“Victoria at the starting line”, Victoria the Crossroads conference, Melbourne
FRI 24 AUGUST 2012
Melbourne Convention and Exhibition Centre
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I’m a proud Australian but I’m a proud Victorian too. In Australia, I adopted a country. In Victoria, I adopted a State. I came here three decades ago and found the place to call home. I’ll grow old here waiting for the Dogs to win the flag!
So you could say I’m an optimist. An optimist by nature. An optimist for this State. We’ve seen tough times before and found the courage to reshape our future. In 2012, it’s time to do it again.
Friends, The theme of this conference is ‘Victoria at the Crossroads’
and there’s much truth in that. But I’d adopt a different characterisation and say Victoria isn’t so much at the crossroads but at the starting line.
The starting line of the economic race in the Asian Century. The starting line of a new economic order following the GFC.
From growth fuelled by debt to a focus on deleveraging.
From fossil fuels to renewable energy.
From analogue to digital.
From Europe and North America as the economic centre of gravity to Asia.
These transitions are unstoppable.
The rise of China, India and the ASEAN nations alone amount to a change on par with the Industrial Revolution.
It is bringing a huge lift to Australia’s national income and downward pressure on inflation.
But it also brings patchwork economy pressures that will be with us for the foreseeable future.
They include, obviously, the strong Australian dollar but also intensifying competition and ageing capital stock.
The resulting economic transition is very real.
For example, manufacturing has lost around 30,000 full-time jobs in the past five years.
At the same time, employment in services has increased by more than 100,000 full-time jobs.
So this can be a growing economy but it will be a changing economy as well.
Friends, This is not a future Victoria needs to fear.
Even now, a decade into the expansion of mining, Victoria’s fundamentals are resilient.
Under pressure but resilient.
Victoria’s year-on-year growth has been on par with national GDP growth, and exceeded it in 2010-11.
Victoria has consistently delivered almost a quarter of Australia’s national output over the past decade.
Unemployment in Victoria at June was 5.5 per cent, not far above the 5.2 per cent national average.
And Victoria’s exports of goods in 2011-12 was recently reported as growing at 10 per cent, faster than the national rate.
So the Victorian economy is holding its own.
Victoria has been written off before as a ‘rust-belt’ state left behind by structural change.
But it has, in fact, re-emerged with a diverse, broad-based economy which includes dynamic manufacturing and primary industries and new service and knowledge-intensive sectors.
The evidence is all around us.
Victoria, with Melbourne as its capital, can proudly call itself Australia’s sporting and cultural heartland.
We’ve seen major urban growth in Melbourne’s north and west, and regional cities like Geelong, Ballarat and Bendigo offering great lifestyles.
Victoria has done so much to position itself as a smart economy that builds on its most precious resource – its people:
You’ve attracted one of only 11 IBM research centres in the world.
You’ve got Australia’s top ranked university.
You’ve won recognition as a UNESCO City of Literature.
You’re a leader in philanthropy and social innovation, home
to great organisations like the Brotherhood of St Laurence.
You’ve a got an institution – the CRC for Advanced Composite Structures – that helps Boeing to develop cutting-edge new technologies for its planes.
And Melbourne is ranked in some surveys as the most liveable city on earth.
So yes, with all those accolades and attributes, I am certainly an optimist for Victoria.
But friends, I don’t just make this judgement on past or present achievements alone.
It is no use lamenting lost golden ages, real or imagined.
Instead, we must focus with hard heads and rigorous minds on the true sources of productivity for a mature economy entering the Asian Century.
Here’s a measure of what that century implies: Asia’s middle class will soon be bigger than the middle classes of the rest of the world combined.
That means our neighbours will want interesting places to take their holidays.
They will increasingly want a high quality educational services.
They will pay a premium for high quality food and wine, especially with ‘clean and green’ credentials.
They will seek financial and legal services to manage their growing wealth and provide safe-haven security.
They will seek entertainment from the cultural industries, which will only grow as the number of platforms expand.
And their business leaders will seek research and industry collaboration as they seek to move up the value chain.
