The ACTU warmly welcomes the establishment of the National Reconstruction Fund (NRF), and the chance to provide its views to this inquiry. The NRF can play a key role in addressing four fundamental weaknesses in the Australian economy:
Firstly, Australia lacks economic complexity. The Harvard University Atlas of Economic Complexity measures the industrial capabilities of a country as a key driver of its growth prospects. It ranked Australia a lowly 91st in 2020, on the Index down from 55th back in 1995, but even worse, we are projected to keep sliding down to 112th position by 2030. Australia’s lack of economic complexity leaves it highly exposed to change. As the authors of the Index comment: “Australia’s worsening complexity has been driven by a lack of diversification of exports.
Secondly, Australia’s manufacturing output as a percentage of our GDP in 2021 was just 6% in 2021, less than half of the OECD average of 13%. Only Luxembourg and Norway have lower levels of manufacturing among developed countries. Yet, manufacturing and the extensive supply chains it relies on and supports, are key drivers of secure, well-paid work and rewarding careers as well as national wealth, productivity and innovation.
Thirdly, our research and development spending as a % of GDP in 2019, also languishes at 1.83% compared to 2.96% across the OECD. It hasn’t always been this way. Ten years earlier our spend was higher than the OECD average at 2.37% vs 2.34%. Given how innovation rich manufacturing is, it is not surprising that our levels of overall research and development are declining. Research and development spearheads the creation of value and improvements in productivity.
Finally, Australia clearly has the capital to tackle these structural weaknesses by investing in the industries of the future: corporate profit at as a percentage of GDP is almost at a record high. But the private sector is not playing its part: with levels of business investment almost at record lows.