Speaker: Jennifer Westacott AO, chief executive of the Business Council of Australia
Venue: Four Seasons Hotel, Toronto
Thank you, and it’s a pleasure to be here today.
Before I begin, can I acknowledge the Australia-Canada Economic Leadership Forum co-chairs, my friend Julie Bishop, and the Honourable John Baird
Can I also acknowledge our keynote speaker the Australian Attorney-General, the Honourable Mark Dreyfus and Minister Kristy McBain. As well as all other distinguished guests here today.
My role this morning is to help set the scene for the next two days of discussions.
To do this, I want to provide some context about what is happening in the world around us and how these forces are shaping our lives at a global, local, and personal level.
Global becomes local
Last time, we were here together in Canada in Montreal– former Prime Minister Stephen Harper made a comment that the world was starting to divide between people with a local orientation and those with a global orientation.
Many people have rejected globalisation, free trade, and innovation because they don’t see them working to lift their living standards.
Since that time, those two forces have converged rapidly – making it unavoidable to confront global forces.
We’ve seen a global pandemic reach into the lounge rooms of people, with a tragic loss of life and disruption to markets – global to local.
We’ve seen a war in the Ukraine disrupt energy supply chains – exacerbating high inflation and a cost-of-living crisis at kitchen tables around the world – global to local.
And we’ve learned that governments have much more control over our lives – certainly in the case of Australia where they regulated when we could leave our homes and who we could meet.
Importantly, we’ve also learned that integrated and robust global supply chains really matter.
That governments, in many cases, have responded by re-nationalising their industries – which seems at odds with a world that has built its prosperity off the back of free trade, and
We’ve learned that strong balance sheets – whether that’s for a country or a company – really matter. But now the world is drowning in debt some of it of deteriorating quality.
And why does all of this matter?
Because we are facing several big forces of change including:
- worsening geopolitical tensions
- the ongoing rise of the Asian economies
- digitisation, technology, and the dominance of global supply chains, and
- the dramatically changing nature of our workforces.
It means to really prosper in an era of constant uncertainty, we need to:
- further diversify our economies
- strengthen our productivity and competitiveness through well planned infrastructure
- change the way we skill and train people
- double down on free and open trade
- access new markets
- strengthen our respect and inclusion of our First Nations peoples
- prepare our societies for endless transition
- continue to work together as global middle powers, and
- fundamentally lift our productivity, and in turn, our living standards by unleashing investment and innovation.
If I go to geopolitics first.
Obviously, we are living in a very different, difficult, and challenging world.
At a business level, we know from EY’s annual global CEO survey that geopolitics is now at the forefront of CEO strategic decision making.
Almost 9 out of 10 CEOs say they are focused on markets where their home country has strong geopolitical and economic set of relationships.
I’m not going to talk too much about geopolitical tensions, it’s not my area of expertise and I’m surrounded by two of the most famous people on this subject in history.
But we are all cognisant of the profound changes in the economic dynamics of the world.
This, in turn, changes the very nature of power and influence.
It is why it is so crucial that one of the enduring foundations of this event is to continually reinforce the partnership between our countries and translate that into prosperity for our people.
As nations, we must cooperate on economic security and resilience, and reinforcing the global world order.
Canada and Australia’s combined strength lies in continuing to develop practical solutions that remove barriers to trade and investment.
We will also need to develop new and innovative multilateral agreements.
Our countries will thrive on multilateralism – not nationalism.
As steadfast US allies and members of the Five Eyes, we can also work closely on national security and defence matters.
These issues are more prominent than ever given the geopolitical backdrop.
As you are all aware, Australia is part of AUKUS – a game-changing deal that rewrites power dynamics and opens up a new set of broader economic opportunities.
Our view is that we don’t want to see Canada excluded from these benefits.
Let me just turn to the Indo-Pacific and let me start with China.
China remains a crucial economic and strategic force.
For Australia, this is an extremely important but complex issue given China’s importance as our largest trading partner.
We both seek to manage our relationships with China in a way that protects our economic interests without compromising our values and national security.
The countries of the Indo-Pacific are looking to Australia and Canada to be actively engaged in promoting a peaceful, stable, and prosperous region.