At the same time, our own changing needs will drive continued growth in industries like health, education and community services over the next 50 years.
Indeed national employment demand in health and social assistance will be more than double that of mining over the next five years – 240,000 versus 100,000.
Victoria is well positioned in each of these areas.
We approach the starting line with advantages.
But as Tim Colebatch pointed out this week, “we must be tough, resourceful, patient and creative.”
Friends, We know none of these successes are possible without the investment and collaboration of the public sector.
Not bigger government but smarter government.
Supporting the drivers of growth and productivity in a modern economy:
- education and skills, innovation, industry, infrastructure, clean energy, regulatory and tax reform.
Some of those drivers like the NBN are economy-wide.
Others involve huge new investments in local infrastructure like the Regional Rail Link and widening the Western Ring Road.
Or getting rid of regulation, like our National Seamless National Economy agenda which, if fully implemented, stands to save $1 billion a year in Victoria over the longer run.
Yet others involve targeted support to specific industries like manufacturing, for which we make no apology.
Indeed manufacturing is the lifeblood of employment, exports and economic activity in so many parts of Victoria.
It’s also a major jobs multiplier in the supply chain, in the export chain, in the banking and services chain.
Our status as an advanced economy is unthinkable without manufacturing.
Yes, the high dollar is causing pain, and regrettably we can’t support every firm or save every job.
But we’re also seeing the structure of Victorian manufacturing reveal competitive strengths as it is tempered by change: In those areas linked to the Australian resources boom.
In those involving higher skilled workers.
In those advanced technology sectors such as machinery and equipment, as well as chemicals and plastics.
And in the automotive sector we’re seeing the emergence of cars like the Territory and Cruze that Australians vote for with their wallets supported – I’m proud to say – by government co-investment.
Innovation and collaboration are the way to embed these outcomes for the future.
Just as we have a national competition policy, we need a national collaboration and partnership policy.
The recent Manufacturing Taskforce report represents a bold vision for the future.
Our Industry and Innovation Statement will involve working together with employers and unions to make that vision a reality.
I look forward to launching the Statement in coming months.
Friends, I’m a proud supporter of smart industry policy.
But I’m also quite prepared to say there’s something even more important, and that’s education.
We hear so much talk about industrial relations reform from businesses and commentators convinced it’s the magic bullet.
But it’s not.
In a high wage economy with strong labour standards and widespread community expectations as to working conditions, it can never be the panacea some commentators imagine.
I’m tired of hardworking Australian employees being told they are the cause of our productivity challenge.
And I’m certainly sick of lectures on productivity by the Liberal Party when some conservative governments can’t find the will-power to pass even basic measures like national OH&S laws and national recognition of trade qualifications.
So IR is not the magic bullet.
But there’s something that is far more powerful and transformative: education and training.
Consider this fact: Low-skill roles will only make up seven per cent of new jobs over the next five years.
The future belongs to well-trained workers in well-managed firms, using the latest technology and supported by high-quality enterprise agreements.
The economists call this human capital.
I call it not letting any child or any school fall behind.
Either way, the effect on our economy is dramatic.
If the states and territories fully implement our COAG education reforms, we stand to increase GDP by 6.2 per cent, a national average of $10 billion by 2040.
More than $2 billion of that could flow to Victoria alone.
To put it another way, meeting the COAG goal to increase the number of young people who complete Year 12 could generate an average annual gain of around $11 billion.
The benefit not only flows to the economy but to individuals
as they lead more prosperous and purposeful lives.
ABS data shows a person with a Certificate III level qualification or higher earns, on average, at least 10 per cent above the weekly wage of people without those qualifications.
In some cases, they could earn up to double.
NATSEM modelling shows university graduates earn
70 per cent more over their lifetimes than someone who only finished Year 12.
Yet today, disadvantaged children in Australia are two years behind their peers in reading and writing by Year 9.
These are the kids who drop out.
Who don’t acquire skills.
Who don’t engage with the workforce.
Educational disadvantage is a human failure and an economic failure.
