Speech to ALSF Federal Council July 2012: “Australia’s Strategic Focus – and what Government Can Do About It”

Introduction

The most basic question in corporate strategy is, what business should we be in?

Just as companies need to make choices about the markets they enter and the markets they exit, so countries have choices to make too.

In Australia today there is a vigorous debate about whether we are too heavily reliant on mining and resources and we are running down sectors like manufacturing.

But the basis for making those choices is much less clear at a national level than at a corporate level.

In business, it is axiomatic that you should focus on your strengths – and that you are more likely to succeed if you do a few things well than if you try to be all things to all people.

In the first part of my remarks today I want to argue that for a nation – just as for a company – it makes sense to have a strategic focus on your areas of strength.

Secondly I want to offer some thoughts about where Australia is strong – and where we are kidding ourselves.

Thirdly, I want to discuss some of the policy implications which follow from a greater strategic focus. In my view, some policies make sense – and some policies simply waste taxpayers’ money and impose unnecessary costs on all Australians.

Why a strategic focus makes sense

Let me turn firstly, then, to the question of why a strategic focus makes sense.

I began by drawing the analogy with corporate strategy. At one point there was a fashion for great industrial conglomerates: companies like IT&T in the US, or Adelaide Steamship and Elders IXL in Australia.

Today, the most successful businesses are generally ones with a clear focus on a market they know very well. Think of Apple, or McDonalds, or Nestle internationally, or Woolworths and Fosters domestically.

The basic logic is as compelling for a country as it is for a company. You cannot be good at everything. It makes sense to focus on a few things – and aim to be as good as you can at them.

This was essentially the argument first made nearly two hundred years ago by the British economist David Ricardo in his theory of ‘comparative advantage’. He gave an example of two countries and two goods, and argued that each country should focus on the production of one of the goods only – the one it can produce more cheaply – and acquire the other good from the other country.

For example, if Australia can produce wheat more cheaply than it can produce cheese, and New Zealand can produce cheese more cheaply than it can wheat, then New Zealand should focus on producing cheese - and trade some with Australia for the wheat it needs.

Ricardo’s theory holds even if both wheat and cheese are cheaper to produce in Australia than in New Zealand. If New Zealand does not have an absolute advantage in either good, but it has a comparative advantage in cheese, it will be better off to focus on cheese and trade with Australia for the wheat it needs.[1]

To focus on your comparative advantage is the strategy which will maximise your national wealth. It is also the strategy which best equips the industries of your country to respond to international competition – because you concentrate on industries where you have the lowest production cost.

Reserve Bank Governor Glenn Stevens gave a telling example recently. He pointed out that a ship load of iron ore exported from Australia was worth about 22,000 flat screen TV sets imported – whereas five years previously it had been worth only 2,200 flat screen TVs.[2]

While the logic of comparative advantage makes sense, there have always been some practical constraints – particularly the cost of freight. Another country may produce goods more cheaply than we can, but the final cost of those goods in the shop here will also include the cost of getting them here.

Historically, this ‘price shield’ has protected Australian manufacturers – particularly those making bulky goods which are expensive to transport relative to their unit price. However even these sectors are under increasing import pressure. To take just one example, the President of the Sheetmetal Industry Association had this to say recently:

Australia’s sheetmetal industry is becoming one of quick turn-around, small-run quantities. Traditional large volume producers are continuing to move offshore for lower cost production to countries such as China where quality is improving and supply is becoming more reliable.[3]

This trend in the sheetmetal industry – and in many others – reflects the fact that an ever growing share of our domestic market is open to international competition. Several factors are contributing to this.

One is that the cost of air freight has been falling, and the volumes of air freight coming into the country have in turn risen steadily. According to one academic study, between 1954 and 2004 average air freight costs fell by over 90 per cent – from USD 3.87 per ton-kilometre in 1955 to under 30 cents in 2004. [4]

In Australia, as in other markets, we have seen air freight volumes rise steadily as the cost has dropped. Between 1957 and 2011, air freight to and from Australia rose from around 3,000 tonnes to around 822,000 tonnes.[5]

An equally powerful driver of change is the internet. This is exposing much of our domestic economy to international competition which did not previously exist. Consider the book publishing industry – a significant part of the economy with total book sales in Australia at around $2.3 billion a year.[6]

