NSW 2040 Economic Blueprint Investing in the state’s future NSW Treasury 52 Martin Place, Sydney NSW 2000
www.treasury.nsw.gov.au
The NSW 2040 Economic Blueprint has been prepared by NSW Chief Economist, Stephen Walters.
Cover image credit: Byron Bay Lighthouse
This publication is protected by copyright. With the exception of (a) any coat of arms, logo, trade mark or other branding; (b) any third party intellectual property; and (c) personal information such as photographs of people, this publication is licensed under the Creative Commons Attribution 3.0 Australia Licence. The licence terms are available at the Creative Commons website at: creativecommons.org/licenses/by/3.0/au/legalcode NSW Treasury requires that it be attributed as creator of the licensed material in the following manner: © State of New South Wales (NSW Treasury), (2019). NSW 2040 Economic Blueprint Contents
FOREWORD BY THE TREASURER 8 EXECUTIVE SUMMARY AND 10 01. RECOMMENDATIONS INTRODUCTION 14 The $2 trillion economy 10 The Premier State 16 Staying ‘lucky’ – capitalising on our strengths 17 Our 2040 aspirations 10 Assembling the 2040 Blueprint 18 Five global megatrends will shape 11 Leveraging other NSW strategies and reviews 19 our next 20 years Likely industries of the future 11 Seven levers will boost our performance 11 Recommendations 12 02. TODAY’S NSW ECONOMY 20 AND INDUSTRY STRUCTURE An enviable standard of living 22 The best performing state economy 23 ... with the best state budget position 23 High level of productivity 25 World-leading infrastructure investment 25 Largest exporter of services in Australia 25 A highly educated workforce 26 A productive and growing manufacturing sector 26 Extensive trade and investment links with Asia 27 Abundant natural resources and food exports 27 Sydney, a finance hub of Asia... 27 ... and magnet for global workers 27 Expanding creative industries 27
4 NSW Economic Blueprint 03. ASPIRATIONS FOR 28 NEW SOUTH WALES IN 2040 The nation’s first trillion-dollar economy 30 Healthy, productive people 3 1 Liveable and connected cities 32 Productive, vibrant regions 33 Innovative, world-class businesses 34 Sustainable environment and resource management 35 Enhanced performance of government 37 04. MEGATRENDS AND CHALLENGES 38 MOVING TOWARDS 2040 Five global megatrends will help shape NSW 39 Domestic issues for attention 44 05. INDUSTRIES OF THE FUTURE 46 Eight criteria for future growth industries 46 Building on our strengths 49 Serving our domestic needs 52 Looking to a vibrant future 54 06. HOW WE GET THERE 60 Lever 1: Human capital 62 Lever 2: Institutions 64 Lever 3: Fiscal policy 67 Lever 4: Infrastructure 69 Lever 5: Innovation 70 Lever 6: Energy and natural resources policy 72 Lever 7: Industry development 74
APPENDIX 1 - References 78 APPENDIX 2 - Stakeholders consulted 79
5 Investing in the future of NSW
NSW TODAY
Infrastructure boom with $93 BILLION PROJECT PIPELINE
Strong and stable economy with AAA credit rating
Abundant natural Home to more than resources including 8 MILLION PEOPLE coal and gas
AUSTRALIA’S ONLY GLOBAL CITY AND GATEWAY TO THE WORLD
Per capita income of Lowest unemployment around A$60,000 rate of any state
Key sectors include financial services, tourism, education, technology and advanced manufacturing.
6 NSW Economic Blueprint The NSW Economic Blueprint is designed to help chart a course for the NSW economy and keep our state strong as we move towards 2040 and beyond.
