Address to the National Press Club: Future-proof

01 September 2017

Speech delivered by Business Council chief executive Jennifer Westacott at the National Press Club.

I acknowledge we are gathered on the land of the Ngunawal and Ngambri peoples and we honour their elders, past and present.

Today, I want to set out some new ideas for our nation’s education system. But before I start, I have to explain why this is a crucial moment for Australia, and why we must begin taking bold steps on economic policy – particularly in education.

We are living through a period of change, the pace and scale of which is unprecedented in human history.

The global economy’s centre of gravity is shifting from the North Atlantic to the Asia-Pacific. China is now the world’s second largest economy and growing by almost seven per cent each year.

Today’s consumer is becoming the most empowered consumer in history. With the power of technology in their hand, they can make or break a business model overnight.

And technology is overhauling the way goods and services are produced and delivered. New global supply chains present big opportunities for high-tech, highly skilled economies that can produce premium products that attract premium prices.

New technologies, particularly artificial intelligence and robotics, are going to change the way we live, the way we work and, indeed, how we define work itself.

Nobody has a crystal ball, but some predict up to half of existing jobs will disappear. Others say it’s around one in 10. We just don’t know. But we can be sure that almost every single job will be different and some sectors will be severely disrupted. And we can be absolutely sure that new jobs will emerge – including many in industries we can’t even imagine.

Against these forces of change, we should ask: what do we want for our society? Do we want to just muddle through and bear the social and economic dislocation associated with it, or do we want to get ahead of these challenges?

I’ve come to the National Press Club today with a strong message from Australia’s business community, and it is this: we are falling behind.

We are falling behind on our rate of economic growth notwithstanding the green shoots that are now appearing. After twenty-six years of uninterrupted economic growth, some believe there’s nothing more to be done.

I am fearful that we are breeding tremendous complacency. We used to enjoy sustained economic growth above three per cent and Australians have rightly developed expectations around rising wages and living standards accordingly. That figure is now around two per cent and Australians are starting to get a taste of what a long period of low-growth feels like.

We must remember that economic growth means that households have more to spend on what matters to them, and governments have a growing revenue base to deliver the services that people want and need.

We are falling behind many of our competitors in Asia, North America and Europe. They have come through recession and are moving to restructure their economies to nurture new businesses and create better, higher paid jobs.

We are falling behind on making it easier to live, work and do business by failing on infrastructure and drowning ourselves in a sea of inefficient red tape.

We are falling behind on energy – once a comparative advantage – now sabotaged by stop-start policymaking by both sides of politics.

We are falling behind on tax competitiveness. We are woefully uncompetitive and that will see investment and the jobs that come with it flow overseas. Business investment remains at its lowest level as a share of the economy since 1994 – the wake of the last recession.

If the Americans do half of what is being proposed on company tax reform, it will suck billions in investment out of this country, along with future job creation and wages growth. So the Senate should pass the government’s Enterprise Tax Plan in its entirety – or run the risk of allowing Australia to flounder.

And incomprehensibly, despite spending billions upon billions more dollars, we are falling behind on educational outcomes.

Falling behind across all these areas means we will fail to realise the potential of this country and all of its people, and that is unforgivable given our natural advantages.

The Business Council wants Australia to get out in front of these challenges to drive stronger economic growth, because that is the bedrock of higher wages, rising living standards and a fairer society for all.

The Business Council believes Australia can be a strong, growing country in which all can share in greater opportunity.

There is no single policy change that will solve all these problems, so we’ll need a comprehensive approach.

We can get out in front by supercharging the green shoots in our economy.

We can get out in front by raising our productivity – the only way to sustainably raise incomes. That doesn’t mean making people work harder for less money, but having talented and creative workplaces that can seize on every possible opportunity.

We can get out in front by creating the best country on earth to do business, with a tax system that protects Australian jobs, protects Australians’ wages, and protects Australians’ living standards.

We can get out in front by having lean, modern and effective regulations while protecting the public interest.

We can get out in front by reclaiming our position as an energy superpower with affordable, reliable power at home and exporting fuel and technologies to the world.

Now, I’m about to say something shocking for the chief executive of the Business Council. We do need a new form of protectionism but I do not mean resorting to trade barriers, industry subsidies and ad-hoc taxes because they simply won’t work.

The new Australian protectionism means protecting our capacity to compete on a global stage. It means protecting our ability to have new businesses and growing businesses that can export around the world.

