Speaker: Jennifer Westacott AO, chief executive of the Business Council of Australia

Location: Sydney

Date: Wednesday 20 July 2022

Thank you Peter.

I would like to start by acknowledging the Traditional Owners of the land we are meeting on tonight – the Gadigal People of the Eora Nation – and pay my respects to their elders past, present and emerging.

Introduction

As I stand here tonight, I reflect that almost 40 years ago, the Business Council of Australia was formed to bring a unified voice from the business community to Bob Hawke’s national economic summit.

Hawke’s vision was to modernise Australia.

He knew big conversations were needed and bold decisions had to be made.

He also knew the only way to achieve lasting and nation-changing reform was through consensus.

Back then, we had a closed, insular and outdated economy.

Many of our major assets were government-owned.

It was a time of:

• industrial turmoil
• spiralling wages without productivity gains, and
• the beginnings of the rise of Asia.

Back then, Hawke had a simple message to business – get organised, come together and speak with one voice.

With the work of the late Sir Arvi Parbo and my great friend Hugh Morgan, the BCA was formed.

By bringing government, business and unions together, that summit unleashed two decades of reforms which refashioned Australia into a modern and prosperous country.

Since then we’ve had:

• a doubling of income per capita, and
• almost 30 years of uninterrupted economic growth before COVID.

Now as we prepare for Prime Minister Anthony Albanese’s Jobs and Skills Summit in September – I believe it must achieve the same spirit of consensus and determination that kickstarts a fresh round of reforms to secure our economic future.

We head into this summit facing some of the same issues that Hawke did:

• rising inflation
• rising interest rates, and
• the need to turbocharge economic growth.

There are also many new and emerging forces on the horizon such as:

• the fundamental change in geopolitics
• the impact of digitisation and technology on how we live and work
• the decarbonisation of our economies, and
• the rise of the Asian middle class.

But the fundamental difference between Hawke’s summit and now is that we have experienced a decade of slow wages growth.

The reason people feel they can’t get ahead is that their wages haven’t kept pace with living costs and they’ve fallen well below rising inflation.

If you think about it – it used to take about two years for wages to rise about $100 a fortnight, now it takes about seven.

In Hawke’s time, median house prices were about 3 times average wages but these days they are almost 8 times.

The last decade was the worst for growth in living standards since the Great Depression.

As it was in Hawke’s time, sustained wages growth isn’t going to be achieved through industrial militancy or poor employer practices.

Nor will it be solved by counter-productive labour shortages.

It’s only going to be achieved through a collaborative effort to reshape the economy into a high wage, high productivity one.

And so, the BCA will step up as we did almost four decades ago – and have been doing ever since – to work cooperatively to reimagine our future.

We want all Australians to have the world’s highest living standards and stable, peaceful and prosperous lives.

But it is not good enough to just hope we get another 30 years of uninterrupted growth.

We must strive to go far beyond that.

We must be bold.

We must redefine Australia to be the frontier nation, the frontier economy and the frontier society.

And that’s what my speech is about tonight.

What do I mean by a frontier nation?

So, what do I mean by the frontier?

A frontier nation is at the cutting edge of driving:

• the new means of wealth and value creation
• new innovation and technologies
• the energy transition and decarbonisation
• new ways of production
• new ways of meeting changing consumer demands
• new industries and skills, and
• a respected, secure and stable middle power driving new sources of strength and respect.

A frontier nation is the ticket to higher wages, higher living standards and a high growth environment.

Frontier nations are capable of constant reinvention – we are masters at this but we need to dig deeper and do more.

This will mean strengthening our competitiveness by:

• having the most talented people
• making the most of our natural advantages, and
• leading the development and application of world-class technologies.

It means we’ll be able to pay for the services our citizens need for decades to come.

Frontier nations are resilient.

They are independent.

They are not reliant on the fortunes of others.

Frontier nations do not live in fear.

They are safe, secure and they have strong partnerships with allies and care for their neighbours.

Frontier nations are those that take the first phone calls in the hours of need.

The importance of reaching the frontier

Given all of this, it’s clear that we can – and we must – be at the frontier if we want to create the next golden era of prosperity.

Because where we are now – back in the pack – isn’t enough to generate the incomes we need to drive better living standards for Australians.

It isn’t enough to generate the economic growth that will allow us to get on top of our almost one trillion dollars of debt.

It isn’t enough to give us the resilience we need to weather and prosper in another inevitable major shock.

Where we are now, isn’t enough to capture the value on offer and create the new forms of wealth from the huge global transformations underway.

