Crawford Australian Leadership Forum

Thank you Gareth. Good morning ladies and gentlemen.

It's always a pleasure to be at ANU. This is the Australian Government's university and I believe it plays a vital role in the development of public policy, and so it is a pleasure to be invited to address this Forum, which in only four years has emerged as an important arena in which to discuss some of the major challenges facing our country, facing our region and globally, and to foster ideas that can inform the development of public policy.

I looked at the topic today and decided that as opening speaker, I'll seek to set the scene for some of your deliberations.

Government doesn't have all the answers, some would suggest government doesn't have any of the answers, so allow me throughout my address to pose a few questions for you – questions that I hope you will be considering today, and be able to provide responses to us because I take this forum very seriously in terms of what you'll be able to deliver.

We live in an era of great disruption. History tells us that this brings many challenges and opportunities.

Those who develop public policy will continue to be tested in coming years, as the pace of change gathers momentum.

Now I see the community as somewhat divided between those who view the world as glass half full or those who view it as half empty – those who are fearful of the impact of change or those who embrace it.

This applies to many of our current policy drivers. We are continually hearing from those who are endlessly pessimistic about, say China's economic growth, while others remain consistently optimistic; we hear from those who say robots will take our jobs or others who say robots are going to be an indispensable part of our lives by relieving us from tasks of drudgery.

So here's my first question: confronted with an uncertain international strategic environment and waves of disruptive technological change, what must Australia do to maintain economic growth and continue as a top-performing global economy?

Let me give you some context.

As the world's 13th largest economy and in our 26th consecutive year of economic growth, I found it somewhat confronting to read Pricewaterhouse Coopers' report published earlier this year that argues Australia will be lucky to be among the top 30 economies by 2050 – we'll be lucky to be in the top 30 economies by 2015 – that would place us nominally outside the G20.

Of course such reports provide a timely reminder that governments and policy makers need to be more creative and innovative in policy approaches to ensure that this is not a self-fulfilling prophecy.

So what must be our response?

We are living in an era of profound change, arguably more profound than in earlier phases of the industrial revolution.

The nature, scope and pace of change at this time is unprecedented in human history.

Many are calling it the 'fourth industrial revolution', driving disruption across a wide range of industries and transforming how goods are produced, how services are delivered – from banking to healthcare, from professional services to the government sector.

It is changing the very nature of businesses and how we live and work and interact.

Even in the arcane world of foreign affairs, I'm as likely to text my counterpart or tweet a foreign policy as I am to read a cable or hold a press conference to announce a change in public policy.

So what will be the impact on Australia of this fourth industrial revolution?

This is going to be my focus today.

A recent Deloitte Access Economics report summarised the current digital technologies powering this disruption: artificial intelligence and machine learning; 3D printing and additive manufacturing; blockchains and distributed ledgers; genomics; the internet of things; robotics; drones; virtual and augmented reality; and wearable technology.

We have certainly seen enough technological change over the past 25 years to know that change will arrive even faster in the next 25 years.

For example, automation. Is Australia even thinking about the impact of what would be one of the greatest disruptive technologies in automation?

Many are forecasting that electric driverless cars will be commonplace on our road within a few years. Uber to the max.

Like all new developments, there are sceptics, however if we assume this technology will be perfected, this could have a huge impact throughout the transport sector.

Just think of the urban environment.

It could challenge the need for vehicle ownership thus impacting on motor vehicle sales.

Uber will struggle to compete, let alone taxis.

Roads dominated by networked electric cars will see far fewer accidents, reducing the need for insurance, panel beating, motor vehicle repairs, traffic control systems will no longer be needed, law enforcement will be reduced.

It goes on and on and on, just one technological advance.

One developer of self-driving vehicles predicts the learning curve for the software would be exponential, as every lesson learned by individual motor vehicles would be networked immediately to all other vehicles, and it would be akin to humans telepathically passing on information about road conditions and the surrounding environment.

Automation extends beyond across the services sector.

I was in New York the other week and I met with Michael Bloomberg, he sits on the International Advisory Committee of the innovationXchange which I've set up in the Department of Foreign Affairs and Trade.

