Answering Australia’s biggest economic question

Finance Minister Lindsay Tanner posed a very important question this morning that affects all entrepreneurs.

What, he asked, will we be selling to the world in 10 to 15 years time?

He also pointed out that our economic policy should be informed by this central question.

As Tanner points out, the many benefits from reforms introduced in the 1980s had run their course. And the mining boom had masked underlying problems that left the economy vulnerable to external shocks.

Australia is now excessively dependent on overseas borrowings with the trade deficit jumping $1 billion to $1.6 billion in July, while the current account deficit widened to $13.3 billion, or 4.5% of GDP, in the June quarter.

”Although it is reasonable to assume that Australia will have a substantial current account deficit indefinitely… the scale of that deficit is still in my view an issue… It is very important that we, over time, improve our economic performance.”

Tanner doesn’t go on to tell us what we will be selling but he does provide solutions: a new productivity agenda, including boosting competition, investing in economic and social infrastructure, improving workforce education and skill levels and streamlining business regulation.

But the problem here is that the question is wrong.

Tanner’s question should not be based on what we will sell. Instead, it should be this: where will the demand come from for our goods and services in 10 years time? Who will buy them, why will they buy, what will they buy?

Then follow that backwards. Who in Australia can satisfy that demand?

The answer doesn’t lie with many of today’s existing large businesses, because history shows us that large businesses are very slow to adapt to any new change. Instead, it will be up to today’s SMEs to rise to the challenge.

So how do we help turn struggling minnows into tomorrow’s global companies that can fulfill that demand better than anyone else in the world? Following that logic leads us to the development of a targeted policy aimed at helping growing small businesses get to the next stage.

It would include tax concessions to assist SMEs attract funding – as they have in Canada. It would include measures to assist successful businesses export. It would include ways to help companies attract highly skilled staff and rewards for training (not punishment in the form of payroll tax).

At present in Australia, entrepreneurship still falls between the gaps. There are powerful lobby groups and agendas for the big end of town. And every state government has small business ministers, programs and festivals that assist start-ups and the mum and dad business improve their skills.

Unless we develop policy based on meeting demand through fostering entrepreneurship, we will not improve our economic performance. And that starts with asking the right questions.