It means protecting our ability to create meaningful jobs for Australians wherever they live. And it means protecting our people by ensuring they are the most skilled, the most trained, and the most resilient people on earth. And that is the education and training challenge.

So we need transformational change to our education system so that Australians can access education and training throughout their lives.

This system is often treated like a collection of silos – schools, higher education, vocational education and training - or VET, as it is known. We need it to operate as one system – now more than ever.

Today the Business Council is releasing a discussion paper for consultation to get the ball rolling. Our paper deals with the whole system, but we have focused unashamedly on tertiary education.

We have a network of successful, world-class universities with a wonderful research capability that does our nation proud. But I’m not going to spend a great deal of time talking about universities today.

My focus is on building the tertiary sector as a whole, and in particular, restoring the status of our neglected VET system. This tertiary system must be joined at the hip to industry so that workers of any age can access the new skills they need to stay in work.

Of course, this will rely on having great schools to prepare our kids. A good school education lays the foundation for a fulfilling life and a love of learning.

And we’ve achieved a lot in recent decades, with more students completing Year 12 than ever before. But we are beginning to fall behind rival countries in school performance, despite government spending in schools soaring over recent years. We need to stop making the same mistakes by focusing solely on the quantum of funding rather than the outcomes we actually want to achieve.

The government has rightly put in place a real needs-based funding model, and has charged my friend and colleague David Gonski with working out the specifics of where to guide the nation’s school systems. David should have space to do that important work, but let me set down some markers from the business community.

First, we need to recognise that intelligence comes in many forms and all children should be able to enjoy school and develop a love of learning that lasts their entire life.

Second, not all children are suited to a traditional academic learning style. Inquiry-based learning is widely acknowledged to be an effective teaching method. In simple terms, that means a focus on students being able to find and use information, and not just remember information and repeat it.

This is crucial for subjects we’re falling behind in, like maths. And let’s face it folks, your options are limited if you can’t do maths. So let’s change the way we teach it, so that all kids can learn maths.

There are already classrooms around the world that would be unrecognisable to most people, where teachers are coaches and mentors, and there are no rows of desks. We should be embracing these kinds of innovations, rather than leaving it to pot luck that the kids who need that kind of teaching will land in the right school.

Third, we need to empower and support our teachers, since teachers and their skills are the most important platform to achieve better results. Great teachers change lives. Everyone in this room should know that from their own experience.

For me, it was Mr Murray and Mrs Williams at Henry Kendall High School in Gosford. I was a very shy kid – lacking in confidence – so Mrs Williams made me go into the school production of the Mikado. Up there, on the stage, in front of everyone. And, as you can see, I don’t have stage fright anymore. That experience gave me confidence.

Great teachers instil confidence and breed self-esteem. I know from talking to students on the NSW Central Coast that my sister, Debbie, who is here today, is one of those great teachers. So is my partner, Tess, who is also here today. I am so proud of them both.

How about creating a new national index for teaching standards so that we can measure our performance and provide the data that schools and state governments need to identify gaps and improve? The business community can lend its expertise to getting such an index off the ground.

We need to value teachers who excel and reward them accordingly. Why don’t we have a salary structure that pays teachers according to standards rather than time served, so the best qualified teachers stay in the classroom? I’m not talking about performance pay, but creating a system where the best classroom teachers don’t feel pressured to become principals in order to earn a higher salary.

Fourth, it is unacceptable that kids are allowed to progress through high school and into tertiary education or work, if they can’t read, write and do maths. We need to put hurdles at key transition points in the school system so that kids don’t drift through without the core competencies they need. It’s unfair to them and serves no one.

We also need to help kids plan their futures by elevating careers counselling, so that students are guided to make the right decisions for them. Business is eager to work with schools to ensure they can offer the best advice and pathways for young people.

We should also ask whether the school system is encouraging children to test their boundaries. In this age of rapid change, everyone will be constantly challenged to upskill and try their hand at something new. So the notion that children should avoid doing anything that’s difficult for them isn’t preparing them for life – it is preparing them for failure.

My final plea for schools is that before we undertake any more reform, we all work out what we want to achieve.

We believe school graduates should be not only competent in basic literacy, numeracy and technology, but have deeper knowledge of areas like history, maths and science. They should be prepared for the world of work – not just a single job or a single employer – carrying the life skills of adaptation, resilience and self-awareness. They need a foundation for future learning and the grounding to become engaged citizens in our society. In short, we should be equipping children for life, not just for sitting tests.

Let me now move to the tertiary system which is the centrepiece of our paper. As I’ve said, by tertiary I mean VET and higher education.