We can’t have a high skill, high wage economy while there is such a waste.
But the problem isn’t just confined to lower performing students.
Australian education results improved modestly but our competitors in Asia have been improving even faster.
So our relative international performance has fallen since 2001.
The respected Programme for International Student Assessment or PISA comparisons show we have slipped from equal 2nd to equal 7th in reading.
From equal 5th to equal 13th in maths.
Think about it this way.
When we dipped to twentieth on the medal tally half way through the Olympics, there was talk about whether sport should be compulsory in schools.
It’s a fair debate.
But remember this: when I became Education Minister national testing of English and Maths wasn’t even compulsory in all our schools.
That was only four years ago.
Now, with NAPLAN and MySchool, we can tell the schools where students most need help.
So instead of arguing about whether we got enough gold medals, let’s have an informed debate about how we can improve all schools across our nation.
And let’s be clear on what that extra effort must entail.
It’s not just about funding.
Money alone cannot be sufficient, and funding is always just the servant or the tool.
The key is quality– and how we improve it.
So I’m talking about a national plan for school improvement, which gives schools the resources they need to get better results for all students.
To make every teacher a great teacher.
And to make every school a great school.
Friends, The success of post-school education in Australia stems from the strong foundations provided through good schooling.
However some of the problems that students face in post-school education also have their origin in earlier years.
Young people lacking basic skills for work or traineeships.
Apprentices who drop out before getting their ticket.
Students who need remedial teaching in first year at university.
I think about the people in the region I represent.
Where education equals emancipation.
Without skills, a storeman in Werribee can’t get a job in the mines.
Without a decent school education, his daughter can’t get one of our new places at university.
If we get schools right, we can get skills right.
That’s critical because we’re pouring massive new resources into VET and higher education.
The number of Commonwealth supported higher education places in Victoria has risen by 28 per cent since 2007.
We’ve put $18 billion into VET nationwide since 2007,
29 per cent of it in Victoria.
And we’ll invest an additional $1.75 billion nationwide over the next five years to reform the VET system.
It therefore defies belief that the Victorian government should be cutting TAFE funding here in a State facing much of Australia’s competitiveness challenge.
I can think of few things more calculated to harm Victoria’s economic future.
It’s also ironic that the Premiers agreed at April’s COAG meeting to reforms aimed at boosting the quality and reach of vocational training.
Three weeks later, the Baillieu government delivered a budget that slashed $300 million per year from the State’s TAFE Institutes.
Given all I’ve said about structural change and opportunity in Asia, that was just crazy.
A complete betrayal of every Victorian who wants to get ahead.
The Australian Education Union state president Mary Bluett described these cuts as “an act of economic vandalism”.
She was right on the mark.
Those cuts are particularly savage in towns like Warrnambool, Morwell and Mildura where local TAFEs are such an integral part of the economic fabric and also the social fabric.
But they’re also a heavy blow for the dual-sector institutions like Victoria University and Swinburne.
You’ve spent 25 years pioneering a unique hybrid model, only to have your efforts undermined when they are needed the most.
The four dual sector universities in Victoria could lose more than $100 million by the end of 2013, more than $30 million at VU alone.
That’s nearly 20 per cent of VU’s TAFE income, an absolute body blow.
In the race of the Asian Century, it’s like having ball and chain around your leg.
So friends, We get training cuts from our State Government counterparts here in Victoria.
Cuts to industry assistance and clean energy pledged by our Opposition counterparts in Canberra.
And no doubt they will seek to fill their funding black hole with cuts to higher education like they did in 1996 as well.
So not only does Victoria face an economic challenge.
It faces a choice as well.
Between those who will impair Victoria’s future by their narrow, mindless, short term cuts.
And those who will deliver a plan for Victoria’s future.
To build and nurture its strengths.
To ensure this State continues to be a crucible of innovation, reform and investment for the future.
A state where we win the economic race by winning the education race.
And, most importantly, where we win these races together.
Because in the Australia I lead, no State, no region, no person should be left behind.
And I’m here to say loud and clear today: Victoria will not be left behind.