The Australian Century, The One To Come

Asher Judah is Deputy Executive Director, Property Council of Australia the author
The Australian Century (Connor Court). Asher Judah’s vision is of the future – the century to come for the land down under. He calls time on the Asian Century mindset, placing Australia’s long-term future front and centre. For Judah, Australia has begun the most important century of its existence. Joining with Andrew Tink, author of Australia – 1901-2001, to discuss two very different centuries for Australia, Asher Judah addressed The Sydney Institute
Wednesday 25 February 2015.

THE AUSTRALIAN CENTURY, THE ONE TO COME

ASHER JUDAH

Can I begin by thanking Gerard and Anne for inviting me along this evening to deliver a joint address with my colleague Andrew Tink. It is great to be given the opportunity to speak about serious issues on such an important stage. It is even better to do so alongside such esteemed company. So to each of you, thank you very much.

I have been given a wonderfully easy topic to talk about this evening, and that is of the future. The great thing about talking about the future, is that by the time your audience discovers that you are wrong, you are, in all likelihood, long dead.

So, before I commence my formal remarks, can we please all agree that the best outcome for everyone, including myself, is that either I live a long and prescient life, or a very short and inaccurate one.

The formal title of my presentation is The Australian Century, the one to come. In order to do this topic full justice, I’ll be speaking about three key themes from my book that stitch together the factors that will give rise to the Australian Century. These three themes are: an event, a handicap and a collision.

An event

The most significant event of the twenty-first century and, arguably, our lifetimes, will be the rise of the global middle class.

The global middle class “consists of those who have scope for discretionary expenditure over and above the basic necessities of life, such as food, clothing and shelter”. This definition encapsulates any household whose income per person ranges between $14 and $60 Australian per day.

Over the next two decades, the size of the global middle class is forecast to almost triple in size. This will see the world’s international consumer market grow from 1.8 billion people today, to over 4.9 billion people in the 2030s.

This remarkable increase is the direct result of sustained economic growth driving up disposable incomes throughout almost the entire developing world, as well as population growth within several prosperous developed nations such as the United States, the United Kingdom, Canada and Australia. Without a doubt, the rise of the global middle class will be one of history’s most significant socioeconomic transformations.

Interestingly, what makes this change so remarkable is not just its size, but the speed at which it is occurring. During the world’s earliest experience with this phenomenon, the first industrial revolution, the United Kingdom took 154 years to double its real per capita GDP for nine million people. Over a century later, the United States accomplished the same result for 11 million people in a third of the time. A century after that, the Japanese did the same for 50 million people in just 33 years. Today, nations like China and India are achieving the same result for over two billion people every 12-16 years.

In other words, the world’s fastest growing economies are modernising themselves at ten times the speed of their predecessors, for over 200 times the people.

Clearly, these changes are without precedent. With over three billion additional consumers forecast to enter world markets over the next twenty years, the world as we understand it is set to change.

Here are some telling numbers. Over the next 15 years, the world’s population is forecast to increase to approximately 8.3 billion people. During this time, some 60 per cent of all people will become urban dwellers as a result of the economic and social magnetism of urban life. This internal migration process will be the equivalent of Greater Melbourne’s entire population moving into cities every month of every year until the end of next decade.

In order to facilitate this rural exodus, thousands of cities around the world will need to be built, upgraded and expanded. In China alone, over 200 cities with populations over one million people will be required by 2025.

This will necessitate the construction of three new cities the size of Sydney every year until 2030. Similar construction will also be required across Asia, South America and much of Africa where urbanisation rates are also accelerating. In total, over the next three decades, almost 100,000 new skyscrapers will need to be built throughout the developing world – the high rise equivalent of 17 New Yorks!

In order to facilitate this massive urbanisation effort, raw material extraction will need to be dramatically expanded. According to some estimates, the world will consume up to five times the minerals extracted prior to the year 2000.

Complementing the physical development of these cities will be the enormous energy requirements necessary to keep them and their citizenry productive and happy. According to Exxon Mobil, by 2040 there will be 2.8 billion households in the world, an increase of nearly 50 per cent from 2010. These households will require energy for lighting, heating, cooking, hot water and refrigeration, as well as electricity to run everything from computers to air conditioners.

Between 2010 and 2040, electricity demand will rise more than 80 per cent with primary energy demand increasing by the equivalent of present day demand levels of the United States and European members of the OECD, combined. Approximately 90 per cent of this growth will come from non-OECD countries.

Large changes are also forecast within the global transport market with energy demand projected to rise by nearly 45 per cent between 2010 and 2040. By 2030, the global vehicle fleet will have doubled to 1.7 billion with India’s passenger fleet increasing from 15 million to 135 million vehicles. This is larger than France’s, Germany’s, Italy’s and the United Kingdom’s vehicle fleets combined!

In order to meet the world’s increased energy requirements, a vast expansion of existing and new energy supplies will be required. During the twentieth century, fossil fuel use increased 16 fold to meet soaring demand. During the twenty-first century, a similar degree of uplift will also be required. In tandem with soaring demand for raw materials and energy sources will be the world’s ravenous hunger for food.

As income levels rise, dietary habits will inevitably change. In addition to increased overall demand for more food, global appetites for more expensive products such as meat, milk and eggs will also grow as consumers seek out more calories, new tastes and higher quality. By 2030, global food demand is expected to be 50 per cent greater than present levels with approximately $11.7 trillion Australian spent on food each year.

In order for the globe to meet this tectonic shift in demand, more than just an explosion of food production will be required. A complete reengineering of global distribution and cold storage systems will also be necessary.

