Fortune favours the brave. So why is Australia so reluctant to take risks?
There’s no doubt Australia is performing well across the global business stage. A quarter of a century of uninterrupted GDP growth makes us an OECD stand-out. But what about the next such period? PwC’s ‘World by 2050’ report suggests we’re on track to fall out of the G20 in the next few years, dropping from our current 19th spot to 28th by 2050. What does that point to if not a tendency to rest on our laurels?
Put much of this down to a risk-averse culture of complacency; a willingness to accept historical averages as good enough for the future. We are comfortable with 2.5 per cent per annum GDP growth because it gets us by. Low risk, low reward.
How satisfactory is that, given our proximity to Asia, the high value of ‘Brand Australia’ in the region and the place we occupy in history, namely, on the cusp of the so-called Asian Century?
The mining boom delivered another stroke of luck for the lucky country. A China-driven jump in demand for commodities with a commensurate spike in prices and mining investment, all coinciding with enormous investments in LNG. The result: an investment boom the likes of which we’ve not seen before.
But the mining boom is over now, so we need an alternative growth engine. Fortunately, we’re presented with powerful opportunities elsewhere. But the real rewards here come with risk, so on that front we have to reassess our attitude.
That starts with a closer look at things, like how pleased we were in reaching the million-Chinese-tourists-a-year mark. A milestone for us, certainly. But how big a milestone when Thailand drew over 7 million, Korea 6 million and Japan is heading for 5 million?
I don’t mean to be alarmist here. As Asian markets mature, there will still be opportunity aplenty. But the potential for real rewards lies in the first light, before they mature.
For Australian business, those opportunities reside in services – home to around 75% of Australian jobs. As Sean Rien from China Market Research Group told the AFR Summit audience, ‘Brand Australia’ embodies the clean, trusted and reliable image that sells well across Asia. It’s there in our food and agricultural industries, our world-class expertise in services like education, health, tourism and financial services.
You can’t put services on a boat and ship them to Asia. If Australian companies want to fully participate in the growth in these markets, they are going to have to be where the customers are. Today we trade with Asia but we are not in Asia. Our Foreign Direct Investment (FDI) data shines a bright light on this truth. We have invested A$62 billion in New Zealand and a woeful A$29 billion in the 10 ASEAN countries. In China, the world’s largest economy in PPP terms, our FDI is just A$12 billion.
I am not arguing that these markets are without risk. Many are quite the opposite, with World Bank Ease of Doing Business rankings anywhere from Number 1 (Singapore) to Number 167 (Myanmar). My point is that we are failing to join the risk-and-reward dots. We’ve got the balance dangerously wrong.
For a flagship local example of where we might go with the right risk settings, look to Atlassian. The local software success story has all the ingredients of a classic Silicon Valley fable, starting with founders Mike Cannon-Brookes and Scott Farquhar dropping out of university to pursue their idea. They turned a $10,000 credit card debt into a $60 million sale of a minority stake to a US VC company. They’ve since won multiple plaudits, including top entrepreneur and employer gongs.
None of that came without risk – feeling the fear of failure and doing it anyway.
We need to recognise that failure is inherent to a culture of innovation. As Dr Larry Marshall, the head of the CSIRO, told the AFR Summit audience, you have to get things wrong on the way to getting them right. In Silicon Valley, where he’s spent some time, failure is seen as a rite of passage, intrinsic to successes of the magnitude of Apple, Microsoft, Google and Uber.
As is diversity. In a globalised business environment, cross-border diversity is essential. John G Rice, Hong Kong-based vice chairman of GE, said he couldn’t think of one product in his 37 years with the company that hailed from a single country in isolation. Diversity, he said, lets you do things you can’t do on your own.
Herein lies another layer of opportunity for Australian businesses. ‘Brand Australia’ carries a better reputation across SE Asia than we ourselves grant it. We have what the burgeoning Asian middle class wants, in spades. We also have a rich diversity of Asian cultural background talent in our community. They want to help but we have to give them our trust and confidence if we want to unleash their potential.
If the recent controversy over locally-made baby formula proves anything, it’s how badly we underestimate our own value. We appear blind to potentially huge markets for our products and services.
My fellow Summit panellist Justin Breheny – ex CEO Asia for IAG and now Chairman of food and nutrition specialist Nuchev – hit the nail on the head when he said “this must be the first time a market has discovered us before we discovered them.”
Australian media reported this negatively as foreign buyers profiting at the expense of local consumers. But it’s probably more constructive to look at it as an educated, mobile, aware Chinese middle class creating its own supply chains in order to get what it wants.
Viewed that way, it’s not about what they’re doing. It’s about what we’re not.
This article originally appeared on LinkedIn. Andrew Parker is a member of the AIC Board.