We stand at a momentous time in history.

We can be bold and take risks and be in control of our own destiny.

Or we can choose to delay, dither and endlessly chase the idea of what might have been.

This is the task of the summit.

Economic structure and industrial base

So, to reach the frontier and secure our future – I believe we need five big post-COVID resets.

We need to:

• reimagine and secure our economic structure and industrial base
• have a laser-like focus on the skills and capabilities of our people because they will be at the centre of reaching the frontier
• unleash the potential of our regions
• strengthen our national security, and
• recalibrate our fiscal strategy to make sure:
  • we can pay our own way
  • meet community expectations, and
  • invest in the future.

First, let’s look at our industrial and economic base.

The global shifts to clean energy, digitisation and technology are transforming global supply chains and rewriting the nature of production.

This is opening up unprecedented opportunities for Australia.

The frontier will be defined by clean energy and low emissions technology.

With all our advantages, we can be at the cutting edge of the new mining revolution producing critical minerals, rare earths and lithium.

We can power up the transition to clean energy while providing the resources the world needs to decarbonise.

We can be at the front – not the back – of the new global energy supply chains exporting our renewable energy and clean manufactured products.

We must be bold on the technologies that we know hold the key.

And ensure our replacement energy system is locked in before we get rid of the existing system.

Because a failure on energy security is the greatest threat to transition.

Success on the frontier also relies on us excelling in advanced manufacturing – using smarter, value added and more innovative ways of making things.

I see advanced manufacturing companies all over Australia being bold and creating new opportunities – but the question is how we scale up production and unleash our potential.

We could be world leading exporters in the space and defence industries.

The global space industry alone is worth $US370 billion a year and climbing – while defence is worth more than $US600 billion each and every year.

With a focused approach, we can make:

• the electronics for missile guidance systems and high security communications
• the control systems for autonomous equipment
• the navigation systems for the hundreds of thousands of satellites that are going to drive pretty much everything we will do, and
• indeed, produce the smaller satellites themselves.

In agriculture, we can scale up to meet the insatiable demand for our fresh quality produce and products from the growing Asian middle class – on track to reach 3.5 billion people by the end of the decade.

Last year alone, these exports to Asian markets were valued at around $44 billion.

In services, if we accelerate our take up of technology, we could create up to 250,000 new jobs by 2025 in areas like customer service, education, logistics and professional services.

In the new digital technology driven world, the greatest rewards will go to those who can integrate systems, whether that’s in defence, energy or manufacturing.

Consumers – whether they are individuals, companies or countries – will pay for the human ingenuity that puts complex systems together.

And in health, Australia could be $3.2 billion better off a year if we capture just part of the global explosion in advances in healthcare.

So, this is the frontier.

These are the areas at the forefront of wealth and value creation.

They are either with us already or just within our grasp.

And make no mistake – not getting to the frontier leaves us back in the pack with middle of the road living standards.

Time to be bold

Now, I want to turn to the bold mindsets we must adopt if we are to reimagine our economy and reach the frontier.

The first is thinking about what we are already good at – our adjacencies and advantages in areas like mining and agriculture.

We must continue to play to our strengths while at the same time drive the new forms of wealth creation.

In new industries, we need to look to the big opportunities I’ve talked about tonight and ask ourselves – are they worth chasing?

Can we play in those spaces?

Can we succeed?

Where can we find the biggest gains?

This will centre on our ability to scale up and in doing so, take risks.

We are doing magnificent things all over the country.

But without risk, there is no reward.

The people, the countries and the companies who do not take risks or make bold decisions are those that stay in the middle lane.

Or worse, they slide into the slow lane where they face the biggest threat of all – being overtaken by the risk takers.

We are currently the 13^th largest economy in the world but over the next three decades we are on track to slip to the 22^nd largest.

That’s something for us all to think about.

Now let’s look at what we must be good at and where we must succeed.

And this is a very dangerous conversation because the risk is it often drifts into nationalism and poor choices – but it is one that we must have.

We need to be bold but not reckless about the areas we choose and those we don’t.

The best way to think about this is:

• where there is an over-reliance on a particular supply chain or market where our fortunes can be held hostage by a few
• things that have sovereign impact where our security is at risk because we can’t do them, or
• foundational areas where you simply must have the capabilities in order to succeed

Let’s take semiconductors as a great example.

Semiconductors power everything around us, from iPhones in our pockets to satellites in space.

They are overwhelmingly made in Taiwan, South Korea, China and the US.

