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Digital era policy questions for Australian politics

Digital era policy questions for Australian politics

Originally published on June 5, 2016


The economic and social transition to the digital era has been impacting upon Australian politics in recent times, with the debate seeming to go around in circles. As a way of trying to clarify my thinking on the issues, I framed some relevant questions in relation to a broader, more strategic and longer-term view.

  1. How well is Australia coping with its transition to the Digital Era - how effectively are we collectively becoming more productive?

I would suggest that our performance has been relatively poor. Youth unemployment is at rates not seen for over 20 years, so is our education system actually efficient? And is our currently employed workforce actually lifting its skill base - or does this only improve when unemployment spikes and individuals are forced to retrain and upgrade their skills? How good are we as a culture at rebounding from adversity?

2. Have our high minimum wages and working conditions given us enough aggregate economic momentum not to stall out?

It depends. Many areas depends upon a 1960’s-level economic model of building new suburbs and shopping centres, which supports the construction, retail, hospitality and related service industries. And the multiplier effect of this appears to support employment more broadly. But now that the mining boom is over, does this model simply work on borrowed time – and borrowed money?

3.Has our current economic model allowed us to attract higher numbers of skilled migrants than we would have done otherwise?

Australia is successfully settling skilled migrants in large numbers. The fact that our macroeconomic indicators have been more positive than many other nations for the last decade is probably something skilled migrants take into account when deciding where to emigrate to.

4.Are we investing sufficiently in our infrastructure to take advantage of future opportunities?

No - much of our transport infrastructure is groaning at the seams, and many people feel that their quality of life is falling as public services struggle to keep up with the extra demand caused by immigration. We have a housing bubble, and large and growing gaps in economic performance between our highly productive inner cities and elsewhere, as evidenced by this PwC media release: 
http://www.pwc.com.au/press-room/2014/gem-mar14.html

5.Are we investing sufficiently in our people to take advantage of future opportunities?

Current policy settings have allowed more citizens to complete tertiary education, which should (in theory); make them more employable and productive. And the current levels of education funding around the Gonski model seem to be making a tangible difference. However, skills shortages exist in many technical and STEM fields, in part because our vocational training system has been badly managed over the past decade.

It also remains to be seen if we are actually training people effectively for today’s economy, rather than yesterday’s. Despite warnings for years, our IT skills deficit is larger than ever. And politicians still talk about “jobs” rather than the transition to thinking about projects and creating businesses, which is what the digital economy consists of.

6. Does our level of public debt inhibit our ability to balance current and future needs?

I think that our government debt needs attention, but we are not at crisis level – yet. Indeed, there is scope to borrow more at the current low interest rate levels if such borrowings are used to fund productive infrastructure rather than recurrent spending.

7. Does our level of private debt inhibit our ability to balance current and future needs?

To me, this is the elephant in the room not being talked about. This is actually something that individuals need to answer for as much as governments. While everyone needs housing, the average Australian house is now double the size it was in the 1970’s.  If the economy turns down, are we going to collectively blame governments because we have borrowed money to pay for houses costing well and truly above historical income multiples?

Likewise, how many Australians have effectively planned for the transition to retirement? While there are now both private and government programs in existence to help with this, the average level of financial knowledge is still in need of improvement. For example, do we expect to receive a full pension upon retirement simply because people retiring now are getting one? And do we deserve to have one if we choose to spend hundreds of thousands of dollars on housing, instead of making provision for our own retirements? 

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All in all, I think Australians have to lift our game collectively. We are going to have to find a different way to ensure that people don’t get left behind, and doing so will require the political courage to undertake deep, genuine and long-term tax reform.

The progressive political parties are going to have to recognize that in a global economy, flexibility means that some of the conditions they hold dear are going to need to be negotiated rather than absolute. Part of this recognition needs to be that having a job is the best form of assistance that can be offered, far preferable to long-term unemployment. And acting like Santa Claus with borrowed money does not avoid the need to make hard decisions – it merely postpones them.

On the other side of politics, the conservative parties need to recognise that doing nothing is not an option either. While the free market is incredibly powerful at lifting living standards, when left to its own devices it can also be powerfully corrosive to the social fabric.

Both major parties also need to recognise that much of the population views change with fear rather than excitement, because many of the ladders of opportunity which used to exist are now either gone, or unrecognisable, or out of reach under current policy settings. “Let them eat cake” is not a uniting or effective political philosophy for the digital era.

I have tried not to be partisan in my remarks, as naturally neither I nor any side of politics has all of the answers. Are there other questions we as citizens should be asking of our elected representatives, and thinking about? What do you think?

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