We are seeing the rise of the Asian super economies – with 3.5 billion people to make up the Asian middle class by the end of the decade.
Economies in the Indo-Pacific are expected to grow almost double that of Australia, Canada, and the US over the next five years.
As these super economies grow, so do the market opportunities for our countries.
But on the flip side, they will also be our competitors.
Canada and Australia are the 9th and 13th largest economies in the world today.
But together we’re on track to slip to 14th and 21st respectively by 2050.
It’s clear we need to forge new mutually beneficial trade and investment relationships with these emerging powerhouses to strengthen the region and secure our prosperity.
This means rethinking our industry structures – and diversifying, deepening, and decarbonising our economies.
This brings me to my next force of change – how we manage the transition to a clean energy future.
This brings huge opportunities but big risks if not well managed given the resource intensive nature of our respective economies.
COP 27 highlighted that global transformation to a low-carbon economy is expected to require investments of at least four to six trillion US dollars a year.
To deliver such funding our financial system
- its structures
- its processes, and
- new classes of assets must be up to the task.
McKinsey estimates that the cumulative investment in assets for the net-zero transition — such as technology, infrastructure, and natural resources — will need to increase from today’s annual average of 5.7 trillion dollars to 9.2 trillion dollars through to 2050.
As we manage this massive megatrend, there are four realities we must face into.
The first is the asymmetrical nature of the effort.
We need to remember that developing nations need reliable and affordable sources of energy to supply their households and businesses — as their populations and economies grow rapidly.
Telling these countries to decarbonise before they’ve industrialised – could become a major tension.
Are we going to simply withdraw our existing commodities – gas and coal – and leave rapidly developing countries stranded?
They will have no alternative but to seek new markets.
In addition, if institutions aren’t ready to finance the full transition – we will end up with inequities around the world and actually slow the pace of change.
The second area to face into are the realities of technology readiness.
Our transition pathways must be realistic about the technology that is ready and actually works.
Whilst at the same time putting everything we’ve got into the research and development of new and emerging technologies.
It’s time to replace technology ideology with technology realism.
The third reality is to pay heed to the lessons out of Europe – and that is we must replace energy systems before we get rid of them.
And finally, we need to get real about what will incentivise investment to drive the shift to a clean energy future.
The Inflation Reduction Act in the US is acting as a massive magnet for investment.
Australia and Canada may struggle to attract the level of capital we need.
So, in addition to working on our own ways to attract investment, our countries should cooperate on:
- regulatory environments
- carbon pricing and carbon markets
- environmental protection policies and how they work alongside decarbonisation
- adopting a realistic approach to developing technologies such as hydrogen, nuclear and carbon capture, and storage, and
- sharing best practice on how we make our infrastructure and our communities more resilient to extreme weather events.
Digitisation, technology, and supply chains
I now want to turn to one of the areas that will define the future, and that’s the changing nature of production – how our goods and services are made.
As we know, very few products are now made end-to-end in one location.
This is being driven by changing technologies, including the use of new materials and production methods, as well as digitisation.
The cost of labour is no longer the main determinant of things like manufacturing.
It is now the skills and capabilities of people innovating and using technology.
This shift means countries like ours can be competitive in areas like advanced manufacturing.
In this new paradigm and with increasingly disintermediated supply chains, we can excel by playing to our existing strengths and natural advantages.
Australia and Canada both have very similar positives in areas such as:
- mining and resources, with new opportunities in critical minerals
- financing, and
- of course, our world class agriculture industries.
These areas are growing – with the rewards at the value-added end of the supply chain.
Going forward, our two countries can work together to grow our advanced manufacturing capabilities and tap into new and emerging supply chains.
On top of changes to production, we are also seeing digitisation accelerate what I call ‘the new era of the consumer.’
Make no mistake, the digitally enabled consumer is one of the most powerful forces on the planet.
They hold the tools of innovation in their hands.
Successful businesses of tomorrow will be the ones that step up to meet these expectations.
Our countries can work together on effectively together on regulatory arrangements.
Regulatory overreach here runs the risks of creating unnecessary friction in the digitisation process.
