A recently released report from Australia’s CEDA economic development thinktank discusses, in frank terms, the challenges of being a distant economy in a global marketplace and offers us many parallels to New Zealand’s own situation.
Contrary to the view that modern transport and communications technologies have reduced the “tyranny of distance” the report reminds us not to be complacent about geographic remoteness from global centres for trade. The increasing trade in services and a trend towards the growth in knowledge sector businesses does not neccessarily obviate the need to be closely connected to markets.
Australia’s relative disconnectedness from global supply chains is cited as a source of concern as is its distance from the deal-making and financial centres of the Northern Hemisphere. On the plus side of the ledger, open financial markets which encourage both inwards and outwards investment are seen as underpinning Australia’s place in the world of trade. Australian coporates tend to use their financial muscle to buy into businesses abroad that align with their own.
The report also notes that most innovation occurs not so much within newly emergent and high risk areas of science, but amongst manufacturing and industrial sectors. Fostering innovation and building skill levels through immigration and education are seen as critical objectives. With two-thirds of global trade and one-third of research and development conducted by global multinational corporations, the report suggests that attracting and engaging with them is paramount.
Australia’s recent economic prosperity has been driven not by outstanding growth in export volumes but rather by extraordinary prices for commodities. This represents a risk to the economy unless there is greater diversity and an increased contribution from value-added goods and services. Yet investments in human knowledge and knowledge infrastructure have declined.
Notwithstanding that Australia’s prosperity differs in that it is largely founded upon a vast trade in minerals, there remain a great many lessons in the report that are of direct relevance to New Zealand. Not the least of these is that, as our largest trading partner, any downturn in global commodity prices is bound also to affect our own fortunes.