NSW TOWARDS 2040
Economic boost as Efficient government through Asian middle class innovation, reform and slashing passes three billion red tape
Increased NATION’S FIRST productivity to TWO TRILLION-DOLLAR counter ageing ECONOMY AFTER 2040 population
Five major urban centres connected by modern infrastructure
Growing regions with improved transport links and resource security Reliable and affordable energy with lighter environmental impact
Innovative industries focused on priority precincts
7 Foreword by the Treasurer
The Honourable Dominic Perrottet MP is Treasurer of New South Wales and charged NSW Chief Economist Stephen Walters with producing this Blueprint.
In a rapidly changing world, we can choose to innovate, challenge ourselves and take advantage of the many opportunities bestowed upon New South Wales. Or, we can sit back and leave our future to chance.
This is not a government which New infrastructure is important, but gambles with the responsibility of we need to take the longer-term view ensuring a better life for the people and ensure we are not just building of New South Wales. physical bridges, but putting in place the planning, policy and framework which We have spent the best part of effectively form the building blocks to a decade re-building the state’s the future. capabilities. In the past year alone, we have opened the new Sydney The dual pressures of dealing with the Metro Northwest train line and the here and now and planning for the first section of the new WestConnex longer term could paralyse us if we let motorway, invested billions into them. But that is not an option. We need improving and building roads, bridges, to ensure that New South Wales stays schools and hospitals in every corner a leader and is not a follower. of the state. New South Wales will become We have a further $93 billion Australia’s first two trillion-dollar state, earmarked for infrastructure projects the clear first choice for business and across the next four years. Vision industry, the first port of call and clear fails without execution, but equally favourite for the majority of those who our vision for New South Wales must come to our shores. extend beyond simply finishing the While traditional industries such as next length of rail line or building the mining and finance will remain next school. important and continue to thrive, we must promote high-growth areas such as advanced manufacturing, tech-innovation, medicine, education and tourism, particularly from Asia.
8 NSW Economic Blueprint New South Wales is already training opportunities to ensure our skills internationally recognised as a match the jobs of the future. high-quality providore to the world We already are hard at work in and over the next two decades we important areas of reform that will will take this to the next level. Better shape the future. The NSW Review of regional and international transport Federal Financial Relations is looking at links will allow us to export more ways to improve the funding relationship of our world’s-best products and between Canberra and New South services to the rapidly growing Wales, with a final report due next year. markets of China and India, as well as The NSW Productivity Commissioner our well-established markets in Japan, Peter Achterstraat recently released the the US and Europe. first discussion paper focusing on the New technology and infrastructure need to make us more competitive. will allow regional New South Wales A final area of focus is to ensure the to have greater opportunities for state has a global outlook. This is much skilled jobs and workers in industries more than being the first stop for more often confined to traditional tourists or default choice for international city hubs. students. We must work diligently to bring As envisioned by the Greater the world to our doorstep and equally Sydney Commission, our capital hard opening our door to the world, city will evolve, with three distinct enhancing our trade and investment centres based around the existing opportunities at every opportunity. CBD, Parramatta and Western This Blueprint, prepared by NSW Chief Sydney Airport. Wollongong and Economist Stephen Walters, draws Newcastle will continue to grow with together many of the opportunities and improved transport infrastructure challenges we face and will help us chart and technological advances boosting a course for our future. I thank Stephen economic opportunities. for his important work and know that as We will have dedicated precincts of this generation builds for the next, the expertise across NSW which support Blueprint will help ensure we keep NSW emerging and growth industries and ahead of the pack and the very best encourage innovation and investment. state in the country. Our education and training sectors The Honourable Dominic Perrottet MP will need to adapt and change with a Treasurer focus on ensuring we have life-long November 2019
9 Our 2040 aspirations • We want a high standard of living for a population that is healthy, well-educated and skilled for high- income jobs of the future. • Our economy should be diversified in favour of fast-growing industries and services and be expanding Executive summary quickly enough to lift living standards. • Our five major urban centres should and recommendations be vibrant and well-connected, with modern infrastructure well-suited to our needs and a growing population. This 2040 Blueprint sets • Our regions should be productive the direction for New and growing, serviced by world-class South Wales’ continued infrastructure and transport links. economic success in a • We desire innovative businesses and industries of the future and a changing world, making government that leaves a lighter recommendations about footprint on private sector activity. where we should focus • Our environment and biodiversity should be preserved for future our efforts. generations and our energy sources The $2 trillion economy reliable and affordable, with enhanced water resilience across the State. New South Wales has among • Government should behave in a the highest average household way that encourages innovation, incomes in the nation and the lowest particularly via procurement. unemployment rate, a world leading service sector and negative net government debt. We should be able to become First $2 Australia’s first trillion-dollar state trillion state by 2030 and its first $2 trillion state after 2040 – and even sooner if we after 2040 find and implement measures to improve our productivity.