At the headquarters of Bloomberg media, he showed me that with one or maybe two clicks on a computer screen, up pops a comprehensive summary of the performance of any particular stock.

It contains detailed analysis of its profit and loss over recent years, the returns on investment in terms of dividends and its stock market valuations – a very detailed analysis.

Impressive research, yet the article was generated entirely by software – there was no human input at all – with real-time updates whenever that stock was accessed.

Bloomberg has employed thousands of stock analysts over the years, and this suggests that the traditional analyst role is disappearing.

The future is certainly exciting.

The arrival of advanced robotics, artificial intelligence, mobile technologies and biotechnology is a celebration of human ingenuity and has exponentially improved our quality of life.

Technology is impacting on geopolitics.

Enabled by globalisation, some countries have surged forward and are taking on new leadership roles: economic, military, political and social.

We are witnessing the relative shifts in economic power.

China has moved from being the 7th largest economy in the world in the 1970s, to the second largest today or possibly the largest by purchasing power.

India has jumped from 9th to 7th currently and is moving up the ladder rapidly.

Indonesia is predicted to be in the top five economies in coming decades.

Economic power is shifting from West to East.

Even in these countries, whose competitive advantage has been low cost labour, advanced robotics and other technologies are further driving down the cost of production.

Huge sums are being invested in advanced manufacturing and robotics.

The Taiwanese company Foxconn, the world's largest contract electronics maker estimates that by 2020, around one third of its production will be performed by robots.

While many jobs in manufacturing or assembly can be highly repetitive, what will available for low-skilled workers?

Countries that led the race into industrialisation including the UK, France and the United States have continued to evolve, developing strong services sectors as traditional manufacturing has shrunk.

That said, technological change, together with the increased competition for capital, access to markets and labour that economic independence has produced, has created uncertainty in many advanced economies.

How do Governments respond to the impact of these profound changes on individual human lives, in addition to the overall benefits to society?

The question we have to struggle with is: is the Australian economy sufficiently agile and adaptable?

Now this challenge isn't entirely new for Australia.

It is useful to look back at our economic responsiveness over the last century.

Australia has transitioned from an economy dependent on agricultural produce and manufactured goods, to one where less than three per cent of Australians work the land and only seven per cent work in manufacturing.

This change has transformed the nature of work in Australia and, at the same time, has created an era of unprecedented prosperity.

Millions of high wage jobs, including in the services sector, where four out of five Australians now work, have been created.

In 2017, half a million more people are employed in construction in Australia than there were 25 years ago – from 518,000 people to more than 1.1 million today.

More than 400,000 jobs have been created in education and training.

More than 600,000 new professional, scientific and technical positions have been created in the last 25 years.

Perhaps the biggest change of all has come in health care and social assistance, where more than 830,000 new jobs have been created.

Whereas manufacturing was Australia's only one million-plus employer in 1992, 25 years later we have four industry categories employing more than one million people each.

On the back of a historic mining boom with an economic and political system the envy of almost of every country in the world, we have emerged as a major economy, even though we have a small population by global standards.

As we do enter this 26th consecutive year of continuous economic growth, it is sobering to recall that we now have a whole generation of Australians who have never known a recession.

This success of course is built on our embrace of liberal democratic institutions, open trade, a willingness to reform to remain competitive and adapt our response to technological, economic and geostrategic changes.

But none of this can be taken for granted.

We know that technological revolutions are relentless.

Whether these phenomena develop into opportunities or threats to our economy and society – and whether these developments support or hinder future prosperity depends entirelyon how we respond.

As an open, export-oriented market economy, Australia's prosperity has been enhanced by globalisation and economic interdependence, and by the critically important free trade agreements removing barriers to facilitate trade and investment.

How do we protect free trade and foreign investment in the face of growing protectionist sentiment?

We have the smallest population of any current G20 economy and the third highest per capita GDP after the United States and Saudi Arabia in this grouping.

This means that we cannot become richer simply by selling goods and services to ourselves – we have a small population and are already a high consumption economy and society relative to our size.

Australia has signed 13 Free Trade Agreements and we are negotiating another six.

