In 1986 Paul Keating said that Australia was in danger of becoming a ‘banana republic’ – that is, a nation totally reliant upon a few primary industries like growing food or mining stuff. With all this talk of the mining boom saving Australia, it bears the question: has Keating’s prediction come true?
If our growth is wholly sustained by mining then when, one day, the mining boom ends, we will be in trouble. It is not in our interest to bet the economy on one horse.
The key response, of course, is diversification. Having a variety of different sorts of companies concurrently operating effectively insures the nation because if (and when) one sector busts it’s no big deal as another is sector to be booming at that time. No army is made up purely of archers, no sports team can win with only one star player.
But can Australia diversify enough? After all, we’re a small country. China’s billion, India’s billion, even the US’s 300 million odd – each of these populations is big enough to sustain multiple major businesses. What of our paltry 23 million?
There is another country of similar size that bears comparison: Taiwan. We both have labour forces just over 11 million and our Gross Domestic Products (PPP) are globally ranked 19th and 18th respectively. Our unemployment rates are about 5%, our median ages are both 37 and a half, and our government deficits 3.3% and 3.4% of GDP. So how is Taiwan going?
Well Taiwan’s biggest company is HTC – perhaps you’ve heard of them? ACER, Asus and D-Link are there too, plus Giant and Merida (both bicycle companies) and Maxxis (a tyre company). And a couple of big food companies: Master Kong, Want-Want and Uni-President (perhaps not familiar to Australians but collectively worth over US$2 billion). The lesson here is clear: you can be small and still compete in the big leagues.
Today of Australia’s 20 biggest companies, 5 are in mining, 8 are in finance (mostly banks) and 4 are in retail. The 3 remaining are Telstra, Brambles (a logistics company) and CSL Limited (a pharmaceutical company).
While I’m not savvy enough to predict how this will play out, whether mining, finance and retail make for the best team, I do wonder whether it would be good to have some manufacturing and technology in there too? What are we actually ‘creating’ for the globe?
Adam Smith reckoned good economics was about specialisation. Each nation doing a few things really well. Having a particular national product and supplying that to the world. I’m guessing Vegemite and Bonds won’t be enough. We need a next big thing. If Taiwan can build an economy on smartphones and bike brakes, why can’t Australia make something too? Yes we’ll always need minerals, banks and shops; but what will we actually use those materials for? What will we spend that money on? What will we place on those store shelves?
You. Smart person. Create something.
In the meantime I’m going to try and beat my Fruit Ninja score (Halfbrick is an Aussie company – we need more like them). Have you joined the 1000+ club yet?