Until a decade or so ago, this industry faced only very limited international competition. But with the advent of Amazon, Google Books and many others, the local industry is under profound competitive pressure. According to the Government’s Book Industry Strategy Group Final Report, if an Australian consumer wants to buy a book published overseas, on average the book will be 26 per cent cheaper if it is bought from an international online bookseller as opposed to an Australian one.[7]

Sector after sector is now exposed to international competition thanks to the internet and modern telecommunications. For a decade or more we have been familiar with call centres in India or the Philippines serving customers of Australian banks or travel agencies or phone companies. Increasingly professional services face such comptetition too, with law firms, accounting firms, architects and others able to serve clients in London or New York or Sydney using professionals based in Mumbai or another lower cost location.

Why is this relevant to the question of Australia’s strategic focus? It is relevant because the real world is increasingly resembling the economics textbook. As international competition becomes more intense, it is ever harder to operate in sectors where you cannot match international cost structures – and it is ever more important to focus on industries where you do have a competitive advantage.

It is one thing to say in theory to say that it makes sense for nations to have a strategic focus. But there is also plenty of practical evidence of nations which have made good strategic decisions and improved their economic performance; as well as nations making bad decisions and sliding into decay.

Why did the United States rise to dominance, for example?  In 1850 it was the sixth largest economy in the world; by 1890 it was the largest. In the early 1950s the USA accounted for over 27 per cent of the world’s economic output.  It remains the world’s largest economy today, with 18 per cent of world economic output.[8]

Key decisions underpinned the success of the US, including an immigration policy which welcomed people from all around the world; a system based on the rule of law rather than hereditary preferment; and an emphasis on education and research including the establishment of the world’s best university system.

An earlier example was that Britain’s religious tolerance attracted many skilled craftspeople from continental Europe where they faced religious persecution. This was an important factor in Britain becoming the centre of the industrial revolution.

In our own region, we have seen several nations leap ahead over the last fifty years.  Singapore is perhaps the paradigm example: its story is summarised in the title of Lee Kuan Yew’s biography, From Third World to First.  When Singapore split from Malaya in 1965, it was a poor country.  Today, its per capita GDP places it among the wealthiest countries in the world.[9] 

Underpinning this success has been a focus on leveraging Singapore’s valuable location as a crossroads of international trade; building an efficient, large scale port and airport; making the country attractive to foreign investors and building scale as a financial centre; attracting talented people from around the world; and establishing a reputation as a jurisdiction governed by the rule of law with high quality officials and very low levels of corruption.

On the other hand we could look at the way Argentina declined economically.  Argentina’s comparative advantage lies in its agriculture, which it used to good effect in the first part of the 20th century. At that time its per capita income was higher than Australia’s. 

From the 1930s, however, Argentina’s fortunes substantially declined.  The initial cause was political unrest and a military junta coming to power.  From the 1930s to the 1970s a policy of import substitution was implemented with the aim of achieving achieve self-sufficiency; this diverted resources away from agriculture and caused a decline in agricultural production.

This error was compounded in the 1970s, with increased government spending, inefficient production and wage increases, leading to chronic inflation and a ballooning foreign debt.[10]

The contrasting experiences of Singapore and Argentina remind us that decisions by national governments can substantially affect a nation’s absolute and relative economic performance.

Singapore chose to focus on trade and import-export activity and associated industries. Argentina chose to withdraw resources from an industry at which it was world class, and to allocate resources to a whole range of other industries where it was a higher cost producer than international competitors.

They are two good case studies of the point made by Harvard strategy professor Michael Porter in his seminal work The Competitive Advantage of Nations:

National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value…A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.[11]

 

What our strategic focus should be

If the idea of a strategic focus makes sense, the next question is obvious. Where should we focus?

The lessons of corporate strategy, of economic theory and of economic history all point in the same direction. We should focus as a nation on the things we are good at – the things where we have relative strength.

