Dinner Speech: Crawford Australian Leadership Forum

Speech

WTS012/2015

29 June 2015

Great Hall, University House, Australian National University

Thank you for your generous introduction.

It is a great pleasure to join you at the dinner end of the day.

The Crawford School of Leadership at Australia's National University is one of our premier policy leadership schools.

It has earned its reputation at the nexus of research, public policy and entrepreneurship. It has also built important relationships within our Asia Pacific region, which together help to enhance our understanding of the world and shape our future.

Under the leadership of Chair, Chancellor Gareth Evans, the Crawford Australian Leadership Forum has again gathered some of the best international and Australian decision makers and opinion leaders who have the vision and the capacity to tackle the big issues—starting with asking the right questions.

The oft-quoted economist John Maynard Keynes once said: “The difficulty lies not so much in developing new ideas as in escaping the old ones.”

Your forum ‘Global realities, domestic choices’ has no difficulty in escaping old ideas.

Today's speakers have already covered wide territory relating to: a new global order; the next stages of the information revolution; and sustainability challenges for Australia's agriculture.

The reality is that dynamic changes to just about every facet of life require us to use the present to its best advantage to propel ourselves into the future.

Tonight, I propose to do exactly this as I speak about how Australia is unlocking its potential through future growth.

Unlocking Australia's Potential

Over the past 40 years, Australia has enjoyed strong economic performance—I have been in Parliament for more than 25 years and during that time there has only been one quarter of negative growth.

This has been underpinned by a growing population and a series of major economic reforms in the 1980s and 90s which helped to create a more efficient and innovative environment for business.

Economic success has greatly enhanced our way of life—average incomes have doubled in real terms since 1975.

The recent Intergenerational Report commissioned by the Australian Government, makes it clear that to take continued economic growth and prosperity for granted would be to our peril.

The Report outlines projections for three drivers of economic growth—population, labour force participation and productivity.

Understanding the changing nature of these drivers must inform the actions of the current and future governments if we are to build jobs, growth and opportunity.

Firstly, let us consider population.

Australians will live longer and continue to have one of the highest life expectancies in the world.

In 1975 there were just 122 people at age 100 or over. In 2055, the projection is for over 300 times this number.

And by 2055, there will be a projected 2.7 people aged between 15 and 65 for every person aged 65 and over, which is down from 7.3 people in 1975.

This lower proportion of people in employment will mean lower economic growth and will put considerable strain on our ability to deliver services, particularly health.

Therefore, to improve economic performance and living standards depends on us working smarter and more efficiently. In other words, we need to produce more, with less.

During the 1990s, Australia's productivity was especially high with an estimated average of 2.2 per cent growth.

This slowed to an average of 1.5 per cent growth in the 2000s.

Continued steps to boost productivity and encourage higher workforce participation will be critical to driving even this rate of economic growth.

Such steps include increasing female participation, together with policies to support parents and prospective parents.

We also need to harness the full potential of all demographic groups, especially older Australians, youth, people with disability and the long-term unemployed.

We must continue to focus on reforms that can improve the competitiveness of our businesses and markets, and provide an environment that encourages entrepreneurship and innovation.

This will also include taking advantage of opportunities presented by changing technologies and new markets, both at home and abroad.

In addition to these policies, the Budget must be balanced to avoid ever-increasing deficits and spiralling debt.

Towards a Stronger Australia

As a government, we are focused on creating the most conducive environment possible to grow the nation's wealth.

Australia's strength comes from the contributions of its people, businesses and local economies across the nation.

We have put in place a five-pillar plan to build on our diverse economy focusing on agriculture, manufacturing, smart technology, education and mining.

We recognise the importance of Australia's regions to our national prosperity and the unique contribution those who live in our regions make to our national character.

This government has made an historic $50 billion—actually, after the last week or two make that $58 billion—investment in transport infrastructure including road, rail and port networks to ensure greater connectivity between our regions, our cities and the world.

Our investments are being undertaken with the understanding that it is more important than ever to select the right project at the right time.

We need to make the right choices because infrastructure is expensive, and because it is in place for a long time it must take the future into account.

So, we need to be smarter in planning for where the growth in population and jobs will occur, so we don't unnecessarily add to transport demand and compound the infrastructure task.

This is a great time to be building new infrastructure. With the slowdown in new mining project construction, there are thousands of skilled construction workers who do not have a new job to go to and dozens of construction companies with empty order books and sharp pencils. Pricing is keen with most jobs coming in under budget.

Infrastructure for Now and the Future

Australians expect their infrastructure to support a high quality, first-world standard of living. They also expect infrastructure to improve their future quality of life.

There are grounds for concern that Australia's infrastructure networks, and the systems under which they are managed, aren't meeting these expectations and are not geared to meet inevitable growth.

The Australian Government has restructured Infrastructure Australia as a truly independent body with its own board and a CEO that provides advice for governments, industry and the community on nationally significant infrastructure needs, to undertake an audit of our nationally significant infrastructure.

Now, for the first time, through this audit which was released last month, we have access to a top-down assessment of our national infrastructure based on its economic contribution.

The audit is an important tool in our decision-making arsenal. It is robust, evidence-based and independent.

We have the information to hand about how our infrastructure is performing as well as its contribution to and potential impediments to future economic growth.

Significantly, it tells us what the cost is of doing nothing. For example, the cost of transport congestion in 2011 was estimated at $13.7 billion.

If we do nothing this figure is projected to almost quadruple to over $53 billion in 2031.

It also shows that much of this future growth will be in our major cities.