We have launched free trade negotiations with Hong Kong and Peru in recent times.

We are pursuing free trade agreements with the EU and with the UK.

Independent modelling has found that these FTAs will boost our GDP by $25 billion over the next two decades.

That equates to each household being $4,000 better off.

Our resilience has been based on significant foreign direct investment in the face of growing economic nationalism in parts of the country, in our region and around the world.

What policy settings will make us more competitive and attractive to investors?

Coming down to the fundamental question: what are the jobs of the future?

By some forecasts, 65 per cent of today's school children will work in industries and sectors yet to be created.

In order to maintain a competitive economy, we need to be nimble and identify and grasp opportunities.

This is why the Prime Minister announced a $1.1 billion National Innovation and Science Agenda to offer incentives for start-up companies operating in cutting-edge industries or utilising advanced technologies.

We want to create a supportive environment for start-ups and early stage capital funding – both at home and in our region.

That is why I have placed innovation at the heart of policy-making in my portfolio, which is helping address some of these challenges.

Last month I announced a partnership between the DFAT's innovationXchange and the Massachusetts Institute of Technology, MIT, and its Solve initiative and Australian software company, Atlassian, to help nations and their young people from the Indo-Pacific region prepare for the workforce of the future.

Australia is contributing $1.4 million to the MIT-led Solve global challenge, it's called "Youth & the Workforce of the Future", which will crowd-source expertise and innovative ideas from around the globe to help prepare communities and governments for the future of work.

The most promising ideas will be awarded pilot funding, and the opportunity to be scaled up for application in our region.

This partnership will help apply the science, the engineering, the technology and innovation capabilities of MIT and Atlassian to the challenges faced by governments and young people in the Indo-Pacific region as a result of technological change.

Engaging with countries and companies at the forefront of the technology revolution will be crucial.

The Australian Government is also engaging with countries and companies at the forefront of the technology revolution, this will be crucial.

Let me take Boeing for example.

Australia is Boeing's largest base outside the United States.

Boeing is engaged in a wide variety of sectors, from the manufacturing of complex airplane components to supply-chain management and defence platform support.

The multiplier effect of such investments is enormous: in 2015 alone, Boeing spent about $400 million with more than 1000 Australian suppliers.

In 2016, Boeing committed to investing $1 billion in Australia, creating opportunities for engineering and machining companies to diversify and win new markets in the international aerospace market.

We are also leveraging research partnerships.

Working with the CSIRO and ten local universities, Boeing's R&D investment in Australia has helped us to become a world leader in developing new aviation products.

Creating the right conditions for collaboration, ideas sharing and the free flow of capital, goods and services – all critical to continued economic growth and international influence.

These are also lessons that we need to share with other nations as they seek their development paths.

We can share our experience in the hope of influencing those who seek sustainable and enduring economic growth.

To maintain Australia's place among the G20 leading global economies, the Government is putting in place policies to drive investment and innovation, to reduce the tax burden on investment and enterprise, open up our enterprises to new markets through more new export trade deals, develop infrastructure that underpins investment and removes the impediments to that investment.

Openness, flexibility, and preparedness to adapt – these are the ingredients to maintaining Australia's social and economic influence in the decades ahead.

But what more must be done?

In terms of our international engagement, I have commissioned a Foreign Policy White Paper to be published later this year.

The task I have asked of you today, to answer the hard questions, is not dissimilar to the task set for the White Paper.

We cannot predict the future, but there will be inevitable disruptions through technology, though conflict, crises and relative shifts in economic and military power.

Our challenge is to identify how we can best protect and promote Australia's values, interests and priorities in the next decade.

I hope that White Papers will become a regular feature of each decade in Australian public policy development, including a consideration of the structures that have benefitted Australia – the international rules-based order that is under challenge from many quarters, the free markets and open economies, where protectionist and nationalist sentiment is creeping into our thinking.

None can be taken for granted, and Australia must ensure its standing and influence is leveraged to our advantage.

So as a glass half full person, I look forward to hearing of your positive deliberations today and look forward to you answering the questions to which governments are struggling to respond.