Yet while this is an obvious proposition in corporate strategy, it does not seem so obvious in politics. Coalition frontbencher Andrew Robb noted in a recent opinion piece that in all his time in politics, “…there has never been a serious debate about the top things we do as a nation: the strengths we should leverage, those we should foster and not compromise.”[12]

Perhaps these things are better understood with the perspective of history. Thomas Barlow, in his excellent recent book The Australian Miracle – an Innovation Nation Revisited, argues that in the nineteenth century it was recognised that Australia needed four things to be competitive: an export market - given the small size of the local market; products that could command high enough prices to offset high transport costs; products that could survive long transport times; and products that needed a relatively small labour force.[13]

Mining and agriculture obviously filled these requirements. We had a comparative advantage in the nineteenth century; and we still have one today. With the current mining boom, we are enjoying the benefits of a long focus on this sector and the world competitive position we have built up in it.

You need only look at the share of international trade in key commodities which originates in Australia. Of the world’s internationally traded iron ore, 28 per cent originates in Australia; 28 per cent of the world’s traded coal, 63 per cent of the world’s traded wool, 15 per cent of the world’s traded wheat, and 10 per cent of the world’s traded gold.[14]

These strong world market shares are reflected in the high export revenues we are earning from these commodities. Of total export earnings in 2010-11 of $298 billion, $58 billion came from iron ore and $44 billion from coal. In other words, with our 2010-11 GDP at around $1.4 trillion, these two commodities alone generated nearly seven per cent of our entire national output.[15]

The boom has delivered significant benefits to the nation. For example, the mining sector’s tax and royalty payments to state and federal governments have risen from around 0.5 per cent of GDP in 2000 to about 2 per cent in 2008-09.[16]

But despite these returns from Australia’s strategic focus on mining and resources, there are strong criticisms voiced in some quarters. There are claims that our economy is ‘hollowing out’ as we replace sophisticated value added manufacturing with simple low technology businesses which dig stuff out of the ground. 

For example, Australian Workers Union boss Paul Howes in a recent speech to the National Press Club said Australia had "bet everything on a horse called the resources sector" while around 130,000 manufacturing jobs had gone since 2008.   Howes called for more government assistance in the car industry and manufacturing industry more generally.[17]

Howes went on to say:

…the AWU doesn’t want to see Australian industry lose. We want Australian industry to win. We want Australia to rediscover its industrial policy vision.[18]

In my view, to allocate even more taxpayers’ money to subsidise the manufacturing sector, as Howes is calling for, would be very poor public policy.

For one thing, this proposal presumes that we have a problem. It is true that manufacturing jobs are declining in relative and absolute terms: according to the Australian Bureau of Statistics, between 2006-07 and 2009-10 the number of jobs in manufacturing fell by 50,000. [19]

But in a dynamic economy, responding to changing demand, sectors will expand and contract all the time. Over the same period, jobs in mining rose by 27,000; in construction by 21,000; and professional, scientific and technical services by 66,000.[20]

This process of change has continued for more than a century. In 1910-11, 26 per cent of employment was in agriculture and related industries and 21 per cent was in manufacturing: by 2011 these numbers were 3.3 per cent and 8.9 per cent respectively.[21]

But secondly, we should ask whether putting further public money into the car industry makes good sense. How likely is it that Australia can produce cars at world competitive prices when we are hopelessly sub-scale?

China made 18.4 million vehicles in 2011, the US 8.7 million, Japan 8.4 million, Germany 6.3 million and South Korea 4.7 million. Total world production in 2011 was over 80 million vehicles. In Australia we made 224,000 vehicles.[22]

Yet we are spending a lot of public money in furtherance of the romantic notion that we must maintain a car industry. According to the most recent analysis by the Productivity Commission, net combined assistance to the motor vehicle and parts sector in 2010-11 was $1.18 billion.[23]

Gary Banks, the Chairman of the Productivity Commission, has commented:

…the sizeable financial support still being provided by taxpayers to the automotive and (to a lesser extent) TCF industries….mainly comprises what amounts to production subsidies, which are hard to justify on any ‘market failure’ grounds.[24]

What about other manufacturing industry? I referred earlier to Glenn Stevens’ comparison of iron ore export prices and plasma screen television import prices. It turns out that all of Australia’s televisions are now imported; the last television manufacturing plant in Australia, Panasonic’s plant in Penrith, closed in 2006. [25]

Here is what the Chief Executive of the Australian Electronic and Electrical Manufacturers Association had to say at the time:

When you have a major facility albeit our last television manufacturing facility, close down, it's a little bit of a wake up call… to what extent are we going to be reliant in the future totally on imported products without the opportunity of being able to be a really active participant in the emerging digital revolution? [26]

That is an articulate statement of the view that we should seek to build everything we can in Australia – and the loss of a television factory is inherently a bad thing.