I want to make one thing very clear, we are not talking about integrating VET and higher education providers. We’re talking about removing the distortions in funding and governance and creating a single tertiary system with a reinvigorated VET sector as a cornerstone. And we’re talking about the teaching and learning side, not the research side. So, in the spirit of good public policy let’s start with the problems we are trying to solve.

Firstly, funding is distorted, it creates the wrong incentives, and it’s basically unfair. In many industries, a student in VET will get less government support than a student in higher education.

Take nursing as an example. Enrolled nurses study in VET. Registered nurses study in higher education. Can someone explain to me why a university nursing student is guaranteed a federal subsidy of forty thousand dollars? And then explain to me why the VET student’s subsidy depends entirely on where they live and the provider they choose? And can someone explain to me why the VET student can access an income-contingent loan of up to fifteen thousand dollars, while the university student can borrow more than six-times that?

Which course would you choose? It stands to reason that students weighing up those two options would pick the heavily subsidised higher education qualification – even if they were better suited to the VET course. How is that in their interest, or the public interest?

With an ageing population, and the growing importance of the caring sector what are we saying about the value of enrolled nurses in our society? You know something? We might really want to fix this.

Our second problem is our occupational structures themselves are too rigid and qualifications take too long for the changing nature of work. In this changing world, people are going to have to dip in and out of learning and regularly update their skills, not drop out of the workforce to do a full qualification.

Our current occupational structures are also overly focused on credentialising too many things as university qualifications. And of course this credentialising problem stems from the cultural problem that VET has a lower status than higher education.

Once and for all we need to fix this cultural bias, reinforced by a funding bias, that a VET qualification is a second-class qualification to a university one. It isn’t. In a world where machines and people will work together and technical skills will be needed by all workers, that cultural bias can only create damage.

Governance is also a problem, particularly when you look at funding. Accountabilities across the Commonwealth and States and across public and private providers are blurred.

We don’t know if we’re getting the best value for the twenty billion dollars we’re putting into VET and higher education each year. There are constant accusations of cost-shifting, but the net result for the VET sector is less real funding now than ten years ago. And on top of that, despite all the investment we’ve got employers saying they’re getting graduates from both systems that aren’t ready for work.

My final big problem is the lack of market information for learners. It may come as a surprise to you – as it certainly did to me – that the ABS says there are over one thousand jobs in the Australian labour market. I don’t think I could name more than one hundred of those occupations.

There is no single place for someone to go to look at all the different jobs, let alone what to study or how much it would cost. Where does that leave a teenager trying to make decisions about their future? Or workers looking to change industries because they can see their jobs are going to be massively disrupted?

It leaves them relying on parents, friends, colleagues, and whatever information they can glean from a variety of websites. If you’re a young person or worker trying to make good decisions about your future, good luck.

And of course, the people who really pay the price are the most disadvantaged people in our society who do not have the resources to help them. That’s just not fair.

So how do we get this right? Let’s start with funding.

We know from other systems like health, that a really good funding model can transform the system. When you get funding right many other things follow.

For the tertiary system, the starting principle should be that the funding belongs to the learner. The learner is in control. And they can choose which provider and which course. Workers building on their previous education can choose which modules and how long they want to study.

Today the Business Council is proposing that every Australian receive a new Lifelong Skills Account to use throughout their adult life. The Account would be made up of a taxpayer subsidy and an income contingent loan that could be used to pay for courses at any approved VET or higher education provider.

The subsidies available for each course should depend on a rigorous and independent analysis of the overall cost of delivering the course, the private benefit to the individual who acquires the qualification, and the public benefit to society. This initiative would pool all of the subsidies and loans that currently exist across VET and higher education.

The great feature of this scheme is Australians would be able to dip in and out of their Account as required throughout their working life. And once you’ve acquired your first qualification, you’ll be able to pick subjects and modules to effectively assemble your own credentials by purchasing in both the university and the VET system. The value of the Account would be capped over your lifetime, so the funding can be managed.

Our second feature is market information. We’re proposing a single platform for market information that helps people find industries or jobs that suit them, tells them what kind of income they could earn, tells people what the subsidy and loan arrangements would be for a course, as well as the loan repayment schedule, and helps them compare providers so they can make informed choices.

This is essential to allow people leaving school and work to pick the right course at the right time with the right information. It is an essential tool if the funding is in the hand of the consumer.