We need the right frameworks that protect consumers and intellectual property without adding to cost and complexity.
Cyber security, an enormous risk to the digitisation process, is an area of obvious cooperation.
And in the space of artificial intelligence, there is scope for us to partner in understanding its far-reaching implications for both the workforce and the management of information.
In every session over the next two days, we need to ask this question.
How do we prepare our people for such change?
A key will be reimagining our skills and training systems – which are export opportunities in their own right.
All the global forces we face will dramatically change the skills requirements of virtually every job.
We will need to change our migration, skills and education systems to enable that transition to occur.
Right now, our skills and education systems are too slow to keep pace with the onslaught of the changes we face.
Every single worker will see multiple task changes.
And make no mistake, every single person on the planet will need some digital and technological capabilities.
The way we train people will need to be constantly updated, so let’s work together on sharing information on:
- restructuring our skills system
- driving the right incentives
- recognising work-based learning as part of an interoperable training system, and
- accelerating the adoption of microcredentials and short courses.
And can I give a shout out to our government in Australia, who has embarked on probably the greatest reset of the skills and education system – certainly in my lifetime.
A Universities Accord, a complete review of the vocational system, a complete rethink of the skills system and a fundamental review of early childhood learning.
Which is the way, of course, we will develop the competences of the future.
But skilling our people will not be enough.
We also can work together on designing well-managed migration systems to bring in the best talent our respective countries to manage the huge economic forces I’ve talked about this morning.
Global to local, local to personal
So, to conclude, I want to turn to what is potentially a major obstacle to success and change – and that’s the preparedness and attitudes of our people.
The global forces I discussed at the start are also showing up as local issues that quickly become personal.
A few weeks ago, the BCA did nationwide research which showed Australians are increasingly worried about how global issues are affecting their daily lives, especially their hip pockets.
We all know – that left unaddressed – this type of uncertainty can manifest itself in people:
- becoming resentful
- turning inwards
- embracing protectionism and nationalism.
The current environment of constant uncertainty is making people feel frustrated.
They are angry, they feel a loss of control over their lives, and they deserve our respect and empathy.
We need to remind ourselves why we gather at events like this – which is to improve peoples’ lives.
And one of the most important ways to do that - is to be vocal and forceful advocates for getting the economic fundamentals right.
We must be the people who encourage governments to commit to the policy settings that deliver:
- lower taxes
- competitive environments
- flexible labour markets
- highly skilled people
- strong and robust social safety nets
- deregulated economies, and
- free and open trade.
However, there is no doubt that things like the Inflation Reduction Act and the EU’s Green Industrial Plan are game changers in the world economic landscape.
Having spent a few days in the US examining the Inflation Reduction Act, this starts to look and feel like a clean energy version of Roosevelt’s New Deal.
Countries like ours can’t duplicate that big expenditure.
But at the same time, we cannot sit by and let other countries eat our lunch.
It’s how we respond to the Inflation Reduction Act that really matters.
So, we are going to have to double down on sensible industry policy to drive our comparative advantages and absolutely double down on getting the economic fundamentals right like we have never done before.
To paraphrase Mike Henry – the head of the world’s largest mining company BHP – given a choice between a short-term sugar hit and the long-term fundamentals, he will pick the long-term fundamentals to invest in every single time.
The world now faces two defining conundrums that we will need to address at this forum.
The first conundrum is the choice between staying the course on simply letting market forces do the work, or deciding to dramatically intervene in a way that drives equity for people who feel disenfranchised from global forces.
Perhaps it can’t be a choice.
And the second conundrum is being honest with the community about the cost and impact of decarbonisation.
We will need to decide how we manage the massive global investment needed to transition to clean energy, especially in developing nations. While the world is the most indebted it has been since the Second World War.
So, let’s fully embrace our collective responsibility here over the next two days to drive partnerships, practical solutions, and cooperation to lift the prosperity of our countries – because:
- it is prosperity that drives security
- it is prosperity that maintains stability, and
- it is prosperity that enables us to deliver fair and inclusive societies that preserve the dignity of our citizens today and the dignity of future generations.