Of course it is sad to see an established business close down. Perhaps Paul Howes would argue that there should have been a public subsidy to keep this factory alive – as part of his “industrial policy vision.”

In my view, if you are uncompetitive in an industry, the better course of action is to exit that industry – and to expand your output in industries where you are world competitive. In effect, that is what happened in 2006 when this factory closed down. The change in relative prices of iron ore and televisions since that time, as Glenn Stevens as cited, suggests it was the right choice.

I certainly do not argue that Australian businesses should not have a go in the automotive sector or any other sector. In a free market economy like Australia’s, business people can put their money into any kind of venture they choose.

Nor do I doubt that there is every opportunity for such businesses to carve out world competitive niches – for example in producing particular components or systems which can be sold to manufacturers worldwide.

Thomas Barlow, in his book I cited earlier, made this very point, observing that:

the Australian companies that seem to be the most innovative and the most globally competitive are those that have found a niche where they can supply new products without the need for mass-scale activities. More than sixty per cent of Australian automotive research and development is now spent by specialized components producers designing niche products such as braking systems, plastic fuel tanks, aluminum wheels, gearshift assemblies, safety systems and steering systems. [27]

What I do doubt is the wisdom of using taxpayers’ money to support industries which would not otherwise be competitive.

If mining and agriculture are obvious areas for Australia to focus, and if car manufacturing – in contrast to component design and manufacture – is not, what are some other areas which do, or do not, make sense?

Andrew Robb, in his article I cited earlier, nominated four: mining and resources; agriculture; education; and medical research.

If the guiding principle is to play to our strengths, it is easy to see why he has nominated these sectors. Education is the third largest export earner after iron ore and coal. Australian universities have done an extraordinary job of winning students from all around the world; the education sector now generates export revenues of around $15 billion a year.[28]

When it comes to medical research, Australia has a substantial track record, with at least six Australian Nobel laureates in this area. There have been significant achievements in commercialisation, with Australian owned or based firms like CSL, Biota and Peplin Biotech producing drugs for diseases like cervical cancer and skin cancer – typically in an alliance with an international pharmaceutical company but using Australian developed intellectual property.

Australia has also enjoyed success in medical devices, exporting some $800 million worth each year. Two large players are Cochlear and ResMed; they grew largely out of government funded science and medical applications.

Several other sectors could be mentioned as candidates for greater focus. It is regularly argued that Australia should be a financial services centre to rival Singapore and Hong Kong. With aggregate superannuation savings exceeding $1.3 trillion and growing, Australia is an increasingly attractive location for banks and investment managers from around the world.[29]  

Unfortunately the Rudd Gillard Government has been back and forth in its approach to this sector, reducing the withholding tax on foreign investment in managed investment trusts when it came to power but recently increasing the tax again. This sends a signal to foreign investment managers considering establishing in Australia – that the rules can change arbitrarily and with little warning.

Another sector which I think is critically important – perhaps unsurprisingly given my telecommunications industry background – is information and communications technology. Here I think we need to be clear about what strengths Australia has – and does not have.

We do not have companies of the scale of Apple, Microsoft or Google, or an enormous domestic market in which to develop consumer-oriented products.

But information technology is not just about consumers. It is transforming every sector – including sectors where Australia is world-competitive such as resources and agriculture.

I well remember as a telecommunications executive nearly fifteen years ago first learning about the use of networked soil moisture sensors on large cotton properties, connected via mobile wireless to a computer in the homestead.

As anyone who has visited a large Australian farm knows, technology is transforming every part of the operation – be it laser levelling of the ground to optimise water flow, robotic and satellite driven harvesting, or in one example of the many kinds of genetic engineering, sunflowers being genetically engineered for the production of natural rubber.[30]

Our strength in agriculture and resources gives Australia a platform that we can leverage in information technology. It is no coincidence that Australia is a global leader in mining and resources sector information technology. As one indicator, Rio Tinto funds three Australian research centres, including the Rio Tinto Centre for Mine Automation.[31]

There can be different views about which sectors should be part of Australia’s strategic focus. But what we can all agree on, I would argue, is that it makes sense to have a strategic focus – and then to use that focus to guide government policy.

