Australia’s median house price reached another record high of $1.113 million this week, ($1.6 million in Sydney) representing an annualised rate rise of more than 7 per cent, despite interest rates being the highest in more than a decade.
Australia’s rental prices also continue their unrelenting rise amid record supply scarcity, prompting economists to conclude crisis is inadequate to describe what’s happening in housing.
Australia’s economy meanwhile grew a tepid 0.2 per cent in the last quarter of 2023 and a meagre 1.5 per cent over the year, the slowest annual rate of economic growth since the 1990’s recession, excluding the pandemic and the introduction of the GST in 2000.
Add to those statistics the still excessively high immigration rates which have fueled the sky-high property and rental prices; embarrassingly low economic complexity; and rising energy costs amid plenty of green energy transition cynicism and scrutiny as well as zeal.
Few would dispute Australia is an island nation adrift in stormy international waters. Global competition for capital and talent, exponential change from advanced technologies we don’t make, high costs of living, and defence insecurity amid geopolitical instability not experienced in 100 years. These conditions have shaken us awake to all these gaps and vulnerabilities post Covid.
“Successive Australian governments … for 61 years have chosen a path of easy relentless growth (property, mining, immigration),” the founder and chief executive of ASX-listed marketplace Freelancer.com Matt Barrie told viewers of the popular Equity Mates podcast.
Mr Barrie is a respected and vocal critic of Australian leaders’ wilful blindness toward investing in, developing and commercialising the critical technologies and industries that drive the 21st century.
“Rather than talking to the engineers, the scientists, the entrepreneurs about what to do about growing the economy and build a diversified, complex and sophisticated economy, instead they have chosen to pump the housing market to the mother of all bubbles.”
Since winning the election in May 2022, the Labor government has been busy presenting itself as something very different from those that were in power decades before it; the thoroughly modern 21st century government to steer the nation successfully through these turbulent 2020’s and beyond.
It committed to leverage net zero mandates as a catalyst to invest in, and to build out at scale the nation’s wind and solar infrastructure to power the nation’s proposed renewable energy-led reindustrialisation.
The dream is to make Australia a green energy superpower and it’s not afraid of using many billions of dollars of taxpayer funds to do it.
Few are bigger believers in that dream more than Greg Combet, the outgoing chair of the Net Zero Economy Agency and the incoming chair of Australia’s Future Fund.
“We are uniquely endowed with abundant renewable energy and mineral resources, a skilled and resilient workforce, engineering and technical capability, large pools of capital, we have a stable investment environment and are a reliable trading partner,” Mr Combet, a former Labor minister and trade union leader, told a National Press Club (NPC) audience early this month.
“Right now, we can seize the chance to use these endowments to secure prosperity for current and future generations.”
“The economic argument is quite simple,” Mr Combet added, “as our trading partners pursue their own emissions reductions targets and wealth from our fossil fuel exports decline, we must create new sources of wealth from industries powered by renewable energy.”
He notes that 97 per cent of Australia’s trading partners are committed to their own net zero emissions targets forcing dramatic change that is already well underway.
The Agency was set up in July last year as a precursor to the Net Zero Economy Authority, a new statutory authority which Mr Combet has architected at the behest of Prime Minister Anthony Albanese and the Minister for Climate Change and Energy Chris Bowen.
The remit is for the Authority to guide Australian workers and industry through a transition that he predicts will be at least 25 years in the making.
The legislation for the Net Zero Economy Authority was delivered to the House of Representatives at the end of March and could be finalised by July 1.
Mr Combet’s NPC address was just before the Prime Minister announced the government would create the new Future Made in Australia Act to anchor one of the nation’s biggest economic reforms in its history.
The Prime Minister also made clear that this government would deliver many (more) billions of dollars of taxpayer funded subsidies, expected to be announced in the May Budget, to help make it happen.
Although big on rhetoric and light on detail, the Prime Minister’s Queensland speech tried to make the case for unprecedented levels of state intervention in rejuvenating industry in a net zero mandated world.
This level and scope of state-directed intervention is de rigeur since the US Biden Administration introduced the trillion-dollar Inflation Redaction Act and its $395 billion Chips and Science Act.
Other countries are now following suit in their own way: the EU, Japan, Korea are all making unprecedented investments in their industrial base.
“In this time of transformative opportunity, our government will not be an observer or spectator, we will be a participant, a partner, an investor and enabler. First, we need to act and invest at scale,” Mr Albanese said, urging us to shake off old markets-know-best orthodoxies which say governments shouldn’t pick winners.
While we have to wait for the Budget to clarify the scope and type of taxpayer money to support Australia’s green energy transition, the signal from the Prime Minister understandably makes a lot of people nervous. Not least because for decades governments haven’t demonstrated the skill, the judgement, the co-ordination nor the execution capability to spend the money or steer massive projects wisely.
