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Our strong and diverse economy

February 15, 2019

Below is a speech I gave to the Committee for Economic Development of Australia at the National Press Club today:

 

We meet at a time when there is more uncertainty about what the coming year will bring than there has been for almost a decade now.

Between the coming federal election, ongoing tensions in the international trade arena, signs that housing markets in some parts of Australia are deflating, and big structural shifts occuring in key sectors like financial services, energy and retail, there is a lot to keep an eye on in 2019.

I’m pleased that, in contrast, here in the ACT, we are projecting stability.

Strong population growth and ongoing investment is contributing to continued economic growth well above our long-run average; our housing market is steady and we expect strong employment growth this year and in the near-term, having recently seen our best jobs growth in a decade.

But of course, our local economy is connected both to the national economy and, as I’ll discuss, increasingly to the global economy.

So any significant downturn or disruption will eventually reach us as well.

We can hope that some of the current risks turn out to have been overstated – as they have been before, particularly in relation to the housing market. But it is also important to plan for the possibility that they have not.

In that context, I’d like to take the opportunity today to outline the work that we have undertaken in the ACT to make our economy more resilient, and how that is leading our approach to this period of elevated uncertainty.

You may not be aware of this, but on a per capita basis the ACT is Australia’s leader in services exports. Although we are home to 1.7 per cent of Australia’s population, we account for 2.5 per cent of this country’s service exports.

This matters because Australia’s economic narrative since the Global Financial Crisis and the end of the mining construction boom has emphasised the importance of our nation making a pivot to services - from being a quarry and a farm to selling knowledge, ideas and experiences.

But this transition has been slow going and is still very much in the works, with bulk minerals exports and commodities continuing to make up a very large share of our international trade.

Although services account for three quarters of Australia’s domestic production, they still make up only around a quarter of Australia’s total exports.

The ACT is a clear exception. Growing our service sector by expanding into new markets has been a core pillar of our government’s economic diversification strategy over this decade, and we are making great progress.

In 2017-18, the ACT’s services exports were worth $2.2 billion or 5.5 per cent of our total Gross State Product - this compares with 4.8 per cent nationally.

Over the last decade, services exports from Canberra have grown by more than 150 per cent as we have opened this city to world and begun actively promoting what we have to offer for the first time.

This growth has been particularly strong in two sectors: education and tourism. International education is Canberra’s largest export and generated $977 million for our economy in 2017-18 – an increase of more than 100 per cent over the past five years.

International enrollments have grown strongly year-on-year and there are now around 19,000 international students enrolled at Canberra’s universities, training colleges and schools.

This is leading to the creation of many more high wage jobs – today around one in ten working Canberrans are employed in the education sector.

Our tourism sector is currently the second fastest growing in Australia next to Tasmania.

We are experiencing record all-time domestic and international visitor numbers – something which I’ve recently been hearing is very much appreciated by local businesses and tourism operators who used to brace themselves for the long summer dry spell when most of Canberra decamped for the Coast.

A few years ago we set a target of achieving $2.5 billion in overnight visitor spending by 2020. With total annual overnight visitor spending now at $2.37 billion Canberra is on track to achieve this goal.

Recently we have seen jobs in the tourism sector growing at an annual rate of 7 per cent, which is more than triple the rate of jobs growth across the ACT economy as a whole.

We have supported and championed the growth of these sectors – along with that of our services sector more generally – because we know that a more diverse economy is a more resilient one.

In the same way that the Australian economy cannot sustain continued growth in living standards simply by being ‘the world’s quarry’, neither can Canberra achieve our potential for good jobs and ongoing growth without diversifying beyond our traditional base of government and administration.

We want to keep all the great progress we’ve already made going. So when we look to 2019 and beyond, there are a few things we’ve learned that will continue to focus our work and thinking.

Connectivity matters

Perhaps the most important lesson from the ACT’s recent economic experience is how much connectivity matters, and how much opportunity is created by a more joined-up world.

At a time when the trend seems to be going the other way – towards closing borders, putting up walls and restricting the flow of people and ideas – we know that making Canberra better connected to our region and the world has been critical to our recent success.

The arrival of daily international flights to Singapore and Qatar has been a direct contributor to the boom in our local tourism industry, because for the first time it is just as easy to get to Canberra from overseas as it is the other capitals.

Lower cost domestic transport via Tiger Airways is growing visitation from around the country as well.

Improved road transport links in and out of the ACT are making it faster and easier for the producers in our region to get their goods to market, and better digital connectivity is making new kinds of business possible – like the establishment of Microsoft’s Azure data centre, the first global cloud provider to achieve Australian Signals Directorate certification for protected data in Australia right here in Canberra.

We believe further improvements to connectivity will help build on these foundations.

That’s why we are focused on securing more direct flights, with routes between China and New Zealand (and onto the Unites States) and more low cost domestic options being particular priorities to ensure Canberra can be reached from all points of the compass.