If we have a focus – what should we do about it

This brings me to the third area I want to discuss: if we decide on where are we going to focus, what then should government do to implement that focus?

If we decide, for example, that education is a strength and a sector that we are going to focus on, does that mean that the government should set up a new group of government run universities? And should government then ban other universities for fear that they might do things which are “off strategy”?

I feel I should ask this question in a whisper, because I don’t want to put ideas into the minds of the Rudd Gillard Government. After all, when they decided that broadband was a priority, their approach was to set up a government owned broadband company to build and operate a wholesale broadband network – and to legislate to ban other companies from competing with the government’s network. In my view this is a really silly way to implement a policy.

We should also recognise that there are plenty of examples of governments decreeing that certain sectors will be vital to their country, putting a whole lot of public money into those sectors, and getting very little in return. I could mention for example the French government’s investment in Minitel – an early version of the internet. Conversely, there are plenty of examples of industries developing and flourishing without any government assistance at all.

Perhaps we can agree on this proposition though: government has a whole range of public policy levers it can pull which will influence the success or failure of particular sectors. It surely makes good sense for government to have a clear strategy about which sectors it wants to prioritise; and in turn it surely makes good sense for those sectors to be ones where Australia has a good chance of being world competitive.

Let me turn therefore to some specific points about what government in my view should – and should not – do to give effect to a view about Australia’s strategic focus.

The first thing to do, I would argue, is do no harm. If you have an economy with a world class mining and resources sector which underpins your national prosperity, you would be most unwise to set out to specifically handicap that sector. Of course, that is precisely what the Gillard government has done with its ill-judged, poorly designed and hastily implemented carbon tax.

The next priority is to align our industry assistance activities to sectors where we can be competitive. It is instructive to look at the Trade and Assistance Review, produced every year by the Productivity Commission. In 2010-11, total net industry assistance was $17.7 billion in gross terms, and $9.8 billion net.

Manufacturing is the most protected sector with $8.5 billion in tariff assistance. By comparison mining receives next to no assistance and farming a mere $173 million. It is no coincidence, I would argue, that our mining and agriculture sectors are highly efficient by world standards and while our manufacturing sector is less so.

The review notes that tariff assistance has declined markedly, but there has been a much greater trend to on budget assistance being paid directly to industry. A particularly shocking example is the $28 billion of commitments by the Rudd Gillard Government under its so-called Clean Energy Future Plan.

This includes pumping $10 billion into the Clean Energy Finance Corporation to invest in early stage ventures; $8.6 billion in the Jobs and Competitiveness Program; and assistance to specific sectors such as coal, steel and electricity generation.

As I noted earlier, the automotive industry, and to a lesser extent textiles, clothing and footwear are big recipients of industry assistance.

A fairly obvious conclusion suggests itself: industry assistance too often is not driven by a cool appraisal of what is in Australia’s best interests, but by political imperatives – including responding to special pleading from union leaders such as Paul Howes.

Is there a better approach to industry assistance? This is a question considered at some length in a recent survey article in The Economist magazine.[32] The article concludes that there are three key lessons from experience in this area.

First, support is most likely to succeed where it is aligned with a country’s competitive advantage. Second, policy should follow rather than lead the market. Third, industry policy works best when it deals with an area where there is a natural government interest and competence.

Thomas Barlow, in his recent book that I cited earlier, makes some complementary arguments about policy for science and research. He calls for minimizing the role of government; leaving decisions in the hands of researchers; spreading support across the board to “let a thousand flowers bloom”; and recognizing that Australia is more likely to have success by a focus in particular niches rather than trying to build superior scale to other nations.

These perspectives seem very sensible to me. I would like to add a couple of other thoughts. The first is the importance of a flexible and adaptable economy – and the danger that industry policy makes our economy less flexible. If we are using public money to subsidise the continued operation of sub-scale and fading industries, we inevitably slow down the rate at which our economy adapts to new opportunities.

Another problem, in my view, is the design of industry funding. Today much of the funding is specific to particular industries; it is not contestable between industries. An alternative approach would be to define a fund to support, say, investment in new industrial or business facilities based on particular criteria such as employment – and allocate it based on ‘bang for buck.’

