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Two Trick Pony

Jun 30, 2023

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Australia's recent ranking of 19th out of 64 countries in the World Competitiveness Yearbook report is further evidence of our over-reliance (dependence) on digging things out of the ground and importing people to prop up the economy. While the country excels in life expectancy and health coverage, its position in entrepreneurship (62nd of 64) and productivity (46th) is alarming. A preoccupation with immigration and reliance on China’s consumption of our natural resources has hindered Australia's ability to foster innovation and diversify its economy. What does this mean for Australian property?

World Competitiveness Centre director Arturo Bris in discussing the results of the report, noted that resource-rich countries – and Australia is one of them – are naturally more productive… However, the challenge for resource-based economies is how to translate such efficiency into prosperity, for example, how to make people’s lives better”.

Professor Bris emphasised that countries like Australia must transform efficiency into prosperity through sound policies and institutions. To achieve this, Australia should look to nations such as Switzerland and Singapore, which have successfully built highly productive economic models without significant natural resources. 

Innovation, particularly in the fields of quantum computing and medical research, could unleash new possibilities and fuel economic growth. The Federal Government’s National Quantum Strategy, announced in May this year, is the type of initiative Australia should be pursuing to realise innovative economic diversity and growth. Still, at a maximum investment level of $1b AUD, it fails to signal genuine intent to succeed. By investing more heavily in research and development, Australia can position itself at the forefront of technology and attract global talent and investment.

Australia's heavy reliance on commodity exports exposes its vulnerability to fluctuating global markets. The Committee for Economic Development of Australia highlighted the need to diversify the economy beyond traditional trade strengths. The recently formed AUKUS pact provides an opportunity to strengthen defence capabilities, promote advanced manufacturing, and create high-skilled jobs. By investing in industries such as aerospace, defence technology, and renewable energy, Australia can foster further innovation, reduce dependencies, and secure its economic future.

Australia possesses world-class healthcare and research institutions, making it well-positioned to lead in medical research and development. By increasing investment in this sector, the country can nurture groundbreaking discoveries and attract global investment. We witnessed Australia’s capacities during the research, development, and production phases of COVID-19 vaccines. Subsequent investments in mRNA capacities (particularly the Victorian State government) are, as with quantum computing, the right moves, but not at a sufficient level to be considered much more than lip service. Australia has the potential to become a global hub for biotechnology and pharmaceutical innovation, fostering job creation and strengthening its competitive position.

Immigration is a divisive and complex issue, one I’m not qualified or capable of distilling into a neat “for” or “against” position in a 500-word (ish) blog piece. On the issue of housing, however, at least in the Victorian context, I have some insights. The simple supply/demand equation demonstrates to real estate agents, renters and buyers, on a daily basis, that there are currently too few homes for the number of people needing to be housed. 

Matt Barrier, CEO of Freelancer, speaking recently at The Sydney Morning Herald Sydney 2050 Summit, described how he sees Australia’s approach to immigration as it relates to property:

“The US uses quantitative easing to drive ‘easy, relentless’ growth — Australia uses quantitative peopling…This is not about ‘growth’ but inflating demand for housing. It’s not about the ‘economy’ but inflating GDP. But population growth does not increase GDP per capita.”  

These are pretty incendiary observations, and there are plenty of counter-arguments to Mr Barrie’s view. The central observation, however, that we, as a country, have an increasing demand for housing is unequivocal. 

In order to realise the innovation and economic diversification proposed above, we’re going to need plenty of smart and skilled people from around the world to work alongside the smart and skilled people already here. We’re also going to need somewhere for them to live… this continues to be the core issue for housing accessibility and affordability in this country and one that our governments (past and present) continue to fail to address adequately.

Written by Jacob Caine CEO