needed. A smart growth strategy is needed in Australia, one that better harnesses the very considerable talents available in our universities and creates new and very agile institutions capable of driving successful knowledge transfer, innovation and commercialisation. Researchers working with industry in both advancing and applying knowledge are easier said than done. We underinvest in this and urgently need to create a network of industry innovation centres to fill the gap. These are creative places where researchers from fields as diverse as engineering, economics, design, psychology and sociology, work with industry to explore how new processes and technologies can underpin smart and sustainable growth, solving problems and driving innovation inspired by invention. Innovations in product development and workplace organisation can go a long way to enabling South Australia companies to succeed but only in an environment where industry and trade policies are tuned to the realities of global market conditions. No amount of innovation can insulate a manufacturer dependent upon exports from the wrecking ball that was the very high Australian dollar, the rise of lowcost manufacturing in Asia, the continued existence of higher tariff and non-tariff barriers, as well as aggressive state financial aid for industry development in competitor nations. Australian industry and trade policy must do more than pray hopefully at the altar of free trade. What remains of our manufacturing industry after GMH closes will depend in large part on the willingness of the Australian government to invest both directly and indirectly in industrial transformation, particularly through building robust regional innovation systems and institutions that help to accelerate transformative change. There is probably quite a lot of common ground on this between Labor and the Liberals. Where they diverge is in relation to whether sharp reductions in business taxes and public expenditure will stimulate growth. These are common ingredients in so called austerity packages, a set of policies premised on the view that reducing public sector expenditure during the global financial crisis will help to restore growth and stimulate employment. We have resisted this approach in Australia, favouring stimulatory measures designed to inject public investment into job generating initiatives in the private sector. It worked with Australia managing to sustain one of the lowest unemployment rates in the world since the GFC. Meanwhile most OECD nations have languished with chronically high unemployment, homelessness and a rapidly widening gap between rich and poor leading to growing social and political tensions. There is great danger for Australia if we head down the austerity path as no doubt the Federal Government’s Commission of Audit will recommend over the coming weeks. We have learnt a great deal about the costs of this well-trodden path, lessons that should moderate the neo-liberal tendencies of the most ardent Thatcherite. There is no evidence that a program of business and public sector tax cuts will deliver anything other than more sluggish growth, unemployment and hardship. The policies of governments must be assessed on their proven ability to counter the impact of financial crisis. When you look closely at the European experience and that of the United States it is clear that the Australian response to the GFC is the gold standard. Rewriting that history as failure will probably be a feature of the report of the Commission of Audit. It is likely to argue that public debt is unsustainable, public expenditure is too high; tax is too high and deep cuts in public expenditure urgently required. All of this is very familiar to those of us who witnessed the round of Audit Commissions undertaken in Australia during the 1990s. In the lead up to the release of the Abbott Government’s Audit Commission report I urge you to have a close look at what has been done over recent years in the name of austerity in Europe and the United States. Three international experts will be in Adelaide in February to share their insights and experiences at a forum on austerity policies on the 18th hosted by my centre [Australian Workplace Innovation and Social Research Centre] and the Don Dunstan Foundation. I strongly encourage you to attend and engage in the austerity debate. Austerity Forum: Unmasking Austerity Speakers: Dexter Whitfield, Jamie Peck and John Quiggin Tuesday, February 18 The Braggs Lecture Theatre, The University of Adelaide 9.30am-12.30pm Associate Professor John Spoehr is the Executive Director of the Australian Workplace Innovation and Social Research Centre at the University of Adelaide Registration essential at:

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