10 NSW Economic Blueprint Likely industries of the future Technology change and disruption will continue, but the experience of the past 20 years indicates that the economy and society will adapt and grow. While there are no perfect predictors of future success, indicators can tell us which industries are more likely to grow over the next two decades. Development of these industries should attract both global talent and global investment capital. Five global megatrends The industries singled out in this will shape our next 2040 Blueprint are: 20 years • Industries where New South Wales is already strong: finance and Global forces will play a big role in financial technology; mining; New South Wales’ next two decades education; tourism and events; and many of them will be positive. the arts. Five stand out: • Industries that serve our domestic • Asia will be a much richer consumer needs: cyber security; medical with new tastes to which we can technology; waste management. cater and new abilities as well. • Emerging industries: advanced • Our previous development efforts manufacturing; food production have placed the natural environment and agricultural technology; under stress and we will need to aerospace and defence; space; respond. hydrogen for fuel. • Digital technologies, including new tools like artificial intelligence, will Seven levers will boost keep changing our lives and our work. • Patterns of migration will help our performance determine how quickly the population State governments have seven main of the state ages. policy levers to improve economic • Rapid change risks bringing social performance – our human capital, problems that need to be addressed. institutions, fiscal policy, infrastructure, innovation, natural resource policy and industry development abilities. Each has limits. But compared to the powers of national government, they may be growing more effective over time. The full 2040 Blueprint recommendations are set out on the next page.
11 Recommendations
Aspiration: A two-trillion- Aspiration: Innovative, dollar economy after 2040 world-class businesses IMMEDIATELY IMMEDIATELY • Support the Productivity Commissioner’s • Work with the NSW Productivity examination of the state taxation system. Commissioner on problems • Invest in the NSW Government’s related to planning, regulation and overseas presence to better promote vocational education. ‘Brand NSW’. • Support the review of the state’s research and development landscape. LONGER TERM • Establish an industry taskforce • Promote the state not just as a tourist to encourage high-growth destination but as a place to invest, future industries. do business and study. • Release a Space Industry Development Strategy. Aspiration: Healthy, • Commit to long-term funded productive people initiatives to encourage more IMMEDIATELY advanced manufacturing. • Improve the performance of the LONGER TERM vocational education and training • Establish research, development and system. commercialisation facilities in the LONGER TERM Innovation Precincts. • Develop a responsive skilled migration list • Help NSW Government bodies to that is integrated with the national list. pilot innovative solutions and share government data. • Undertake education reforms including those via the Gonski process, particularly • Use the Innovation Precincts and to reward high-performing teachers. industry strategies to concentrate research strengths, drive collaboration • Invest in training and capability between researchers and businesses building to cut construction industry and speed up innovation. skill shortages. • Adopt the eight criteria for future growth industries outlined in Chapter Aspiration: Vibrant, 5 to ensure that benefits of industry well-connected cities development activities are maximised. • Support the growth and success of IMMEDIATELY early stage innovative businesses by • Improve the ways the state plans developing programs to incentivise long-term infrastructure. businesses to invest, innovate and hire. • Set funding governance arrangements Aspiration: Productive, and selection guidelines for project vibrant regions specific assistance to ensure money is spent efficiently. IMMEDIATELY • Create a digital finance and fintech • Work with the Commonwealth industry development strategy. Government to examine ways for new • Develop a digital emerging migrants to move to the regions. technology industry strategy with LONGER TERM a focus on artificial intelligence, • Better commercialise research blockchain and quantum computing. in food, food technology and • Resource the implementation of agricultural technology. existing defence industry plans. • Help regional businesses diversify and • Establish medtech commercialisation capitalise on growth in tourism. and accelerator programs. • Improve freight networks in the regions. • Develop advocacy strategies for major upcoming defence procurements.
