This speech was delivered by the Hon. Malcolm Turnbull MP, Prime Minister of Australia, at the Business Council of Australia's 2015 Annual Dinner on 5 November in Sydney.
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Well, Catherine, thank you so much for that very generous introduction. And can I just say that it is fantastic to be on a unity ticket with you, and I know with all of your colleagues in the BCA, in favour of innovation.
And Catherine said something about innovation being for the whole of the economy, and that is a fundamental point. A lot of people think that innovation is about a couple of people, you know, in a garage, someone in their parent’s garage coming up with a fantastic new application. And, that type of start-up is a big part of the innovation ecosystem. A big part of the economy. As I was saying this morning in Melbourne, speaking to the Melbourne Institute, when you think about the big firms, the big companies that have essentially recreated a digital world, or reformed our world in the digital space, many of them, if most of them if they were humans, would still be at school.
Google itself, the giant Google, dominating the landscape, 17 years old. And the elder statesmen of the digital age, Microsoft and Apple, are 40 and 39 respectively. And I'm sure there are lots of people here who are younger than that.
The reality is that we are living in a world with a pace of change that is utterly unprecedented. And we do need to draw breath occasionally and reflect on it.
Forty years ago China barely participated in the global economy. Now it is the world's single largest national economy. China’s online market, its online commerce market is larger in dollar terms than that of the United States, and of course has a lot further to go.
The transformation of the middle class in Asia is extraordinary. This, if you believe Angus Madison's great work that he did for the OECD years ago about economies over millennia, this is the first time for 300 years that half of the world's middle class are living in Asia. And that is as of right now in 2015.
And of course that is simply because of population, because of the inexorable consequences of demography, that huge consumer mass will be of middle-class consumers, will be dominated by the big Asian economies.
So the opportunities for us are absolutely extraordinary. There has never been a better time to be an Australian. There has never been a better time to be an Australian business. There has never been a more exciting times for Australia.
The opportunities are enormous and the only barriers, the only constraints, the only limitations we have, my friends, are our own imagination or our own enterprise. It is all there.
We have, and I'm appropriating Andrew Robb's great diplomacy, we have opened up those economies in a way that also is unprecedented in our history. The China-Australia Free Trade Agreement is the best free trade agreement, the highest quality free trade agreement China has ever entered into.
And only last week I was in South Australia and Tasmania talking to so many people, so many businesses, mostly businesses much smaller than those you represent who are seeing the benefits of that, particularly in food and wine. The Premier of South Australia, Jay Weatherill is here and would understand the impact that that China market is having on his own State.
And you know, turning to South Australia for a moment, in deference to the Premier, and of course I acknowledge all the other distinguished Parliamentarians here, especially my colleagues.
I see the Cabinet Secretary, Arthur Sinodinos, there, he was a pillar of the Howard Government, he is now a, positively a flying buttress of the Turnbull Government. Re-incorporated. Lucy would approve that, a bit of adaptive re-use from an architectural point of view.
But Jay Weatherill would understand this, as would all South Australians, if you said that, if you said "85-year-old manufacturing business in Adelaide", most people would think, "Gosh, that sounds a bit grim," and there are many examples of this. I am singling this company out, but it is a good example.
A company 85 years old, making plumbing fittings, manufacturing company in Adelaide, Philmac. It is a leading exporter in its niche, in a rather specialised niche, making gate valves and plumbing fittings, it employs nearly 300 people, it is about to employ another 30, and you can see that that is a company which is driven by innovation.
So you don't have to be - and this gets back to Catherine's point - you don't have to be a start-up by some brilliant young engineers from the university to be an innovative company.
What we need across the nation, across the corporate world, across the world of government, is a change to the culture that recognises that in an age of rapid, unprecedented change, in an age of disruption, in an age of transition, we need to be thoroughly agile.
We need to be prepared at every stage to say the way we did thing s yesterday, or last week, is not the way we will do them in the future.
That means organisations need to be much less hierarchical, they cannot be blame-based. You have to, as chief executives or senior executives; you've got to encourage the people that work for you to challenge you. You've got to ensure that you're always testing existing practices. You know, the old phrase "not invented here, we've always done that way" is disastrous.
It's always important to be cautious, of course, but in a disruptive age of rapid change, deference, if overdone can be death from a corporate point of view. Change is rapid. We've got to treat volatility as our friend, not as our foe.
Now the Government's objectives in terms of its economic policy are very simple. Very easily stated.
We need to ensure that Australia remains a high-wage generous social welfare net, first world economy. We need to ensure that our communities increase, our horizons expand, our children and our grandchildren can have better jobs, more exciting jobs, bigger opportunities than we have had.
And to do that, it is perfectly plain that we have to be more innovative, more technologically advanced, more enterprising, more competitive, and more productive, that much is absolutely clear. There is no room for complacency.
The next lift in national income we all understand has to come from productivity. And in a sense, innovation is another word for productivity. It will lead to greater productivity.
Now, for many years the perception among business is that our political processes have not deliver as promised - that Parliaments don't work as they should, that necessary reform has hit the wall, that the system is almost dysfunctional.
