Offshoring No Threat to Australia

The Business Council of Australia today released a position paper on offshoring, predicting the trend to outsource information, IT and other services to offshore companies would have largely positive implications for Australia’s economy and jobs.

The BCA paper, Offshoring, Global Outsourcing and the Australian Economy: Continuing Australia’s Integration into the World Economy, argues offshoring represents the latest stage in Australian economy’s integration with global markets – a process which Australia has largely managed successfully for many years – rather than a new phenomenon in itself.

BCA President, Mr Hugh Morgan, said the paper’s objective was to add to a constructive debate about the broader economic context of offshoring as well as its longer term opportunities, benefits and costs.

The paper outlines the largely positive relationship between Australia’s economic development and global integration and shows how Australia has been a recent recipient of work that has been offshored from other countries.

“Companies, here and overseas, cannot ignore the potential cost benefits of outsourcing services from lower-cost providers,” Mr Morgan said.

“Concerns about job losses and industry restructuring are inevitably raised whenever a new phase of globalisation is introduced.

“While we should not discount the costs involved with adjusting to these changes, we cannot afford to turn our back on offshoring as a new source of opportunity and competitiveness for Australian-based business.

The paper says that despite claims from opponents to offshoring, cost is not the only consideration when individual business decide whether to offshore. Rather, it is a complex decision involving a range of considerations including the social, economic and legal environment in potential offshoring locations.

The paper also argues that the long-term trend of outsourcing skills and services to lower-wage economies has not and is very unlikely to result in a lowering of wages paid to Australians.

“In fact, all the evidence from the past 20 years shows that opening up Australia’s economy to external competition has resulted not in a ‘race to the bottom’ but higher skilled jobs and higher wages,” Mr Morgan said.

“The paper shows that Australia successfully managed the many and varied facets involved with connecting our economy into global markets, and there is no reason why it cannot again from this latest phase of globalisation.”

Mr Morgan said an equally legitimate issue raised by the paper was whether the concept of ‘offshoring’ itself was a valid one.

“Every time Australia imports a product or service, it has effectively offshored a portion of its economic activity” he said.

“As the paper states: ‘It could be argued that the concept of offshoring is itself open to debate … Indeed, the practices associated with “offshoring” could just as easily be described as global outsourcing.’”

Offshoring, Global Outsourcing and the Australian Economy: Continuing Australia’s Integration into the World Economy