How this process is managed against the backdrop of rising protectionism, environmental degradation and dwindling water supplies will be one of this century’s great challenges.

Lastly, running alongside the physical housing, employment and sustainment of the growing middle class will be the provision of their service as well.

Mass urbanisation, rapid industrialisation and rising levels of disposable income will radically alter the size and nature of globally consumed services. Indeed, as the global middle class expands, demand for services which address the educational, leisure and professional needs of a wealthier population will naturally increase also.

The three kingpins of growing service demand over the decades ahead will be higher education, tourism and wealth management.

In 2010, there were approximately 150 million students enrolled in postsecondary education around the world. Within ten years, that number will have breached 262 million. International tourism is also forecast to undergo a similar positive upheaval. By the end of this decade, worldwide tourism is predicted to increase by 60 per cent to over 1.6 billion international tourist arrivals.

Finally, and perhaps most important of all, is the growth in services demanded by the world’s poorest. Presently defined as the “unbanked billions”, all of these people are yet to secure trusted access to basic financial services such as savings accounts, loans and remittances.

Over the decades to come, these people will be seeking the ability to financial empower themselves. In doing so, the process they will engage in will come to be known as one of capitalisms greatest empowerment legacies.

A handicap

For almost all of Australia’s existence, our nation has suffered from having great potential held back by uncontrollable constraints. Founded at the south eastern tip of the Eurasian supercontinent, Australia has always been too far away from the centre of global affairs to exercise lasting diplomatic influence. Being so lightly settled across such a large and diverse landmass, we’ve always been too capital and labour poor to build the economic depth reflective of a genuine continental power.

Perhaps most frustrating of all, our hopes for inward expansion have nearly always been dashed by the harshness of our environment. Historically viewed as one of the world’s toughest settlement prospects, Australia has longed lacked the technological expertise necessary to both survive, and unlock, our territory’s full potential. With all of these inbuilt disadvantages arrayed against us, it is easy to understand why Australia has only evolved into a successful, but minor player in world affairs.

In this century, however, the limitations which have kept us on a path of restrained achievement are slowly giving way. Whereas last century Canberra’s distance from London or Washington weakened our clout in international affairs, in this century, Gladstone’s proximity to Shanghai and Tokyo Bay will be amongst our greatest strengths.

And whilst last century’s lack of capital and labour undermined our plans to unlock the continent’s full potential, in this century, insatiable foreign demand combined with unprecedented need and urgency will give us the tools to empower the opposite.

Lastly, in spite of old soils and remote resources restricting our ability to maximise our natural bounty, in this century, technological innovation will give us the power to properly penetrate, explore and manage our pastures, deserts and oceans.

Put simply, for much of our existence, Australia’s interaction with the era it has lived in could only be described as being upside down. What we cared about, was rarely heard. What we wanted, we couldn’t have. And what we had, we couldn’t responsibly exploit.

In this century, however, things are finally turning right side up.

A collision

With global demand rising across the raw material, energy, food and service provision sectors, Australia will be perfectly placed to ride the approaching economic king tide to a more prosperous and influential place. Just as electricity and refrigeration revolutionised Australia’s settlement, employment and production practices, the collision between insatiable foreign demand and near unlimited domestic supply, will trigger a second gold rush for Australia.

Whereas our first gold rush was driven by a dozen isolated and landlocked goldfields in Victoria and Western Australia, this reprise will be powered by an archipelago of world class mines, gas wells, farms and coastal metropolises. For the raw materials, energy and food production industries, the rise will be responsible for unleashing a sustained increase in demand for nearly every product they produce.

With the demand cycles associated with the rise lasting decades, perhaps even forever, vast geographical regions and industry related cities will be energised as a result of increased capital inflows, labour force movements and logistical infrastructure development. Indeed, for as long as the rise continues, Australia’s primary economy, terms of trade and strategic importance in foreign affairs will be overwhelming and positively enhanced.

Australia’s industries with expertise in technology, service delivery and wealth management will also greatly benefit. Through a combination of Australia’s time zone happenstance and its multi-century experience with services such as urban planning, healthcare, education, banking and professional governance, millions of gifted workers and savvy entrepreneurs will find success and opportunity in an increasingly service hungry world.

As with the global commodity export boom, the global services boom will have a transformative effect upon Australia. However, in the case of the tertiary economy, it will be our most dynamic service centres which enjoy the greatest uplift. In tandem, the swelling of Australia’s primary and tertiary sectors will bring about a golden age in Australian society.

Through a combination of a surging economy, booming exports, intense foreign investment, strong population growth and rapid technological change, this historic collision will not only enrich the broader Australian community, it will be the catalyst for helping our nation finally come of age.

Conclusion

In the not so distant past, a small island nation called England looked enviously upon its regional rivals Spain and Portugal.

The Spanish and the Portuguese, originally minor powers themselves, had built vast overseas empires which dwarfed the economic, military and technological capacity of the middle-ranking English nation. However, with the benefit of circumstance, capacity, vision and luck, the English incrementally recast their place in the world by seizing the chance to build something better.

By 1922, the English governed the greatest empire in human history. Over the space of three and a half centuries, the English had combined hard work with changing circumstances to forge a new reality for themselves.

In this century, the Australian Century, our nation will also have the ability to carve out a bold new future. Endowed with almost limitless capacity, near inextinguishable natural resources, defendable territory and limited social division, Australia has few reasons for keeping its ambitions small.

In this century, the rise of the global middle class will give Australia the chance to become something greater. The twenty-first century can be our century. It’s time we went and seized it.