Treasurer Josh Frydenberg has called on Australian businesses to invest in new technologies now to fully realise their potential benefits and address the country’s lagging productivity performance.
In a call to arms speech to the Business Council of Australia on Monday, Mr Frydenberg said big corporates are not aggressive enough in the pursuit of growth, and urged them to invest in new technologies rather than focusing on short-term economic returns.
“If we are going to create new jobs and enable people to earn more for what they do, we need businesses to increase their capital expenditure and to adopt new technologies and business practices that effectively integrates capital with labour,” Mr Frydenberg said.
“The lesson from companies like CSL and Cochlear is to take advantage of conditions, invest in research and development and back yourself to grow. For these companies, the willingness to take appropriate risk is part of their long-term growth strategy and success,” he said.
“A more positive approach to investment and growth by Australian corporates would not only lead to a stronger economy but would contribute to the goal of capital depending.”
But Labor has hit back following the speech, saying the government is all talk and no substance when it comes to economic policy.
Australia’s productivity growth has “slowed” over the last decade, increasing on average by only 1.1 percent over the last five years. Mr Frydenberg said he wanted to get this figure to 1.5 percent, which would lead to a $3000 pay increase for workers by the end of the decade, and make the level of GDP and real wages 4 per cent higher and the economy $70 billion larger overall in real times.
Treasury research has found that the top 5 per cent of Australian firms accounted for almost all of the country’s productivity growth.
Australian companies need to get on the front foot and start embracing cutting-edge technologies now, Mr Frydenberg said.
“There is a clear gap between those at the frontier and the rest. Many firms appear to be waiting for technologies like artificial intelligence, autonomous vehicles or the Internet of Things to mature before they adopt them,” he said.
“Sectors like mining where they have embraced cutting-edge technology like driverless trucks and trains are seeing reduced costs, better metrics and increased outputs. Even when technologies are both proven and in place for some technologies it takes time for the full benefits to be seen.”
The Treasurer compared this to factories taking 30 years to reconfigure their processes to take advantage of the electrification of the United States in the 1890s, and the development of the integrated computer chip in 1975, but a two-decade wait before computers were on every desk.
“A corollary today is the effective use of machine learning which requires a new system-wide approach with the right data sets, skilled technicians and analysts as well as a regulatory framework fit for purpose,” Mr Frydenberg said.
The slow take-up of these technologies is slowing Australian productivity, he said.
“As technology becomes more pervasive the impact of these factors should diminish over time and we will see productivity increase. But how much and how quickly our productivity increases in the overall economy will depend on the actions of governments, employers and employees who all have a role to play. Government as an enabler and business as the principle driver of economic activity,” Mr Frydenberg said.
The Treasurer called on the corporates to “back yourself and use your balance sheet to invest and grow”.
“If we are going to create new jobs and enable people to earn more for what they do, we need businesses to increase their capital expenditure and to adopt new technologies and business practises that effectively integrates capital with labour,” he said.
The Coalition will be doing more to improve digital skills in Australia, and to position the country as a “world leader” in FinTech, Mr Frydenberg said.
The speech was criticised by shadow treasurer Jim Chalmers, who said the Coalition is all talk when it comes to economic policy.
“Telling companies to invest more in their business is not an economic policy. What Frydenberg has tried to do today is pretend the whole problem in our economy is that businesses aren’t investing enough,” Mr Chalmers told media on Monday.
“Clearly we need to see more business investment in our economy, but it’s not good enough for our treasurer to pretend that’s the whole problem and that he’s had nothing to do with it. We have a government that has a political strategy but not an economic policy.
“This government needs a plan for growth, for wages, for productivity, for investment, right across the board. Australians have been crying out for a plan for the economy for years now but the government has been too busy playing politics to come up with one.”