12 NSW Economic Blueprint Aspiration: Sustainable Aspiration: Better environmental and government performance resources management IMMEDIATELY IMMEDIATELY • Support the NSW Review of Federal • Work with the Commonwealth Financial Relations. Government and the states to LONGER TERM agree a national energy policy. • Examine NSW Government • Keep working with Commonwealth, procurement practices to ensure state and local government to that government purchasing better deal with waste. encourages innovation. LONGER TERM • Ensure that government decision- • Develop a policy on hydrogen making is underpinned by the best production and export. available information. • Adopt a longer-term policy on • Make better use of data and digital drought that emphasises water technology in delivering government security and better drought-proofing. services, especially health services. • Create an environmental goods and • Realise the ambitions of the NSW services development strategy to Cyber Security Industry Development capitalise on waste management Strategy by committing to ongoing and circular economy opportunities. support of the NSW Cyber Security Innovation Node. • Develop a state-wide policy to ensure adequate supplies of drinkable water.
13 01. Introduction
The people of New South Wales are at the heart of this 2040 Economic Blueprint.
Eight million people, all of us with dreams, hopes, wants and needs, all with a stake in the ongoing success and future of our great state.
14 NSW Economic Blueprint This 2040 Blueprint aims to inform These helped set up Australia for views on what the New South close to three decades of growth Wales economy can achieve over from the early 1990s. the next two decades. The 2040 Blueprint seeks to show From pre-federation times to how a new generation of reforms the ‘banana republic’ emergency can improve living standards in of 1986, Australians have often New South Wales – but without relied on the onset of crisis to requiring some great crisis. change our economic mindset. The recession of the early 1980s and the disruptions in its wake triggered a long era of national reform: we floated the dollar, curbed protectionism, ended unproductive regulation and government ownership in some industries and toughened competition policy.
15 The Premier State
New South Wales faces After a period leading to significant budget deficits less than a decade the next two decades and ago, the NSW Budget is now in beyond with impressive surplus and will remain so right across advantages. the Budget projections. We have a resilient and flexible Net debt is negative and the state’s economy that has powered national AAA credit rating is secure. economic performance in recent years. We do face challenges: an ageing We have high levels of household population, climate change, high income and productivity1, the lowest energy costs, disruptive technology, unemployment rate and an enviable tax inefficiencies, trade tensions, standard of living. Add to that scarcity of water, threats to our abundant natural resources, a highly biodiversity and the unwelcome educated and skilled workforce, disruptions of technology. world-renowned tourist destinations, stable and reliable government and And old economic “rules” don’t associated institutions, highly sought- seem to be working as well as in after education facilities, a world the past. Low interest rates are leading service sector and highly not generating stronger economic competitive industries. growth, low unemployment has not sufficiently lifted wages and rapid changes in technology have not We have a resilient boosted productivity by as much as and flexible economy economists had predicted. that has powered Yet disruption also brings national economic opportunities. Most notable of all, the extraordinary growth in Asia’s performance in middle class has the potential to drive recent years exports and economic growth in New South Wales for decades. And the rise in Asian education seems likely to deliver a torrent of new ideas that can drive living standards even higher. That process has already begun.
1 Productivity is the ratio of outputs to inputs at a point in time. Productivity growth measures the change in productivity over a period of time. 16 NSW Economic Blueprint 6
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