And it’s why we are working closely with the New South Wales Government to progress a faster rail link that can connect our two capitals in under three hours (while the seemingly never-ending discussion goes on about bullet trains.)

The benefits of continuing to become more connected, and the opportunities that would be lost in terms of good jobs and better wages if we were to retreat from the world in the face of uncertainty, are front of mind for our government. We will keep making the case for better connectivity whenever and wherever we get the chance.

 

Focus, but don’t put all your eggs in one basket either

In pursuing the growth of our services sector via international markets, we have focused initially on a handful of countries – it doesn’t make sense for a jurisdiction our size to try and take on the whole world at once.

In the early stages of our International Engagement Strategy, we have worked on developing the relationships between Canberra and our five key priority international markets: Singapore, New Zealand, China, Japan and the USA.

Those efforts are now paying off with significant increases in international students and tourists, as well as in the growing number of Canberra businesses across our key capability areas that are selling into those markets or partnering with firms there.

Two examples which emphasise the breadth of this reach are Instaclustr and IE Asia pacific.

Instaclustr’s growth has been underpinned by the CBR Innovation Network and through venture capital arrangements supported by the ACT Government.

Instaclustr has travelled with the ACT Government on trade missions to the United States enabling increased exposure in international markets, and it is now a successful international company.

In 2018, the Canberra born and bred data solutions business closed a $20.8 million investment round led by New York-based private investment firm Level Equity.

IE Asia Pacific travelled with the ACT Government on a trade mission to Indonesia in 2013.

These foundations have enabled IE to expand to the entire ASEAN region and become the preferred supplier for surveillance needs for countries like Australia, Indonesia, Malaysia.

Our relationships with these countries are important; they are now at a stage where activity led by our government is being matched or exceeded by activity that is growing out of people-to-people links and business, institutional and academic networks.

Our relationships with these countries will continue to be important as they grow in these more organic ways.

We’ve seen the benefits of taking a focused approach; but we also understand the risks of putting all your eggs in one basket (or five, as the case may be).

That’s why we are now starting to expand our efforts to a small number of further growth markets where the ACT also has some comparative advantage.

Just last week I led my second delegation of education providers to Indonesia, and we have also recently been exploring opportunities for partnerships with South Korea in areas like renewable energy and inbound investment.

When things look uncertain, it’s easy to fall back onto what’s familiar. But to keep diversifying our economy and strengthening its resilience, we need to push past that instinct.

This is something policymakers are really grappling with at the moment in the national context given developments with China and some of our other traditional trading partners like the US and UK.

So through this year and beyond, our government will be aiming to strengthen and grow the economic partnerships we already have while forging new ones where the right opportunities exist to do so.

This goes for both international relationships and regional ones. A good example of the work we’re doing regionally is the memorandum of understanding (MoU) our Government has signed with South Australia and the Northern Territory to collaborate on building the national space industry.

This MoU advocates for the development of Australia’s space industry, promoting national capability in space and input to discussion on national space policies, programs and strategies.

 

Collaboration can trump competition

One final lesson we have learned in recent years that is guiding our approach to today’s economic challenges is this: collaboration is just as important as competition in delivering growth and more good jobs.

As I mentioned earlier, Canberra’s education sector is a major contributor to our economy.

Our six universities and the Canberra Institute of Technology are attracting some of the best students and researchers from across Australia and around the world, and bringing billions of dollars into our local economy.

A Deloitte Access Economics report in September 2018 found the tertiary education and research sector contributes $3.3 billion and 20,000 FTE jobs to Canberra’s economy.

Our tertiary institutions have been particularly successful in promoting collaboration because they form a supportive ecosystem that makes Canberra’s education offering stronger than the sum of its parts.

The close ties between our institutions means students don’t just get the chance to study at one world-class university – they also get to work with researchers or partners from other institutions; participate in cross-campus activities; and access more facilities than any one school alone could afford.

Collaborating makes all of our higher education institutions more attractive than they would be if they competed against each other, alone.

Regionally we are also working with the Canberra Region Joint Organisation (CRJO), which comprises ten local government areas that surround the ACT to focus on the economic development of the whole Canberra region.

This includes collaborating on the development of a Statement of Regional Priorities, which includes a borderless approach towards the Canberra Region being recognised as an ‘agrifood’ export precinct.

We’re committed to the CRJO exactly to coordinate this kind of economic development, because we understand that collaborating can create new opportunities where competition seeks only to carve up existing ones.

 

Conclusion

It’s too early to say how 2019 is going to pan out, or whether any of the emerging challenges in front of us will mean real changes for our community and economy.

We should hope for a continuation of the strong growth and good fortune Canberra has seen in recent years - but we have a responsibility to do more than just hope.

That’s why our Government will be taking the lessons from the past few years and putting them to work as we navigate the period ahead, to continue delivering more good jobs and steady growth for this community.

Thank you

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