I want to say to you tonight emphatically that the business of government is to get things done. Australians expect their elected representatives to deliver practical common-sense policy to improve economic security and the general wellbeing of the nation.
We need to be thoroughly pragmatic. We have to be open-minded and practical, business-like. If there are obstacles in the Parliament that can be cleared through sensible negotiation, then we should engage constructively and overcome those obstacles, as we did to secure the passage through the House of the China-Australia Free Trade Agreement legislation. If it means reaching across the aisle for bipartisanship, then we should do that, too.
Businesses should not be afraid to invest because of some perceived political risk. Our Government, any government, should push for coherence and consensus whenever we can.
We are expected to govern, we are expected to deliver. Ideology is no substitute for results.
So we need to get the economic and regulatory settings right so that we can empower, enable rather than impede the spirit of your and so many other businesses, smaller and younger than yours; we want to encourage their spirit of entrepreneurship.
Now, we all understand that there are big challenges out there. The global economy has been unable to sustain the strong growth we had hoped for after the GFC. The IMF has forecast global growth of 3.1% in 2015, compared to the pre-GFC average of 4.2.
As a result of the inevitable decline in commodity prices, we have seen major falls in our terms of trade, some 30% from their peak. And although average incomes are around 14% higher in real terms than they were at the beginning of the mining boom, we simply can no longer rely on increases in our terms of trade to drive future income growth.
And so government and businesses together need to do the hard work to drive the productivity growth that in future years and in future generations will forge continued improvements in Australian living standards.
We, the governments, need to be making the right investments in key infrastructure. We need to make those investments in a creative and imaginative way. We need to be prepared to invest. The Federal Government should adopt a much more engaged and involved approach to infrastructure. That's why I've appointed a Cities Minister, that's why we will be taking a partnership role, a supportive role to ensure that our cities where most of our Australians live and hence most of our GDP is developed or is created, we need to make sure we have a creative and positive role there as well.
So we want to focus then on the measures that will enable us to achieve those goals, and we'll have more to say about that with our innovation and science agenda to be released next month, not very long away from now.
Now, I believe that we are in a world of, as I said earlier, of extraordinary opportunities. If you take the Brookings Institution's estimates, by 2021 there could be more than two billion people in middle-class households in Asia. Now, let's just reflect for a moment on the opportunity in China, and I know we all spend far too much time talking about China as opposed to other markets, but the observations about China apply to many other countries in the region.
China, as we know, has seen extraordinary economic growth which has been largely fueled by policy-driven investment. And that was the product of financial repression. Interest rates were kept low, both to the depositors, hence repressing household incomes, and making money cheaper, hence you got enormous levels of investment, very rapid rates of investment. Rapid rate of investment and very high levels as a percentage of GDP. The Government has been trying to re-balance back to consumption for many years, at least the last two 5-year plans have set that as policy, but it is now starting to happen.
As China moves to a more conventional share of consumption in their GDP, that opportunity for us is simply gigantic. Now, we need to recognise that that is not going to - that will mean that our exports into that market will be much more diverse than they have been in the past. They will still no doubt be dominated by a number of large commodities, but the range of services, of consumer goods, of food and wine and numerous other products; everything from tourism to education to architectural design services will be available there.
And so this is an extraordinary opportunity for us. Now, how do we make sure that we are able to do that?
We need to have a much more competitive economy. We need to be vastly more agile and adaptive. But we need to do so in a way, changes that we make need to be undertaken in a way that is seen as absolutely fair, and I made this point in Melbourne this morning.
There is a big debate going on about the tax system, and that's good. We have quite deliberately not played the rule in-rule out game that has been a feature of discussions before, because we want the public to understand that all of the - everything is on the table, that the Government is approaching these issues in a genuine, open-minded and consultative way.
We want to make sure that by consulting as widely as we can we come to the right decisions, to the right judgments, and in doing so; we build confidence in the reform process. You see, we're prone, as business people, as politicians, as economists, to talk about reform in abstract terms, as though it was a virtue in itself.
Reform is simply a means to an end. It simply is a means of ensuring that we are able to compete in the years ahead, that we are able to take advantage of those opportunities, and therefore it needs to have very deep public support. You cannot spring change on people as a surprise. You need to build that strong constituency.
So you have to have on the one hand an acceptance, an understanding that the purpose of reform is to create better opportunities in the future, better jobs, and greater opportunities for investment, greater prosperity, and greater economic security. That, if you like, is your motive, that's got to be accepted.
But then you need to ensure that people understand you've gone about it in an open-minded and thoughtful and consultative way, and that's why I was delighted to meet with my colleagues with the leading participants in the national reform summit, business groups, the ACTU, ACOSS, right across the board. The Government should be seen to be engaging as widely as possible. That's why we welcome every contribution to this debate, even if it's critical, even if it's saying the Government is planning to do X and that's a bad idea. Well, that's fine.
The more discussion there is, the more informed and comfortable people will be that we are having a very sensible and serious look at things.
