Following the unprecedented COVID-19 situation, Australia needs to map out a detailed plan on how we transition our trade-exposed economy.
Australia’s economic prosperity has been built off the back of the mid-2000s sharp rise in the prices of iron ore, coal and natural gas. High commodity prices, driven largely by the rapid urbanisation and industrialisation in China, led to greater mining investment here in Australia. The benefits were felt throughout the economy with more and better paying jobs, an increase in government revenue and greater shareholder profits. However recent world events require Australia to now look at how we can diversify and transition our economy to be strong and prosperous into the future.
There is no doubt the untapped potential lays in our strong services sectors and our ability to utilise our enviable free trade agreements to grow services exports. Currently, the Australian economy is built on services and they account for 70 to 80 percent of the Australian economy. Yet services only make up just under a quarter of our total exports.
Tourism is important to the Australian economy and has been growing faster than the rest of the economy for a number of years now. The sector directly provides about 660,000 jobs and approximately an additional 400,000 indirectly. However as we’ve just seen with the recent bushfires and COVID-19, we cannot put all our eggs in one basket.
Successive governments have secured landmark free trade agreements with unprecedented market access to some of the world’s largest economies. Building on the trifecta of China, Japan and South Korea, the most recent agreement with Indonesia opens our services sector to a growing market right on our doorstep.
With a growing middle class and one of the fastest growing economies in the Indo Pacific, Indonesia presents an enormous opportunity to build on the $5.8 billion in services exports in 2018-19. The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) provides a more predictable business operating environment and importantly an increased potential for training, skills and knowledge sharing in the areas of education, health, aged care and tourism. It’s not surprising that education is Australia’s top services export to Indonesia ($899 million in 2018) however IA-CEPA will increase this through the provision to allow majority Australian-owned businesses to provide certain technical and vocational education and training in Indonesia. This is a huge win for Australian education providers and will ultimately create more jobs and economic growth for Australia.
The potential for Australia goes even further than tourism, education and aged care. Creative industries is another sector where we punch way above our weight. We have some of the best actors, directors, costume designers and cinematographers in the business right here in Australia. Not to mention the time-difference advantage we have that works well with visual affects and editing for Hollywood. But we could and should be doing even more. We should be building a long-term sustainable industry right here in Australia which would include training, education and more jobs for Australians. Competitive incentives, offsets and regulations could see Australia become a leader in creative industries and help transition our resources dependent economy.
Everyday we hear buzz words like ‘the future of work’ and ‘skills shortage’ but if we are serious about addressing the underlying issues we will make services exports a priority. I commend the Government on the industry led Services Exports Action Plan but now they need to implement the plan. Now is the time for Government to be focusing on new services exports across the board and making the necessary investments and policy adjustments to rebalance Australia’s exports.