In 2019, we’re a banana republic

James Riley
Editorial Director

In 1986, then Treasurer Paul Keating said that Australia risked becoming a third-rate economy – a ‘banana republic’ – if it allowed the sophisticated industrial side of the country to fall away. “We must let Australians know truthfully, honestly, earnestly, just what sort of international hole Australia is in,” he said.

At the time, he was talking about a chronic current account deficit. But his point related to getting manufacturing going again and being competitive in the world in the production of complex goods and services.

Freelancer chief executive Matt Barrie reckons we have moved beyond risk, and that we have arrived. In 2019, we’re a banana republic, albeit one where instead our economy relying on the exports of a single export product and controlled by foreign capital, we are an economy where 38 per cent of our largely unprocessed and unsophisticated exports go to a single market.

Paul Keating was right, the Freelancer chief says. Australia’s neglect of its ability to develop, build and sell complex products and services to the world has pushed the economy into BananaLand.

Certainly 2019 has has had a heavier banana republic vibe since Harvard published its Atlas of Economic Complexity last month. Australia ranks 93rd in the world for economic complexity, down from 57th in 1995. The downward trajectory has been consistent and strong.

Australia ranks just below Senegal, which commands 92nd on this league table of international competitors, and just ahead of Pakistan. Regardless of the Harvard ranking attracting criticism from some quarters, both the ranking and shocking downward trend should be worrying our national leadership a lot more than it is.

Mr Barrie will interview former Prime Minister Malcolm Turnbull at the StartCon event in Sydney next week, and will discuss strategies for getting tech and innovation back onto the national agenda. Already the largest startup and innovation event in Australia, Startcon is expecting record show this year with well over 4,000 people through its doors.

“I would posit that today we are a banana republic, because if you look at the Australian economy 38 per cent of exports going to one country,” Mr Barrie said.

“If you look at the definition of a banana republic as a small state that’s politically unstable because of the domination of the economy by a single export controlled by a foreign capital,” he said.

“Well, rather than having a single export we have a single export destination, China. 38 per cent of what we produce, of what we dig out of the ground, goes to one country.”

“Australia is devolving quite rapidly now from a developed economy to a developing economy.”

While the gravity of the situation was starting to dawn on government, the response has lacked any urgency. And the signals toward quantative easing by the Reserve Bank to stimulate short term growth was just wrong-headed.

“Isn’t the best way to stimulate growth to change the narrative about how we can build world class industries and businesses through innovation and R&D, rather than drive interest rates to zero or less than zero in an effort to drive savers to spend their money,” Mr Barrie said.

In spite of the neglect, in recent years Australia has produced a clutch of world-class entrepreneurs and some great global businesses. But while its fine to celebrate these successes, it is impossible to ignore the reality of Australia’s shocking performance and downward trend in improving economic complexity.

Reversing the bleak trend will take time and investment.

“The biggest thing that [Scott Morrison] could do is to fix the education system in this country. We need to get more people into the technology industry. And you have to start by fixing the secondary school system,” Mr Barrie said.

More resources to educate teachers. A program to educate parents. And a general promotion across Australian society of a narrative that highlights where the opportunities lie for students and for the nation.

While the numbers of students enrolling in computing science and engineering have continued to slide, the focus most be on earlier intervention to ensure secondary students are engaged and applying for tech places at university.

“We have got to change where the country puts its focus. Australia has got to be thinking about [the equivalent of] an Apollo project where the whole country is galvanised in the way that Israel was when it completely transformed its economy to a technology focus.”

Mr Barrie has promised the StartCon conference has kept its focus on building a speaker program of global entrepreneurs providing actionable insights into building innovative products and global companies.

StartCon is by far the largest event in Australia for startups and tech innovators. It opens at the Royal Randwick Racecourse on November 22 and 23.

Do you know more? Contact James Riley via Email.

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