A house divided?

The new Business Council of Australia report – Pipeline or Pipe Dream? Securing Australia’s Investment Future – highlights how important the effective delivery of major projects will be to the future shape and health of the economy and living standards.

It reinforces that Australia’s massive pipeline of investment is much broader than the resources sector and that a divided nation is ill prepared for the future.

“Our research shows that capital project investments are the main show in town in Australia’s economy and will be for some time,” BCA president Tony Shepherd said.

Research conducted by Independent Project Analysis (IPA) for the BCA shows that resources projects are 40% more expensive to deliver in Australia than in the United States Gulf Coast.

“We are becoming a high-cost and thus high-risk place to invest, and low labour productivity compared to other nations has reduced the competitiveness of our project delivery.”

Shepherd suggests that Australian resources projects are 40% more expensive to deliver than in the US Gulf Coast and that Australian labour is typically 35% less productive than in the US Gulf Coast for resources projects near cities, and 60% less productive for projects in remote locations.

The BCA wants us to ensure successful and cost-effective delivery on the existing project pipeline.

“We must work to provide the public infrastructure to support a growing economy and population. And we must also offer an investment environment that keeps the pipeline flowing into the future… We don’t just say it’s labour cost. The planning and approval process, the supply chain issues, project management, skills, all of these things are a factor.”

Jennifer Westacott and Tony Shepherd share the same Business Council of Australia platform calling for higher community understanding of the importance of growing our economy and population, as well as of individual investment projects.

Jennifer’s approach is more socially aware and in line with the OECD report, titled Divided We Stand: Why Inequality Keeps Rising, that recognises that inequality in America has been rising dramatically.

“Income inequality in OECD countries is at its highest level for the past half century. The average income of the richest 10% of the population is about nine times that of the poorest 10% across the OECD, up from seven times 25 years ago.

Jennifer states, “I think that’s right and that’s why we’re calling for this inquiry, because what you don’t want to see is a polarisation of wealth and you don’t want to see entrenched disadvantage just getting worse. I actually think, and there are some other commentators who agree on this, that if you look at some of the difficulties in the US, it’s the lack of wealth being shared across the economy that can’t, if you will, pump prime the economy. It’s the polarisation of the wealth in many respects is a handbrake to getting growth going again.”

An examination of the Human Development Index (HDI) – a composite statistic used to rank countries by level of “human development”, (taken as a synonym of the older terms (the standard of living and/or quality of life), separates out “very high human development”, “high human development”, “medium human development”, and “low human development” countries. Australia ranks second after Norway on this index after inequality of incomes is taken into account, whereas last year the United States ranks 23rd.

By selecting the low-cost Gulf Coast environment, the BCA is effectively supporting the growth of income inequality as the basis for increased labour market flexibility at the expense of increased inequality. The argument that capital will flow elsewhere is a plea for laisser faire policies at the expense of social equity in the distribution of benefits of national assets.

This selection of a comparison with the Latino low wage, low unionised and low socio-economic community suggests a failure to appreciate the social underpinnings of productivity improvement. “The single most important driver has been greater inequality in wages and salaries.” (OECD 2011-12-05)

A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. The bottom half of the world adult population owned barely 1% of global wealth.

The difference between Jennifer and Tony lies in the former’s concern for changes to the way we all do business, the need for a high wage, high productivity and social responsibility to generate a more equitable distribution of whealth and the latter’s demands for big end of town protection.

They need to talk to each other about the real issues with productivity improvement and social development and the way in which the Business Council of Australia can support SMEs to get a greater share of the action in the nation’s economic and social development. We need a balanced perspective that addresses skills formation; job creation and productivity enhancement across the nation to builds innovation, creativity and entrepreneurship into that pipeline.

Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.