Date posted: 1/12/2016 8 min read

Catherine Livingstone on the future of Australian business

Catherine Livingstone discusses how Australian business must capitalise on digital technology, entrepreneurship and FTAs

In brief

  • Fostering entrepreneurship and building infrastructure is vital to underpinning business innovation
  • Strategies are needed to counter factors such as globalisation and changing demographics
  • Digital technology education needs to be better embedded in both schools and tertiary training

By Tony Malkovic
Photography by Attila Szilvasi

We may be living in “the Asian Century” but it’s the next decade we need to focus on if we want to capitalise on economic opportunities. That’s the message from Business Council of Australia president Catherine Livingstone.

According to Catherine Livingstone AO FCA, the next ten years are set to be busy for Australian business. There are many things on our to-do list if we want to do well at home and abroad.

That includes capitalising on Australia’s free trade agreements with Asia, reshaping domestic economic policy, improving our international competitiveness, reining in the budget deficit, and getting serious about innovation and entrepreneurship.

And if we want an insight into how we might achieve some of this, Livingstone suggests we might look across the Tasman to New Zealand.

Livingstone is one of Australia’s most respected business leaders, the president of the influential Business Council of Australia (BCA), the chair of Telstra, a former chair of the CSIRO, and a champion of innovation and engagement with Asia.

“In terms of our engagement, and Asian markets’ engagement with Australia, I think the free trade agreements (FTAs) that have been finalised have been very helpful — if we take advantage of them, and that’s the big qualifier,” she says.

“When governments enter into free trade agreements, they’re there for business to use. If business is passive, then we won’t get any advantage from them.

“So it really is up to Australian business to step up, understand the opportunities embedded in the FTAs, and use them.”

There’s another cautionary note.

“Everyone talks about the growth of the middle class in China and the potential of the China market,” she says.

“The China market is huge, but it’s a combination of lots of markets, with individual cities being markets in their own right.

“It is also a very competitive market and we shouldn’t be naive about that.

“The domestic Chinese companies in different sectors are already very competitive, and then of course you have foreign investors and foreign participants. So unless you understand the market and the niche you’re going for, China can be a very challenging experience.”

And you shouldn’t be naive about the quality of your offerings either. Even if you’re not targeting Asia, Livingstone says you need a world-class product. If you don’t have one, your Aussie customers will find a top-notch offering elsewhere – online, anytime.

“That is the risk: domestic businesses think ‘I’m not going to go into Asia because I don’t feel my product’s good enough or I’m not up to it’,” she says.

“But by the same token, by not engaging in Asia, if they think they’re insulated from global competition — that’s absolutely not the case.

“Allied to that is the capability of Australian business, particularly small business, to participate in e-commerce, and particularly mobile e-commerce.

“If small business can’t provide an e-commerce facility, particularly mobile e-commerce as so much is moving to mobile connectivity, they’ll find themselves potentially left out.”

Mega trends

While China has relied on its five-year economic plans for more than half a century, Livingstone says Australia needs a ten-year approach to counter the three mega trends that are irrevocably changing the way we need to do things.

These include:

  • Globalisation and emergence of global supply chains
  • Changing demographics, such as our ageing population and chronic youth unemployment
  • The all-pervasive effects of digital technology on business and our lives

Livingstone says those mega trends mean Australia needs to radically rethink its economy and come up with a tailor-made “purposeful policy” approach to structural reform over the next decade.

She argues it should also include redesigning major, big expenditure government programmes such as health, education, and aged care to help rein in the deficit.

“And do it in a way that enables the community to transition and government to transition, so it’s step by step by step to get us to where we need to be,” Livingstone says.

“We need to redesign our programmes and that will at the same time address our deficit and in ten years’ time we’ll be back in a more robust fiscal situation. I would say that’s number one.

“If you want to draw a parallel with New Zealand, I think New Zealand possibly ten years ago was in a similar situation and it applied purposeful policy to restructure the fiscal situation and economy to get back into a position of strength.”

For a specific example of what she means, you only have to compare Australia’s and New Zealand’s dairy industries.

Livingstone pointed out in her inaugural address as BCA president that while Australia’s dairy industry flatlined over the past decade with only a 0.1 per cent growth in exports, New Zealand’s dairy exports have increased by 12 per cent.

The difference, she says, is due to New Zealand’s strategic policy intervention in re-shaping its industry (including the negotiation of FTAs) with the help of industry participants, a move that later allowed it to make inroads to Asian markets such as China.

Australia, on the other hand, took a somewhat set-and-forget approach to deregulation of its dairy industry.

“When you take a systems view of a sector and ask ‘How do you make this strong?’, and then you look at potential government actions and potential industry actions and put them together so you have complementary measures, it’s amazing what you can achieve,” Livingstone says.

It really is up to Australian business to step up, understand the opportunities embedded in the FTAs, and use them.

Strengths

In effect, the Australian government has already started down the track of reforming industry policy and playing to what it perceives are some of our strengths.

