Future belongs to a smart country

Australia needs to invest in its knowledge economy if it is to compete in the global economy, says the former head of the federal Treasury’s budget and revenue groups, Greg Smith.

“Australia cannot rely on the mining industry as its sole economic advantage in the long run,” he told the Tax Summit: Project Reform.

Rather than rely on the resources, manufacturing or services, Smith believes Australia needs to turn to its knowledge-based part of the economy such as information technology, media, research and development, and knowledge-based services including education, consultancy and financial planning.

“At the moment, only 10% of our total investment is going into intellectual property, whereas in most of the rest of the advanced world, it’s 20%-30% of investment going into that sector,” says Smith. “A country that invests mostly in the primary sectors and in property I don’t think is going to be able to cut it in the 2030s and 2040s without shifting investment as well.”

Making this switch will require a radical increase in the level and focus of public and private investment. “What we need to recognise is we’re not remotely clever at the moment,” says Smith. “That is very much an aspirational stretch and somehow Australians have to wake up to the fact that it requires a combination of public and private investment to actually deliver it. Every other country in the world which is delivering on these fronts is delivering through that combination.”