Now I talked earlier about business and how big business and even old businesses can be transformed by innovation. The same is true with government. Using technology to help businesses and consumers interact with government more easily and more effectively is an absolute no-brainer, and so we established - I established in my own Department - when I say I did, the Government did, but it was in the Communications department, now in PM&C - the digital transformation Office whose role it is to ensure that by 2017 all frequently performed transactions with Government can be undertaken on digital platforms, end to end. That will in due course save money for Government, but it will be genuinely transformative in terms of the way businesses interact with government.
And our goal and I say this knowing I have a Premier in the audience, our goal is to ensure that citizens, when they deal with government, can deal with all levels of government. When they provide, for example, something as simple as their change of address, why do they have to provide it to one agency after another, to one government after another?
"Tell me once", should be a principle that applies right across government. We should be able to recognise that the fascinating constitutional differences between Local Government, State Government and Federal Government - obscure and unclear and ambiguous as they often are - are of absolutely no interest to citizens and most businesses. They want results.
That's why I always say, when you're campaigning to be elected as a Federal Member of Parliament, you will find that most people you meet will raise Local Government matters with you.
Now, as the first man to be the Lady Mayoress of Sydney, you can imagine I have a very deep appreciation of Local Government, and I always say if you want to limit your prospects of election, give your would-be constituent a lecture on constitutional law. If you want to secure your election, say to your constituent when they ask you as a federal candidate about the cracks in the pavement or the rubbish collection say, "I know the mayor, I will get onto her as quickly as possible and it will be sorted out."
So the reality is that we should, without - while respecting the important roles of government, we should in terms of our interface with the public be able to make it far more seamless. And that's why we will make our platforms, whether it is mygov or any other digital platforms that we develop as part of the DTO's work, we will make that available to state and local governments for free. So if they want to on-board, they can do so.
We want more Australians, whether they are businesses or citizens, private citizens, if you like, to be able to deal with government in a more straightforward way.
Now let me say a little bit about tax and I notice that Allen Madden was the first person to raise tax tonight so it is obviously a key issue. The fundamental objective of the tax system, as we know, is to raise the money needed for government. But it is a very big lever. I mean, the tax commissioner is in many respects the largest single shareholder in many Australian businesses in a practical sense.
So it is absolutely critical that the tax system has the minimum dead weight loss as the economists would say the minimum brake on economic activity.
So we have to always ask ourselves and be prepared to always re-examine the tax system and the way it interacts with other - with superannuation and transfer payments and so forth, we have to always ask, "Are we able to achieve our objective of raising the money we need in a more efficient way?"
That may not - that does not mean raising more money. It means doing so in a way that backs business, backs enterprise, backs work, backs investment, rather than holding it back. And as Catherine said at the outset, circumstances change all the time. We have a lot of measures, a lot of taxes, particularly at the State level which are very old and apply, were imposed or created in a very different world.
Now it's often said that an old tax is a good tax. That's probably true in some respects from an administrative point of view, but in practical terms, in 2015, we have to be prepared to re-examine all of these measures and ask it whether it is contributing to our prosperity or whether it is, in one form or another, holding it back.
And that is what re-are undertaking at the moment. We are looking at every aspect of the tax system, of savings, transfer payments, right across the board, with the aim of ensuring that we can deliver the revenues government needs, but does so in a way that will contribute materially to the growth of our economy and the opportunities for Australians.
It's absolutely vital that as we do that, we do so in partnership with the rest of the community, with business, with organised labour, with the organisations like ACOSS. It is important that we are seen to be and are in fact genuinely consultative. And you've seen in the short time that I've been Prime Minister that I've reached out to many of you in this room, often with very different interests, very different agendas, to hear what you've got to say, because we can always draw something from it.
The critical thing is that we get to the right decision and that we do so in a way that is seen as legitimate. And it is that consultation, that engagement that drives the legitimacy.
Nobody knows for sure what the perfect policy will be. There probably is no perfect policy, only time will tell. But nothing gives a policy greater legitimacy than the sense that everybody has been heard, that all of the claims, all of the stakeholders, all of the interests, all of the arguments have been listened to.
So the Government I'm leading, in summary, is one that is committed to growth, is determined to ensure that we equip ourselves to prosper in a much more competitive world, in a world that has vastly greater opportunities, in a world of unprecedentedly rapid change.
We want Australia to be more agile, more innovative, and more productive. As I've said and I know Catherine has said, and I know you want it to be too. And so we need your help, your ideas and not just from the BCA members but from all the other interests that are here in this room, we need your help to ensure we make the right decisions.
We are absolutely committed to that task. Remember the goal. Australia a high-wage, generous social welfare net first world economy, a country that is seen as being open to opportunity but thoroughly fair, that backs and encourages those who want to get ahead, but also looks after those who, for one reason or another, are not able to. That's been our unique success in years gone by.
In a different world, in a rapidly changing world, we need to be more agile to maintain those great Australian values. I know that we can count on not just the support but the help, the ideas, the counsel of everyone in this room to ensure that we can do that in the years ahead.
Thank you very much.