Under its industry growth centres initiative, which is part of the Industry Innovation and Competitiveness Agenda announced in October last year, it identified five areas where Australia enjoys a comparative advantage:

  • Advanced manufacturing
  • Food and agribusiness
  • Medical technologies and pharmaceuticals
  • Mining equipment, technology and services
  • Oil, gas and energy resources

These five sectors will become the focus of concerted efforts regarding deregulation, skills, collaboration and commercialisation.

Livingstone is one of several prominent businesspeople appointed to an independent advisory committee to help supervise the rollout of the industry growth centres.

That overall approach dovetails with BCA thinking. Last July, the BCA released a paper, Vision for a Competitive Australia, in which it outlined four key changes Australia has to make to compete more effectively on the world stage.

The BCA’s vision involves:

  • Adopting a global mind set in everything we do
  • Government returning to a more thoughtful role in facilitating and coordinating economic development
  • Growing those sectors of the economy that can win on a global scale and make the greatest contribution to lifting national wealth
  • Embracing innovation to dramatically increase Australia’s competitiveness.

Livingstone says the key to such an approach is having a clear idea of where we want to be in ten years — and then designing policies with that end in mind.

“Am I optimistic? I am optimistic because we’ve seen examples of where it works, for example New Zealand, but in fact there’s no option,” she says.

“I think we can get community consensus and political consensus that this is the most fruitful path to go down.

“And once you take a ten-year view you put into context all of the short-term actions. So if the short-term action is at variance with achieving the ten-year view, then it’s going to be pretty obvious.

“I think in that way there can be a bipartisan approach to the long-term view.”

Livingstone believes innovation is another must-do item on our list.

She says there are several things we need to focus on: digital technology skills, fostering entrepreneurship, and building and maintaining the infrastructure to underpin business innovation.

“The Business Council of Australia is particularly vocal about STEM (science, technology, engineering and maths) skills, particularly in primary schools,” she says.

Capable

She queries the way those disciplines will be placed under science and maths in the current national curriculum review.

“The worry there is that, because we don’t have a huge cohort of specifically trained teachers, unless the digital technology stream is separately identified and resourced with teachers trained in the area it will just get lost under the maths and science,” she explains.

“So we need to get those core skills much more embedded at the school level, starting with primary schools.”

Beyond the schools system, we could also do better in the vocational and education training (VET) and technical and further education (TAFE) sectors, she says.

“We tend to think of the universities as the tertiary sector but the tertiary sector should have a much more complementary relationship — with the VET part of it more appropriately funded and robust. Because it’s the VET sector that will enable people to acquire some of those fundamental skills in trades, design, and electronics. And if you look at things like advanced manufacturing, for example, you need all of those contemporary ‘trade’ skills.

“The VET sector, particularly TAFE, offers a fairly fast avenue for re-training and upskilling. Because that’s been hollowed out through underfunding across virtually all the states there’s a gap in the skills continuum, and it’s a serious gap.”

Another gap exists in supporting risk-taking and entrepreneurship.

The federal government last year signalled it would reform the way it would tax employee share schemes to help promote entrepreneurship and support innovative start-up companies.

Livingstone says that’s an important signal for business.

Also important is the need to support what’s known as “knowledge infrastructure”.

“Much as you might talk of bridges and ports and whatever, we should look at what knowledge infrastructure we have, because that’s what’s going to attract bright people,” she says.

By way of example, she cites the case of the National Collaborative Research Infrastructure Strategy, the scheme that’s helped fund infrastructure projects such as the Australian Synchrotron project and the Australian National Fabrication facility.

Much as you might talk of bridges and ports and whatever, we should look at what knowledge infrastructure we have, because that’s what’s going to attract bright people.

Bargaining chip

“That’s absolutely what Australia should have and does have, yet the funding to that was under question,” she says.

“It is an important element of our knowledge infrastructure to have those facilities, and they’re somehow seen as dispensable or a bargaining chip.

“So developing a much more mature concept around what our knowledge infrastructure is and how we build and maintain it rather than thinking it’s an expense that we can just cut if we need to save some money, would be a fundamental mind set change.”

Likewise, she’s concerned that funding for National ICT Australia (NICTA), Australia’s largest ICT research organisation, has been extended for only two years.

“NICTA is, in terms of the sort of capability we should be building, a core capability needed for the future involving the whole ICT, data analytics, digital skills area,” Livingstone says.

“We have built this institution over some 12 years, yet now we’re saying after June 2016, we’re not going to fund it.

“Yet everywhere else in the world, people are trying to build up capabilities such as NICTA.”

While our knowledge infrastructure might seem to underpin our research efforts, she points out its true worth will be in underpinning business in the 21st century.

“A key step in signalling how important innovation is would be to adopt this concept of knowledge infrastructure and understand its importance to the ability of businesses to develop new business models and adapt existing business models in the face of massive technological change,” she says.

“In Australia, we need to have collaborative infrastructure which is accessible by multiple parties because we don’t have institutions that are big enough and have enough funding to have all these facilities themselves — nor would that make sense.”

What does make sense, says Livingstone, is that we roll up our sleeves and make a conscious effort to re-think and re-shape our economy over the next ten years — with our future wealth, and hence reinvestment capacity, depending on it.

Tony Malkovic is an award-winning freelance journalist.

This article was first published in the May 2015 issue of Acuity magazine.