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Outsource magazine: thought-leadership and outsourcing strategy | August 24, 2017

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Loss of Australian competitiveness irreversible

Loss of Australian competitiveness irreversible
Martin Conboy

Former Australian Treasury Secretary Ken Henry has cautioned Australian businesses that the resources boom fuelled by Asian demand has transformed the structure of the Australian economy so deeply that the lack of competitiveness suffered by foreign exchange and trade-exposed industries (Retail, Tourism, Education and Manufacturing) is largely irreversible.

Dr Henry, who is also heading up the government’s Asian Century white paper taskforce, told a Melbourne business conference that the mining boom had resulted in a surge of investment 62 per cent higher compared with the sector’s 20-year average rate of growth.

Not only has the investment boom been skewed to the mining and resources sector, it is also starving other sectors of capital to improve their businesses. Moreover the investment bulge is leading to higher labour and material costs and an appreciably stronger Australian dollar. In 2000 one Australian dollar brought US$0.55 and 12 years later it is buying US$1.05. Trade-exposed businesses would need to achieve a unrealistic fifty per cent increase in productivity to make up for the lower price to sell their products.

Additionally a new wave of robots, far more adept than those now commonly used by carmakers and other heavy manufacturers, are replacing workers around the world in manufacturing and distribution.

We only need to look at what’s happening in the automation of call centre and customer service environments as smartphone apps and self-serve web sites erode the need for human agents.

Such advances in manufacturing are also beginning to transform other sectors. One is distribution, where robots that zoom at the speed of the world’s fastest sprinters can store, retrieve and pack goods for shipment far more efficiently than people.

Robotics executives say even though blue-collar jobs will be lost, more efficient manufacturing will create skilled jobs in designing, operating and servicing assembly lines.

Dr. Henry went on to say that Australia was “kidding ourselves” if productivity measures, often mooted by business and government leaders, would help “obviate the need for structural adjustments in the economy,” he said.

“There’s simply no feasible increase in productivity growth that would reverse all or even a significant proportion of international competitiveness that’s presently being experienced by Australia’s trade-exposed non-resource industries,” he said.

Furthermore the simple fact of the matter is that global labour markets have restructured and highly skilled and less expensive Asian knowledge workers can and will do the work required of them. Gone are the days when Asia was a place where low-value business processes were sent as a labour arbitrage play.

“If we want to benefit from the Asian Century, we can’t think of us standing apart from Asia selling product into it,” he said. “Rather Australia will be most successful if we achieve deep, seamless integration [with Asia].”

“We’re living through an extraordinary period of economic change, the like of which will never appear again in our lifetimes … and perhaps won’t come to Australia again for several generations,” he said.

“And that’s why it’s important to think deeply about these issues and to engage widely in the Australian community to ensure the opportunity is not squandered.”

Dr. Henry said the structural changes in the economy meant jobs are being lost in traditional trade-exposed industries like manufacturing, but stressed many are also being created elsewhere. A report commissioned by the International Federation of Robotics last year found that 150,000 people are already employed by robotics manufacturers worldwide in engineering and assembly jobs.

“You never hear anyone say that on an average business day in Australia something like 5,000 to 6,000 people walk into a new job – that’s each day,” Dr Henry said.

On another related note I have just returned from China (Wuhu) and I met an American executive whose US-based company was picking considerable volumes of work from Australia in the areas of live web chat support, social media monitoring and email response. This is without a physical presence in Australia from local companies frustrated by Australian BPO service providers not being interested or not having the wherewithal to provide such services. These companies were not chasing a cheaper price; they just wanted the work done. As I have indicated before the results of The Sauce‘s Australian BPO Study 2012 clearly indicate that social media and online marketing are going to be growth markets for BPO providers; I just wonder if anybody is listening. The other related thing that I heard from the Americans that I met was that the lines between marketing and social media were blurring.

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