Transcription
This is a story about the need to be good as well as lucky. Australia has been lucky in the natural resources that have been driving its uninterrupted growth for three decades. But now it needs to be good in innovation and investing to keep that growth going, as our colleague Haidi Stroud-Watt reports from Sydney.
Australia has long been known as the lucky country, a land of sun, surf and abundant resources. Yet for those looking to drive its future, fortune has been harder to find.
"We now find ourselves at a place where there's basically no interested growth capital in Australia. Our last round, which was world record setting series B, 80% of the funds inbound were foreign direct investment. Only three out of 20 investors who joined us were from Australia. So we are obligated to look outside. It's the lack of familiarity."
Michael Biercuk is the founder and CEO of Q-Control, a quantum tech startup based in Sydney.
"It's not about loyalty to Australia or disloyalty, it's about economic opportunity. The US and the UK right now are making massive investments from the public sector and, of course, the private sector, in advancing this technology for sovereign capability. Australia has not yet done that, and we are looking forward to that kind of investment in the future."
This is a real map of data coming from commercial airplanes. At Q-Control we focus on this new field of quantum technology. And our specialty is building new kinds of AI that make this emerging technology area actually useful for end applications. One of the core areas that we've invested in is helping navigate when there is no GPS. Now on a daily basis, GPS completely governs our lives. Unfortunately, the reliability of GPS has diminished tremendously just in the last year. Since March of 2024, we've seen almost a thousand flights a day, commercial aviation flights, disrupted by deliberate GPS jamming. This is emerging as a major threat, and it's not just in commercial aviation. Defense sees exactly the same challenges. We set out to try and fix this through our work in quantum sensing, and we built a new technology that lets us navigate without GPS.
"It's the business of tomorrow, the kind many believe should play a far greater role in shaping Australia's economy of tomorrow."
"Well, we run the risk of falling behind. I mean, there's no question about that. You've got, you know, you've got to stay at the head, at the front of the pack. And to do that, you have to, you know, you've got to keep innovating, you've got to keep asking every day, are our policies working? Complacency is a killer in politics and government as in business."
But before examining the Australian economy of tomorrow, it's worth explaining the economy of today. It was 1964 when the author Donald Horne famously took aim at Australia, calling it a lucky country run mainly by second-rate people who share its luck. It was a jab at its complacency, a country whose wealth, he argued, came not from innovation or ingenuity, but from its abundant natural resources. Iron ore, coal, gold, the list goes on.
"There's no doubt that the economy has a pretty narrow base."
Jennifer Westacott is a senior advisor at KPMG and a former CEO of the Australian Business Council. She says that although the country's economy might not be highly diversified, it's proven to be very lucrative so far.
"I think the economy still has incredible kind of foundations in mining and resources, and there's still a long, long way to go in resources."
Australia ranks second in the world for median wealth per capita, but its narrow base is showing fragility. Commodity earnings are expected to fall to 271 billion US dollars this year, about 385 billion Australian dollars, and continue to drop over the next two years on falling prices and an uncertain global economy, while the Reserve Bank of Australia recently slashed its forecasts for economic growth and productivity.
"So I think, you know, that the first thing we need to do is make sure that we protect and strengthen that incredible base that's propped up living standards for many, many years, and has made the country extremely prosperous. And so there's lots of ways of diversifying the economy and driving greater innovation in the economy. The first is to drive higher levels of investment, and investment as a share of GDP is around the same level that it was in the 1990s. So we need to get investment happening. That's about lower taxes or a more competitive tax system. It's also about reducing regulation. We've also got to drive more innovation. That's about skilling our population, making sure that we drive the new skills of the future, embracing things like AI, and going with sectors of the economy that are in our comparative advantage. And things that we can scale on."
And the economy's fragility places even more importance on setting up its future. Australia, for all its wealth, spends just 1.7% of GDP on research and development, well below the OECD average of 2.7%. Malcolm Turnbull was the Prime Minister of Australia between 2015 and 2018, and before that ran Goldman Sachs Australia.
"At the level of the economy, the big priority has always got to be productivity and that is driven by innovation. So you've got to... You got to at one level redu... get rid of as much regulation and red tape as you can. At the same time, you've really got to supercharge innovation. This was a really important part of my time as PM, my first big economic agenda, the National Innovation and Science Agenda in 2015. That gave tech, R&D investment, venture capital a huge lift, and which they're still benefiting from. But you've got to do it again. You know, you can't just do it once and put it aside and say that's it."
"How do you characterize the environment when it comes to tech and innovation? Do you think it's not getting as much attention or as credit as it should be, or do you think that progress has stalled?"
"Well, look, Australia does not spend enough on research and development. The full Australian business doesn't, and we're not spending enough in the pure research, primary research... realm of universities and research institutions. So that needs more encouragement."
As a result, Australia's foreign direct investment is still heavily skewed towards mining, forcing companies like Q-CTRL to look overseas for investment.
"We have not seen the same level of major tech successes, minting billionaires, building generational technology businesses in Australia, as we've seen in the United States. And as a result, I think that lack of familiarity has made people just less willing to take some bets. And our objective, frankly, is to show by example, whether you're in government or a local investor base, that the upsides are enormous and real. And we're just trying with everything we can to deliver on that opportunity."
"Could there be that kind of transformative sort of movement in Australia? And if so, what are the policy measures? What are the things in terms of supporting that possibility that you see?"
"I think there's no question that the opportunity is there. I came to Australia from the United States because the research community was so strong when I was an academic at the University of Sydney. The bigger challenge has been building an industry base around the transition from basic science over into industrial applications. In that, Australia has been lagging. Now, we were the first venture-backed company in the field in Australia. The challenge is we haven't seen that many more in the last 7 years."
Westacott, who also serves as chancellor of Western Sydney University, believes Australia should be capitalizing on funding cuts to U.S. universities to attract talent and drive innovation.
"I think the first thing that we need to do is of course continue to invest in our universities, continue to invest in research and development, but we also need to send very consistent and clear policy signals that we are open for international students. Now we have a cap on international students at the moment, you know, which is very controversial in Australia. We need to send that message that we want international students, one of our biggest exports. We also need to make sure that we are encouraging skilled migration from young people. You know, KPMG did a study several years ago which showed that we add 30 billion dollars to the economy by targeting those highly-skilled young people and we now are in the Business Council of Australia. The key message that big employers would give to me is that they want more skilled... Very specialized skills. So we should be really targeting those young people from the United States to come and live and work in Australia, the greatest country on earth. And really targeting those super-skilled. So it's an opportunity, but we can't just kind of sit back and expect it to happen. We're going to have to have deliberate and purposeful policies and actions to encourage those people to come to Australia."
"We have a huge opportunity in terms of talent. And, you know, while no one, no Australian government wants to go out there and say to, you know, talented people in other countries, "You're living in a terrible country, come and live in our house." You've got to be tactful about this. But let's face it, there is a war for talent, human talent, and we have some very attractive things going on which is why, by the way, we need to be putting more money into research because those scientists and, you know, are technologists who want to come here and work with us. But if you think about the livability of our cities, for example. You know, we have some of the most livable cities in the world."
Ultimately, lifestyle can only take you so far. If Australia wants to remain competitive, it needs to be more than just a great place to surf. It needs to be a great place to invest. Its luck may not be running out entirely, but to get the economy humming, it needs investment and innovation. It needs to be good as well as lucky.
"I think Australia is lucky, but we've made a lot of our own luck too. So I'm very optimistic about Australia's future."