By 2031, 69 per cent of our population of 30.5 million will be concentrated around the greater metropolitan areas of Sydney, Melbourne, Brisbane and Perth.

Amongst our cities, especially our largest—Sydney and Melbourne—we are seeing two distinct trends in population settlement:

  • an increase in housing density in inner city areas and along transport corridors; and
  • the continuing sprawl of low density housing on the city fringes.

The challenge here for governments is to plan for the long term—where the growth in jobs and population will occur.

A key message from the infrastructure audit is that Australian Government funding alone will not be enough to meet future needs.

Since we came to office in September 2013, the Government has vigorously pursued alternative sources of funding for major infrastructure projects that encourage private sector investment, including foreign investment.

This includes providing incentives to our state and territory governments to recycle mature assets into new greenfields infrastructure. This initiative is already seeing success here in the Australian Capital Territory and in New South Wales.

An Airport for Western Sydney

An example of a transformational project which meets many of the criteria I have just mentioned is an airport for Western Sydney.

It is new greenfields infrastructure which will cater for population growth and would be a catalyst for economic growth.

For more than 50 years governments have talked about a second airport for Sydney.

We are working to make it a reality.

Western Sydney is already Australia's third largest economy and, in its own right, would be our fourth largest city.

Its population is projected to grow from two to three million over the next 20 years—or over half of Sydney's population growth.

Expectations are that demand for passenger air travel to and from the Sydney region will double over the next 20 years, and double again by 2060.

An airport for Western Sydney will provide the required additional aviation capacity and opportunities for thousands of jobs during construction and many thousands more over the long term.

It also has the potential to generate $24.6 billion in direct expenditure by 2060, and contribute $23.9 billion in GDP to the national economy.

We expect the airport to be operational by the mid-2020s.

Abundant Australian Agriculture

Nowhere is the role that infrastructure plays in contributing to Australia's economic growth and productivity more obvious and more significant than in agriculture.

Thriving and profitable agricultural and natural resource industries are fundamental to our national prosperity now, in decades past … and will be into the future.

The mining and resources sectors have been a major driver of the economy over the last few decades, but with the decline in mineral prices we have come to appreciate again just how important agriculture is to our nation.

Agriculture is where 12 per cent of Australia's GDP originates, which equates to about $155 billion a year in economic activity derived from our farms.

Australian agriculture feeds 60 million people around the world each year and with encouragement, could double that number.

Transport costs comprise a sizeable portion of post farm-gate value, therefore efficient and competitive transport infrastructure including local roads, bridges and highways that connect Australia's farmers with their national and international markets is imperative.

And meeting burgeoning demand for our high quality produce will only come to fruition if our road, rail and port networks can cope with increasing volumes.

Our premier freight rail infrastructure project, the 1,730 km Melbourne to Brisbane Inland Rail will go a long way to help service our future freight task which we expect to double by 2030.

It will be a game-changer for how we move freight across three eastern states—Victoria, New South Wales and Queensland—and link to the existing national network to move freight around the nation.

It will better connect regional communities with capital cities, and producers with export markets, resulting in lower transport costs that will translate to lower prices for consumers.

Inland Rail will not only improve the efficiency of our transport network, it will have a positive impact on any future infrastructure investments.

An Implementation Group under former long-serving Transport Minister John Anderson will be delivering a business case and delivery plan soon.

Our North, Our Future

I will now move north, because it is there where vast opportunity lies.

Twenty-five years ago, in my maiden speech to Parliament, I made what was then a controversial prediction—that Australia was uniquely placed to be a supplier of food to Asia, the fastest growing sector of the globe.

These predictions are now coming true way beyond my expectations.

Come 2050, our Asia Pacific region will account for almost half the world's economic output.

The size of the market in China in particular is one I don't think we can yet grasp.

China's current population is more than 1.3 billion and authorities expect it will peak at more than 1.5 billion in 2030.

The peak in India's population growth does not appear to be in sight.

Northern Australia is already a major contributor to the national economy.

It is Australia's gateway to the Asia Pacific, with 55 per cent of Australian exports shipped from northern ports in 2012–13.

By 2040, northern Australia may account for nearly 42 per cent of the Australian economy.

The region has successfully worked its natural advantages into booming mining and energy industries; it has a farming sector producing more than one tenth of Australia's $46 billion farm output; and it has world renowned tourist facilities.

It also has an abundance of clean land and water, sophisticated institutions and skilled workers.

The rest of the world wants many of the things such strong economic building blocks can produce.

Developing northern Australia is a key priority for the Government because it would benefit the entire nation through investment, infrastructure, jobs, services and emerging industries and export potential.

Just over a week ago the Government released the Northern Australia White Paper.

This White Paper is really a 20 year blueprint to boost northern Australia's development and investment. It is putting in place the right policies, at the right time.

It focuses on transport infrastructure, developing water resources, establishing secure and tradeable land rights, attracting more investment and reducing red tape to encourage business.

Importantly it recognises that we can't develop the north without the full participation of the people who live there, particularly our Indigenous population.

Unlocking the potential of the north works in tandem with the recent trade agreements signed with Japan, Korea and now China. These agreements are hugely significant, and will underpin Australia's prosperity for years to come.

Such a trifecta means we now have a set of trade agreements with over 50 per cent of our export markets.

Conclusion

In summing up, Australia has a tremendous future, but to get there requires knowledge, planning and partnerships.

We want to work with governments, business, industry and policy leaders such as yourselves to make the best domestic choices that will become global realities.

Thank you again for the opportunity to join you this evening.

I wish you another highly productive day tomorrow.