It can come through productivity-enhancing investment, both public and private. But we are not undertaking that investment now. The public sector is just catching up from underinvestment in the 1990s and the first part of last decade. And it’s not happening in the private sector, now in cash preservation mode, containing gearing post-GFC, with investment still weak.
We’re not doing the things we need to do to underwrite productivity improvements. We need to.
In that respect, the role of Australian governments is to build the infrastructure, both hard and soft, which will make Australian industry more efficient and cost-effective. We need to fight a rearguard action against loss of current industry. And we need to encourage new industry.
Here are a few on my list of productivity-enhancing infra- structure initiatives: • A broadband network is one. • Investment in education, training and labour skill development. • Upgrading of rail facilities, including inter-city freight. And fast rail? • Provision of reasonably priced land for residential, industrial and office development to contain the cost of doing business. • Government services to business, including such things as the ABS, research facilities and projects for industry development, and business facilitation. • Seed facilities to encourage or underwrite industrial and regional development. • Special projects which use Australian industry, possibly with some local content or procurement guidelines. • And we mustn’t forget to re-focus on industry policy.
These are just a few suggestions. We now have a number of government organisations looking closely at infrastructure, and it’s up to them to determine priorities and practicalities. My point is that we should use productivity-enhancing infrastructure as a major criterion in that choice. The need is to reduce the cost of doing business in Australia. While the resources boom continues and the dollar stays high, this will serve as a rearguard action against loss of industry. But, equally importantly, it will serve as the underpinning of growth once the minerals boom ends.
I don’t want to set up a wealth fund that will only serve to provide welfare for our grandchildren. I want to set up the industries that will provide them with jobs.
Dr Frank Gelber is director and chief economist of BIS Shrapnel.