Both of these things – better market information and the Lifelong Skills Account – will force a rethink of how qualifications are designed. The change to funding will free up VET and higher education providers to expand their scope, offer more specialisation for people in work, as well as more modular-based learning.

The funding changes will also really help small business to upskill their workers. It will be essential of course to maintain industry’s leadership of Training Packages.

This new system will also need to be governed differently. We are proposing a new national body jointly owned and funded by the Commonwealth, States and Territories.

Its job will be to propose the subsidy levels for each qualification and maintain their currency, build and maintain the market information platform, manage the flow of funding, contract and manage providers to ensure there are no more rogue providers, and manage the Skills Account for learners.

We are not proposing this body have a policy role. That is absolutely the role of governments. We are also proposing we retain the separate regulators, standards and industry bodies for both VET and higher education providers.

Our proposed system would lead to better outcomes with the learner at the centre of the system, and funding following them, vastly more informed consumers, and a governance model that is clear about who does what in a shared system.

The changes we’re proposing are big, but they can be done in increments and there are some key transition points. So where do we start?

Number one. The Commonwealth and the States need to sit down and work out a plan of how we will move to a tertiary model – and the consequences of not doing it.

Number two. As part of that plan, they should at the very least agree about the future role and function of VET.

This question plagues the system, but doesn’t seem to exercise our policymakers.

So not one more dollar, not one more cent, should be removed from VET until state and federal ministers work out what we are going to do with this important sector.

Because my great fear is that by the time we work out that this sector was hugely important to the economy, it will have been run down so much we have to spend billions of dollars to put it back together.

Number three. We need to agree on the role and function of TAFE.I am a great advocate for competition as a driver of better, more efficient and innovative services. But we must make sure that TAFEs have a level playing field to compete.

TAFEs have to have the autonomy to be liberated from the dead weight of regulation so they can properly compete with more nimble private providers. We cannot let TAFE simply wither on the vine, or die the death of a thousand cuts.

The fourth and final transition point is to do the costing work on the funding model. Surely, it’s important we know how much a course costs to deliver? And surely, we should have a better idea of the public and private benefit that flow from certain qualifications?

The costing work will do this and be the starting point for the funding model, along with the current spending of $20 billion.

And while these four steps are happening, we can’t neglect other parts of VET, especially the apprenticeship system. The number of apprentices and trainees under instruction has almost halved over the past five years. This decline has to stop.

The Commonwealth and States and Territories need to work with business and unions to build a reinvigorated, modern and ambitious apprenticeship system that provides a real, viable alternative for a young person.

The other area that is often overlooked is foundation studies, and we simply cannot afford to let this fail. We can’t neglect adults who lack functional literacy and numeracy. How will they survive the transition? We have to make sure people have a second chance. I don’t want to live in a society that abandons these Australians.
There’s no question that big reform is hard. But we’ve done tough things before, and what’s the alternative?

Let’s look at the counter-factual. If we don’t do reform then we’re saying we’re happy with not knowing how money is being spent, presiding over the decline of the VET system and for there to be tremendous confusion and the wrong incentives for young people and workers.

And are we really happy for young people to go on making the wrong choices and find themselves unable to get a job they want? Are you really happy with that? I’m not. We can get out in front now, or we can make huge and costly corrections down the track.

To achieve reform we will need to let go of rigid ideologies that are not serving us well – such as the view that more funding is always the solution. We can start a reform agenda like this one within the current funding envelope of twenty billion dollars.

It will require compromise from everyone’s point of view. That includes business. We have to adapt and change the way we recruit and the expectations we have. We have to think about new pathways to work. We have to make it clearer about what we need from future workers. And we have to own the transition underway in our workplaces.

But we need a better tertiary system to support us. If we don’t reform, we’re condemning the people working now, and the next generation, to a system that is simply not fit for purpose. We can do better than that. We have to be better than that.

Education is dear to my heart because it changed my life. I grew up in public housing and my grandmother believed education was my opportunity. She was right.

Education was the game-changer for me, as well as my brothers and my sisters. My education is why I’m standing here now, and why I have had remarkable opportunities throughout my life.

Education is the great enabler. It is the best way of tackling inequality. It is a lifelong voyage of discovery.

When every Australian can realise their potential, our nation will realise its potential. When every single Australian has the opportunity to thrive, we thrive as a nation.

I want every Australian – no matter where they live, no matter what country they came from, whether they’re working or not working, whether they’re fifty or fifteen – I want them to have access to the best education and training system in the world.

Because this not just an economic priority, it’s not just a social obligation – it is a moral imperative.

Thank you.



Latest news