Not a clever country: Why Australia needs to develop highly skilled sectors

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November 10 2020
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Australia should transition away from mining and property towards industries of the future or risk losing competitiveness over the long term, an industry expert has warned.

Why Australia needs to develop highly skilled sectors

Speaking at the Tax Institute’s summit, former head of the treasury budget and revenue group Greg Smith said Australia needs to look at its advantages as a society to help develop creative and highly skilled sectors that are necessary to grow the economy.

“Australia cannot rely on the mining industry as its sole economic advantage in the long run,” Mr Smith said.

“I don’t see us being a big manufacturer. I don’t see us being able to get back to being an exporter of services, which we’ve lost a fair bit of with this pandemic.”

Instead, Mr Smith believes Australia should look to the knowledge-based part of the economy such as information technology, media or research and development and knowledge-based services such as education, consultancy or financial planning.

“At the moment, only 10 per cent of our total investment is going into intellectual property. Whereas in most of the rest of the advanced world, its 20-30 per cent of investment goes into that sector,” Mr Smith said.

He pointed to the dangers of Australia’s current economy which is dominated by the mining sector and property.

“A country that invests mostly in the primary sector and in property, I don’t think is going to be able to cut it in the 2030s and 2040s without shifting investment as well,” Mr Smith continued.

In his keynote, Mr Smith said he was a realist when it came to the achievement of that goal.

“What we need to recognise is we’re not remotely clever at the moment. That is very much an aspirational stretch and somehow Australians have to wake up to the fact that it requires a combination of public and private investment to actually deliver it.”

“Every other country in the world which is delivering on these fronts is delivering through that combination,” he said. “Everywhere in the world which is making any sort of inroad on that, do it jointly, and that’s the big mistake that Australia has made, not realising that.”

“I actually think there will be a need for another tax reform. It’s just that it’s not going to look like the one that, unfortunately, is being called for by 99 per cent of the people calling for tax reform at the moment. It’s going to be a very different type of tax reform. And I think it will be a public policy reform rather than just a tax reform,” Mr Smith concluded.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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