Former and current heads of the Productivity Commission warned wrong way go back.
Inaugural Productivity Commission chairman Gary Banks said Labor needs to “U-turn, or at least detour” on its economic agenda, saying plans to spend billions of dollars subsiding local manufacturing was a “fool’s errand” that risks repeating mistakes of the past by propping up “political favourites”.
Then came the reactions to the reactions, penned by some of Australia’s leading innovation industry thought-leaders, who have worked for many decades urging successive Australian governments to commit to fostering emerging technologies, businesses and industries.
These include Professor Roy Green, a CSIRO board member, and Mark Dodgson, an emeritus professor at the University of Queensland, an executive in residence at Oxford University and a visiting professor at the Imperial College London.
Most of their ire was directed at the Productivity Commission, long perceived as the villain, out of touch with a technologically advanced world and Australia’s need to play a valuable part in it.
They argue frequently that the PC’s markets-based and comparative advantage-based approach to economic and industry development has overseen Australia’s multi-decade industrial decline.
Professor Dodgson channelled Oliver Cromwell’s speech in 1653 dissolving the House of Parliament, accusing the PC of being “intolerably odious to the whole nation.”
Professor Green suggested that instead of telling us why the future can’t be made in Australia, the critics should “more profitably turn their minds to how it can.”
“Australia is uniquely fortunate in having another chance to get its policy settings right,” wrote Professor Roy Green.
“And faced with existential challenge of climate change and energy transition, we must. The scale of the opportunity is huge – to grow the industries and jobs of the future in a global market estimated to be worth $10 trillion by 2050.
Green says the Future Made in Australia initiative is the first step in a co-ordinated “whole of government” approach to enabling competitive advantage in this market for Australian firms in collaboration with our research and education institutions.
Many innovation and industry leaders were cautiously optimistic toward the idea of a Future Made in Australia, having wanted to see Labor’s myriad innovation, renewable and defence industry programs formed into a cohesive industry policy, something that has been absent in Australia since the 1980s.
Realpolitech was wondering what, precisely, we were supposed to cheer or deride at this point. A sloganised vision? An intent? The Prime Minister’s speech was big on rhetoric and light on detail and the devil is always in the latter and we haven’t seen any yet.
But it is Greg Combet’s National Press Club address that revealed more insight into the scope and complexity of what this government is trying to do and the critical role the new Net Zero Economy Authority will play.
Mr Combet spoke of the litany of green energy commitments and projects across federal, state & territory governments, business and industry and regional communities across Australia. He says the Net Zero Economy Authority is putting together a pipeline of these projects and will be figuring out how to help bring them to concrete investment decisions.
And for those looking to identify the central co-ordinating agency for the much talked about whole-of-government approach needed to bring the Future Made in Australia vision to any form of reality, the Net Zero Economy Authority looks to be it.
“All of this activity presents a need for coordination, which is one of the functions of the new Net Zero Economy Authority,” said Mr Combet.
“Over the past nine or ten months we have met numerous governments, businesses, unions, regional bodies and stakeholders to get this coordination work underway. To make sure that policies are complementary, not working against each other. The task is to try to get everything heading in the same direction, to use resources efficiently, with a common purpose.
“The Authority won’t take on the roles of existing government agencies. It will complement, coordinate, identify gaps and contribute to policy development. Hundreds of billions of dollars in investment will be needed to achieve net zero in Australia.”
The government will lay out the next phase of its net zero driven reindustrialisation approach in a couple of weeks.
Mr Combet says it will look to capitalise on Australia’s comparative advantage in minerals and renewable energy, aiming to encourage large-scale investment in green industrial production.
Apart from the myriad complexities of co-ordination, the biggest concern to many is the government’s singular focus on wind and solar.
Realpolitech has written much – here and here – about the many flaws inherent in trying to rely on wind and solar to power industrial-scale production. Nowhere in the world has solar and wind been reliable and scalable enough to meet the energy demands of the present and future.
Sooner or later, this government or another will have to entertain a serious conversation about other forms of renewable energy including nuclear.
“Reviving Australian 21st manufacturing is the most important need for the country’s future prosperity, agency and stability,” says Freelancer’s Matt Barrie. “But you can’t build a 21st century industrial base on wind and solar. It’s ridiculous to keep saying we can.”
Meanwhile, come May 31, Mr Combet is moving on to chair the Future Fund. But he has architected the Net Zero Economy Authority to be here to stay and central to coordination and execution of the biggest economic and industrial reform most Australians have ever experienced.
“We have a decades-long journey ahead,” he warns.
“And that’s important to bear in mind when we read about the current social license issues (of renewable projects), planning problems and supply chain constraints. These are all substantial problems that must be tackled, no doubt.”
For Australian taxpayers, I think that means Breathe in, Buckle Up and hold on to your wallet as best you can.
Do you know more? Contact James Riley via Email.