We are not going to compete with Taiwan.

We won’t be mass-producing semiconductor chips.

But why can’t we be at the high-end of the supply chain making secure semiconductor devices?

We are world leaders in quantum.

We are on track to be one of the world’s key producers of mRNA vaccines.

We can’t afford to lose these advantages.

Along with AI and autonomous design, these will be the foundational capabilities of a frontier economy.

We must strengthen and further develop our capabilities in these areas.

And while we’re great at coming up with big ideas, we must get better at commercialising and scaling them up.

We don’t want a repeat of the situation with solar panels – where Australia was at the forefront of that technology but now China makes 80 per cent of the world’s solar panels and its market share is rising.

Sovereign capability is about economic and national security – not protectionism.

I’m not talking about picking winners.

I’m talking about focus.

I’m talking about moving away:

• from grants to investment
• from fragmentation to coordination, and
• from a scattergun approach to a sharper focus on future industries and nationally significant precincts.

The most dangerous mindset is not to do anything for fear of picking winners – that’s a decision that will leave the country stranded.

With all the areas where we can and must succeed on the frontier, we have to be bold about the big settings.

We cannot do any of these things if we are hamstrung with an uncompetitive environment.

This means:

• having a more competitive taxation system – not the lowest rates, but an internationally competitive system
• being open to foreign investment by reducing the friction in the system but remaining unwavering in protecting our national interest
• having a planned transition to the clean energy future – not a stop-start chaotic and expensive approach
• working with the Commonwealth and states to remove productivity sapping and pointless state taxes like stamp duty and payroll tax, and
• busting the plethora of red tape that stifles our capacity to adapt and change and adds to prices and delays.

We must be a country that is an investment magnet.

We are not there now.

We are simply not there now.

Our people

The next reset we need is our people.

They have and always will be the forefront of the frontier.

For example, we know we have the technology to achieve 50 per cent of the energy transition.

The other 50 per cent is going to come from people and their ingenuity.

It’s people who drive AI.

People who drive digitisation and its people who invent technology.

So, to me it’s people who are absolutely at the core of getting to the frontier.

The frontier won’t come to us. Our people will take us to the frontier.

Let’s start with migration.

Migration has been the backbone of this country and the great frontier nations because skilled people bring ideas, energy and innovation – and they bring capital.

They transfer that to others, helping create new jobs, new industries and new ways of doing things.

As we head into the summit, migration cannot become a battleground in this country.

Instead we have to steer a sensible course.

We have to be bold enough to face into the fact that right now we don’t have enough people to do the work that is needed.

And there’s no doubt this is holding us back from locking in the recovery – let alone getting to the frontier.

Now let’s look at skilling and reskilling Australians.

The massive driver that will take us to the frontier is the capabilities of our people – empowered by our skills and education system.

And that has to start before Australians turn five.

We need to be bold about creating a system that creates multiple pathways for children to succeed.

And that system can invest in kids much earlier in their lives, especially if they are disadvantaged.

A system that reinforces the fundamentals of numeracy, literacy and digital skills as early as possible.

Now let me go to schools.

We want to be the smartest people on the planet, but we refuse to confront the reality that our school system is not working as it should.

We need to be bold enough to say that no matter how much extra we seem to spend, we are not keeping pace with international standards.

On pretty much every global indicator, we are falling behind.

Our schools should be beacons of excellence – where we are bold enough to try new things and admit when things aren’t working.

So, let’s not blame the teachers, let’s improve the system.

And let’s pay our teachers in line with standards and experience..

Encourage and incentivise them.

Let’s invest properly in their professional development.

Let’s empower principals with the autonomy to hire the people they need to drive results.

And for students, let’s reimagine what they leave school with:

• not just a mark, but a foundation to lifelong learning
• an academic result with a focus on literacy, numeracy and digital skills
• a recognition of workability skills such as teamwork and communication, and
• putting a value on volunteering and work.

These should form the basis of a skills passport that students can add onto in the tertiary system for the rest of their lives.

Then we need to be bold enough to modernise our tertiary system, recognising that universities are not the only credible pathway.

And instead have the capacity to combine credentials from university and vocational education because that’s what employers tell me they want.

We need to be bold enough to break down longer degrees and certificates into shorter courses that can be stacked together.

And we need to let people and their employers choose the right packages of training.

But there’s no point training the best people and educating the best people if you can’t get the most out of the best people.

So, we need a fit-for-purpose modern workplace relations system.

