Asia Pacific Has to Be in Focus

The Age
19 June 2012

By Tony Shepherd
President, Business Council of Australia

If Australian businesses are to create wealth and generate new jobs now and in the future, then we must be internationally competitive.

Governments have a key role by providing the policy settings that set the rules of the game.

The G20 meeting this week in Mexico will have a major focus on policy reforms to improve competitiveness and support a stronger economy. G20 has rightly identified the need for governments to share ideas and encourage each other to lift confidence and encourage growth.

The sorts of reforms that will be discussed include workplace relations, taxation reform and education and skills, as well as reducing barriers to cross-border trade and investment.

Importantly, business will have a voice in broader G20 discussions through the parallel business summit, known as the B20. Australia will be represented by John Denton, a member of our board, and a partner and chief executive of Corrs Chambers Westgarth.

Australian businesses recognise that when it comes to G20, we have to balance our traditional links to Europe with our emerging economic and broader relationships in Asia and Asia Pacific.

We can look to Europe and recognise that we have performed well in comparison, and that many of the policy reforms we should be starting to address here are those that were neglected for too long in Europe. The danger is we can be lulled into thinking we are an example for others to follow, and can use the platform of G20 to teach rather than learn. But while we pat ourselves on the back for doing so much better than poor-performing economies, our real competitors are focusing on the main game and threaten to overtake us. The only real choice Australia has is to look to Asia Pacific and recognise that this is the region in which we have to compete. It is here that our point of reference should be when it comes to international comparisons.

While our most recent headline growth figures are good, our productivity and relative competitiveness results over recent years have been disappointing.

The high dollar has brought into sharp relief structural weaknesses in our economy that had been previously been papered over.

It is becoming increasingly apparent to Australian businesses that these weaknesses are eroding our national competitiveness.

These weaknesses include our high cost structure and low productivity; many industries, including those in the manufacturing and services sectors are finding it difficult to attract investment, and the new competitive landscape that has emerged in Asia and Asia Pacific more broadly. This involves rapidly growing economies undergoing structural change, driven in large part by the emergence of a dynamic new middle class in Asia.

We need to recognise that we are part of this changing competitive landscape.

Seven of Australia's 10 largest trading partners are in Asia.

These changes have taken place over a long period of time, but have accelerated in recent times.

Being a stable democracy is certainly helpful but its advantages only take us so far.

The Business Council wants Australia to continue to be a high wage economy, but this can only be achieved through higher productivity. This requires leadership from government, business, unions and others that emphasises a longer term focus on policy settings. It requires us to learn from what other governments, especially those in Asia Pacific, are doing.

Realising the opportunities of the rise of Asia and Asia Pacific is a tremendous challenge.

First and most importantly, our focus has to be on Australia's domestic competitiveness and how we shape up against competitor countries. For all economic sectors, this means pursuing difficult longer term reforms, including effective policies for national infrastructure planning and delivery, including proper cost-benefit analysis; an efficient taxation system, with tax rates that compare well with competitors; a flexible workplace relations system; access to skilled labour through effective training and workforce development, in combination with flexible and responsive skilled migration policies, and making sure that regulations are properly developed with regulatory impacts considered.

Improving our international competitiveness also means looking at our external priorities.

We need to continue pressing foreign governments to remove or lower trade and investment barriers.

There is a need for G20 to give a higher priority to requiring genuine progress with trade liberalisation, especially the global trade negotiations where Trade Minister Craig Emerson has led trade ministers in overcoming an enormous impasse.

If we are to make genuine inroads into lifting competitiveness, we must approach G20 with a genuine commitment to reform our own domestic and international trade and investment policies.

We need to make sure we avoid the temptation to approach G20 with a sense of national self-satisfaction. Australia should always be mindful of where we can improve. Past generations of Australians have always taken that approach and future generations would expect nothing less.

This is the right time to move on structural reform and to work with other countries to do the same.