Since Donald Horne wrote The Lucky Country nearly 60 years ago, Australians have debated the extent to which our good fortune as a nation has been due to circumstance or sound management. Horne’s description of the leadership of that era as “second-rate” might be unfair, but there is no doubt Australia’s growth has been helped along by a good dose of luck.
Over the past 18 months, we have seen this with the pandemic. Leaders have mostly made good decisions in challenging circumstances that have ensured rates of COVID-19 are relatively low and the economy has remained resilient. Our good fortune to be an island nation provided a first line of defence we chose to employ rigorously. Acknowledging our past good luck should remind us to avoid future complacency. While we can expect an economic bounce-back as borders reopen, a modest ambition of re- establishing our previous growth trajectory will not be easy.
Australia’s good fortune in China’s growth model may now be waning. The evolution of the Chinese economy and its integration into the global trading system have driven demand for Australia’s commodities. That model is changing. Beijing has shown it wants to check private business, exert control over its tech sector and rein in property sector excess. The introduction of the “three red lines” policy to reduce the leverage of property companies has led real estate giant Evergrande to the edge of collapse. Beyond Evergrande, with the property sector contributing as much as 29 per cent of China’s GDP — a remarkable figure in global terms — former IMF chief economist Kenneth Rogoff has written that “it is hard to see how a significant slowdown in the Chinese economy can be avoided”. This is the moment when good leadership pursues the economic potential of our region as a whole.
Our good fortune in natural resources has the Australian economy in a “long carbon” position in a “short carbon” world, despite our considerable potential in renewable energy. The COP26 summit, being held as this issue is delivered to AICD members, will seek to hasten the transition of the global economy away from carbon-intensive industries and activity, at the same time as an energy crisis is playing out, particularly in Europe and China. The frustration of AICD members with our national energy policy has been long documented in the Director Sentiment Index. This is a moment when good leadership can enhance the good fortune of our resource endowments in the transition of the global economy.
A turbulent world
Our good fortune to prosper in a period of relative peace is now less certain. The recent AUKUS security pact, the deepening of the Quad dialogue between the US, Japan, India and Australia, and the expansion of the China-led Shanghai Cooperation Organisation to include Iran are all signs of deepening diplomatic fault lines. Investment in our diplomatic and trade corps is critical to help navigate this environment, but this is a moment when good leadership anticipates and prepares for a turbulent decade.
The pandemic has been a lesson in the interconnected nature of the risks we face in a global economy and how circumstances — and business models — can change abruptly. There are already thousands of mutations of the COVID-19 virus, so we will be “living with COVID” for some time yet.
In Evergrande, we are seeing again, as in 2008, that the financial troubles of a single company in a single industry can reverberate in global markets. Cyber attacks continue to proliferate, many with the resources of nation states and significant criminal enterprises, and our interconnected technologies multiply the risks and impacts.
To counter the swings in our good fortune, Australian organisations will need to continue building their resilience. Resilience requires investment in technology, systems, people and the stakeholder relationships that sustain our organisations. We need to ensure our organisations are sufficiently diversified to weather changes in fortune. At an economy-wide level, we need to improve our record on innovation and R&D, halting the slide down international league tables. We need economic policy to tackle the Gordian knot of tax reform, economic growth and inequality, and housing affordability. And we need confidence our education system is delivering world-class outcomes for students at every level, aligned to the direction of our economy.
We have had good leadership, not just good fortune, across our economy over a long period. But directors and leaders across every sector must be prepared to grapple with challenging times ahead. To paraphrase WB Yeats, no country has so much luck it can afford to play with it.