After all, if applicants for the assistance can generate a certain number of jobs in exchange for it, why should it trouble us if the jobs are in automotive manufacturing or tourism or aged care?

A third problem with today’s policy settings is that we are relying too much on industry policy and too little on policy settings to encourage vigorous competition. As Porter argues in The Competitive Advantage of Nations, companies which have performed well in competitive markets at home will be best placed to take on the world.

Increasing domestic competition was a bipartisan policy direction for twenty five years – but unfortunately the Rudd Gillard Government has dramatically reversed direction. In sector after sector the arrangements for the incumbent operators are now much more cosy than they used to be.

In telecommunications, Labor has re-established a government owned incumbent monopolist – and legislated to ban competitors. In banking, Wayne Swan waved through mergers between Westpac and St George and Commonwealth and BankWest – taking out of the game two players which were price leaders, and allowing the big four to re-establish their comfortable oligopoly.

In coastal shipping, Anthony Albanese has just legislated to impose even more protectionist measures than previously existed – and in turn we can expect an even more inefficient and expensive coastal shipping industry. In superannuation, Julia Gillard’s modern awards system directs the flow of compulsory superannuation contributions towards certain preferred funds with close union links – and locks out retail funds from competing for most of this business.

In my view there are two further steps which are obvious ones to take if we are to improve our strategic focus as a nation. The more smart and educated people we have, the better our economic performance will be. So rather than choosing in favour of particular industries, let us choose in favour of skilled and adaptable people who have the capacity to work effectively in many industries.

The first way to do that is to prioritise research and education. I would like to see every dollar we spend on industry assistance tested against this question: why should we not instead put this dollar into the university sector?

In a knowledge economy, the more knowledgeable people we have, the better off we will be. We cannot predict what will come of such investment in human capital – but we can be confident that investment in human capital will be rewarded.

Certainly success in many of the sectors I mentioned earlier – medical research, information technology, financial services – depends on having a large number of smart, well educated people. The role that our schools and universities play is critical.

I was interested to see recent comments by Alan Noble, who is the head of engineering for Google in Australia. As a highly qualified Australian who spent many years in Silicon Valley, Noble knows what he is talking about when he says, “Right now, we're seeing too few Aussies studying computer science, resulting in a workforce lacking a key skill.”[33]

The second obvious step is to give even more emphasis in our immigration program to bringing in smart, educated, talented people. This should be our priority in choosing people for permanent residency and ultimately citizenship.

The Coalition has already committed to key measures in this direction. In our policy leading up to the last election the Coalition committed to ensure that two-thirds of our permanent migration programme would be for the purposes of skilled migration. In addition, we committed to liberalise arrangements for temporary business visas (457 visas) subject to clear standards, to make them more accessible to business.

Conclusion

Let me conclude as I started – by arguing that we should have a strategic focus as a nation on the things we are best at and we can be world competitive at.

We are a small country in a big competitive world which does not owe us a living. We have done well as a nation and our citizens in general enjoy a high standard of living. But we cannot take that for granted.

Nothing will – or should – stop business people having a go at any sector they choose. But when it comes to public policy measures – including taxation, education funding, immigration, research funding, and direct assistance to business – we should have a clear strategic focus.

Government should avoid the futile misallocation of resources to areas where we can never be particularly good.

That has not, unfortunately, been a guiding principle of industry policy or economic policy under the Rudd Gillard Government.

We have a lot of room to improve!

[1] R Castle et al, Focus on Economics: Managing the Australian Economy, 1994, p 199.

[2] Glenn Stevens, Governor of Reserve Bank of Australia, Address to the Committee for Economic Development of Australia (CEDA) Annual Dinner, Melbourne - 29 November 2010 , http://www.rba.gov.au/speeches/2010/sp-gov-291110.html, downloaded 2 July 2012

[3] ‘Metal Manufacturers surviving troubled waters’, Manufacturers Monthly, 29 June 2012, downloaded 3 July 2012, http://www.manmonthly.com.au/features/surviving-troubled-waters

[4]D Hummel, ‘Transportation Costs and International Trade Over Time’ , downloaded 3/7/12, http://www.krannert.purdue.edu/faculty/hummelsd/research/hummels%20jep%20rewrite%20final%20with%20tables.pdf

[5] Bureau of Infrastructure, Transport and Resource Economics, downloaded 3 July 2012, http://www.bitre.gov.au/publications/ongoing/international_airline_activity-time_series.aspx