We need to re-empower business and workers to unlock value in their workplaces to take advantage of the huge opportunities I’ve talked about tonight and share the benefits.

This was achieved with the introduction of enterprise bargaining 30 years ago – a system that was part of the Hawke reforms.

But that system is in decay.

It is bogged down in red tape and technicalities.

And you can’t get the most out of people if you’re not utilising them to their future potential:

• If women aren’t working or advancing because they can’t get childcare
• If families can’t make the paid parental leave system work for them, and
• If people with disabilities can’t work because they are excluded by a job description that was written 50 years ago.

And for Indigenous Australians, we need to be bold and match reconciliation and recognition by lifting our ambitions from closing the gap to raising the bar and realising people’s potential.

For everyone to realise their full potential and for us to disrupt disadvantage – that disruption has to be about job aspiration and economic advancement.

We know the frontier will be a time of constant reimagining and task change – not job destruction.

With the right skills system, workplace relations system and a participation model that brings out the best in everyone – we can help people through the transition.

And we can make sure the new jobs are available for every single person in Australia.

Regions

In the same way that we need to get the best out of our people, we need to get the best out of our places, particularly regional Australia.

The frontier is not defined by borders.

It cannot just be located in the inner suburbs of Sydney, Melbourne, Brisbane and Perth.

Here we need to be bold: choose some places, get behind them, and back them in.

To tap into new markets and make the most of our regions, we need to start by identifying the places with the greatest potential to contribute to the national economy.

Then we can target them for investment, coordination and a concentrated place based approach to turn them into major economic hubs.

Let’s embrace 30-year infrastructure compacts that will turbocharge these areas.

It will take boldness and effort to narrow the very serious regional divide in this country.

Let’s reimagine a connected nation through transport, through energy transmission and through the digital system – where we connect Australians to one another and we connect Australia to the world.

Our security

Now, let’s go to the boldness we need in national security.

A frontier society must be a secure society.

Economic and social wellbeing are fundamental elements of our national security.

Weak economies like weak companies are vulnerable and soft targets.

We cannot afford to be timid.

We are a thriving, successful country.

The battle in the Ukraine has brought into sharp focus the overwhelming importance of democracies standing together to protect freedoms.

We have enduring relationships with the United States, the United Kingdom and New Zealand built on our common values.

And we must continue to forge ahead with alliances like AUKUS, the QUAD and the Five Eyes.

Together with allies, we are stronger.

But in our region, we should lead.

We must be bold about our role in the Indo-Pacific.

We need to be at the forefront of shaping the regional architecture and building the prosperity and resilience of our neighbours, for our mutual benefit.

The government’s expansion of the Pacific Australia Labour Mobility scheme is an important step.

But we could be doing more by launching a major education, skills and labour market initiative in the Pacific.

Half the population of the Pacific Islands is aged under 23.

But less than one-third of school leavers secure formal employment.

So, why don’t we encourage Australian employers to offer Pacific Islanders a variety of employment pathways including:

• four year visas
• full-time jobs
• traineeships, and
• apprenticeships.

They could also help with housing and provide other incentives.

And then governments and employers would work together to improve their skills and employability by offering things like a skills guarantee.

This would involve Pacific Islanders undertaking short courses or micro-credentials at TAFEs, universities or other training providers.

They could continue to apply their new skills here or return home and share what they’ve learned.

Business has to do its part in the region by investing in the critical projects such as infrastructure and energy to build the foundations for modern, resilient economies.

I want to pay tribute to the Indo-Pacific reset being led by the Prime Minister and Foreign Minister Penny Wong.

They are taking steps to foster greater trust and understanding to bring our region closer so collectively we can build on the talent and aspirations of all of our people.

We also need to be bold about a broader security reset.

And to do this, we need to be willing to have conversations about investing in the right defence capabilities.

We have to talk about short and long term here.

Yes, of course we have to plan to replace our major assets like submarines and frigates.

In the meantime, we should be thinking about our short term needs such as missile capabilities.

We need to make sure we have a workable defence policy and be bold enough to make some actual decisions as well as drive some big plans.

Our unwavering priority must always be to defend and secure our country.

Paying our way

So, finally I now want to turn to how a frontier nation must have resilient, strong finances so it can pay its own way and secure its future.

It’s time for us to have a conversation about the adequacy and efficiency of the nation’s tax base including federal and state revenue sources.

This will involve some difficult questions, some tasks, and a massive conundrum.

The questions are obvious:

• who should do what in the Federation and
• who should pay for what?

There’s no doubt our Federation is littered with duplication, a lack of efficiency and confusing systems.

In respect of who pays, there are some tough conversations we must have around government services – primarily centred on eligibility, targeting and access.

The tasks – which are more complex but not unachievable – are about ensuring better and more efficient service delivery.

We need to look at the design and ongoing funding of systems like health, aged care and the National Disability Insurance Scheme which will continue to grow.

We need to put ourselves in the shoes of the people who access these services, not the people who provide them – so we can adopt simple technologies that could reduce things like multiple requests for the same blood tests.

We must modernise and embrace technology in these systems.

We need to assist people with the digital transition instead of leaving them behind.

And with the digital tools – trust them and support them, don’t patronise them and exclude them.

Which now brings me to our fiscal conundrum.

I am sure as we exit the summit and head towards the budget there will be a very big conversation about how Australia will not have enough revenue over time to pay for aged care, the NDIS, health and other services.

That’s a legitimate debate to have.

What I am nervous about is that we won’t get that debate right.

My plea on the fiscal conundrum is that we must avoid the lazy and counter-productive path of just taxing more.

Instead, let’s have a conversation about making our tax system more efficient so it supports the economy to grow faster than forecast – that is the sustainable path to higher revenues to government.

Punitive and incentive sapping taxes are not the answer to any of our revenue problems.

Surely, we would reap more if the system was geared towards encouraging the investment and innovation needed to drive growth.

It would be the ultimate betrayal of our social compact to tell people you can keep spending without growing the economy.

I would love it if the company tax receipts doubled – not because we increased the tax burden, but because we decreased it.

It would tell us that we are more successful as a country – we are investing more, doing more, paying people more, and yes because we are more profitable.

National character

In conclusion, I want to call on all Australians to be bold about our national character so we can reach the frontier.

Reform is still possible.

It’s about taking a step-by-step approach.

Hawke did more than unleash seismic macroeconomic changes – he also laid the foundations for the National Competition Policy reforms which benefited the economy to the tune of at least $56 billion in today’s terms.

So, in tandem with the Jobs and Skills Summit, we should be getting on with the little things because it’s the accumulation of the little things that count.

Shortly, we’ll be putting out the BCA’s report on how we can release the handbrake on growth with some common-sense quick microeconomic reform wins.

The summit is an opportunity to reset what we do and how we work together.

It’s an opportunity to ask ourselves, what is the Australian way?

During COVID, we saw governments, unions and business come together to problem solve and put a floor under the economy and our society.

But I feel there is a temptation to retreat into our corners.

The summit is a chance to return to floating and testing ambitious ideas without immediately shooting them down.

It’s a time to talk softer, listen harder and respect each other in our national discourse once again.

I feel we want to attribute labels to people that don’t make sense and then shut down important conversations.

Progressive isn’t left wing and conservative isn’t right wing.

Frontier societies have civil discussions.

We have to be bold in restating what I believe is at the centre of our national character.

And that’s fairness through opportunity.

Australians know when something isn’t fair and they can see it coming a mile off.

They value fairness in a way that I think many other societies value freedom.

Fairness is also a global concept – and it determines how we act and how we are seen around the world.

As we strive for the frontier, we have to re-find our sense of

• self-belief – this isn’t arrogance or hubris
• ambition
• pride
• drive
• imagination
• aspiration, and
• a sense of giving others here and abroad a helping hand.

But the greatest unfairness we could commit now is to be timid and reticent about seizing the moment.

To do that would leave Australians stranded back in the pack with low wages and high costs.

That would be inexcusable – especially when we have such tremendous assets and advantages.

But with the exception of our bedrock industries of mining and agriculture, we just can’t seem to really power and scale up our new industrial base.

It’s taking too long.

We lack a sense of urgency.

We’re second guessing ourselves while competitor countries overtake us.

The summit can be a circuit-breaker – and we can use it to recommit to the boldness of action we used to have.

The boldness to get us to the frontier.

The reason countries, companies, and communities go to the frontier is for better lives.

It’s not easy.

It requires courage and a shared ambition.

To paraphrase from Ronald Reagan’s great 1986 speech about the Challenger disaster – the future is not written by the faint-hearted, it is written by the brave.

The frontier is the place for:

• the pioneers
• the risk takers, and
• the new explorers, people like Michelle Simmons advancing quantum technology.

The frontier is not for the cynics or the closed minded.

It is for the visionaries and the optimists.

It is for those who are willing to be bold.

The frontier is where the hopes and dreams of this generation and those who follow can be realised.

Thank you.