[6] Book Industry Strategy Group, Final Report to Government, Sep 2011, p 17

[7] Book Industry Strategy Group, Final Report to Government, Sep 2011, p 38

[8] University of Groningen, Groningen Growth Development Centre, Maddison historical statistics, viewed 2 July 20112, http://www.rug.nl/feb/Onderzoek/Onderzoekscentra/GGDC/databases; International Monetary Fund, World economic outlook database, viewed 2 July 2012, http://www.imf.org/external/ns/cs.aspx?id=28

[9] Singapore’s GDP per capita at USD110,100 in purchasing power parity terms ranks it eleventh, ahead of such countries as the US, the Netherlands, Australia and Canada. Source: The Economist, Pocket World in Figures 2011.

[10] A. Beattie , ‘Argentina: The superpower that never was’, Financial Times, May 23 2009, downloaded 5/7/12, http://www.ft.com

[11] M. Porter, The Competitive Advantage of Nations, 1990 Macmillan London, p.171

[12] A Robb, “As a nation, we should play to our strengths”, The Australian, 20 June 2012.

[13] T Barlow The Australian Miracle: an innovative nation revisited, 2006, p.218

[14] Source: Bureau of Resources and Energy Economics, Reources and Energy Statistics 2011; Australian Bureau of Agriculture and Resource Economics and Sciences, Agricultural commodities 2011.

[15] DFAT, Composition of Trade, Australia, 2010-11, Table 2 p 27, downloaded 5 July 2012, http://www.dfat.gov.au/publications/statistics.html

[16] E Connolly and D Orsmond, The Mining Industry: From Bust To Boom, Research Discussion Paper, December 2011, Economic Analysis Department, Reserve Bank of Australia, p 37

[17] Labor captive to drivel, says union boss Howes, M Franklin, :The Australian, May 23, 2012, downloaded 2/7/12, http://www.theaustralian.com.au/national-affairs/industrial-relations/labor-captive-to-drivel-says-union-boss-howes/story-fn59noo3-1226363942636

[18] Paul Howes, speech to National Press Club, downloaded 4 July 2012, http://australianpolitics.com/2012/05/22/paul-howes-npc-address.html

[19] ABS, 2011 Labour Statistics In Brief, 8155.0.

[20] ABS, 2011 Labour Statistics In Brief, 8155.0.

[21] ‘A Century of Change in the Australian Labour Market’, Australian Bureau of Statistics, 1301.0, Year Book Australia 2001; Australian Bureau of Statistics, 6104.0, 2011 Labor Statistics in Brief.

[22] World Motor Vehicle Production by Countries: OICA correspondents survey, downloaded 5 July 2012, http://oica.net/category/production-statistics/

[23] Productivity Commission, Trade and Assistance Review 2010-11, p 110.

[24] Banks G 2010 “Industry Assistance in a ‘Patchwork Economy’”, Speech to ACCI Annual Dinner, 23 November 2011, p.9

[25] The World Today - Wednesday, 25 January , 2006  12:30:00 , Reporter: Tom Iggulden

[26] The World Today - Wednesday, 25 January , 2006  12:30:00 , Reporter: Tom Iggulden

[27] Barlow T 2006 The Australian Miracle: an innovative nation revisited. p.235-236

[28] DFAT, Composition of Trade, Australia, 2010-11, Table 2 p 27, downloaded 5 July 2012, http://www.dfat.gov.au/publications/statistics.html

[29] 2012 Budget Statement 4: Building Resilience Through National Saving, downloaded 5 July 2012, http://www.budget.gov.au/2012-13/content/bp1/download/bp1_bst4.pdf

[30] See Barlow T 2006 The Australian Miracle: an innovative nation revisited. p.227

[31] B Fischer and S Schnittger, BAEconomics, ‘Autonomous and Remote Operation Technologies in the Mining Industry: Costs and Benefits’, downloaded 5 July 2012, http://www.baeconomics.com.au/wp-content/uploads/2010/01/Mining-innovation-5Feb12.pdf

[32] ‘Picking Winners, Saving Losers’, The Economist, 5 August 2010

[33] A Noble, ‘Dreaming of Silicon Beach’, Australian Financial Review, 7 June 2012