NSW 2040 Economic Blueprint - Investing in the state's future
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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
01.
FOREWORD BY THE TREASURER 8
EXECUTIVE SUMMARY AND 10
RECOMMENDATIONS INTRODUCTION14
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
Recommendations12
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 31
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 - References78
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
Executive summary and services and be expanding
quickly enough to lift living standards.
and recommendations • Our five major urban centres should
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
infrastructure and transport links.
South Wales’ continued
• We desire innovative businesses
economic success in a 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
reliable and affordable, with enhanced
The $2 trillion economy
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 BlueprintLikely 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
keep changing our lives and our work.
Seven levers will boost
• 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.
11Recommendations
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 BlueprintAspiration: 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.
1301.
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 BlueprintThis 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.
15The 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 Blueprint6
The global middle class (billion people)
5
4
3
2
1
0
2015 2020 2025 2030
Asia Pacific North America
Europe Central and South America
Sub-Saharan Africa Middle East and North Africa
Figure 1: Asia’s soaring middle class
Projected size of middle class on five continents to 2030 (billions of people)
Source: Brookings Institute and NSW Treasury
Staying ‘lucky’ – capitalising
on our strengths
New South Wales writer Donald Horne We had more luck after the recession
coined the phrase The Lucky Country2 of the early 1990s: the extended
in 1964. He meant it ironically, yet economic expansion in China pushed
that phrase came to define popular the prices we receive for our exports
thinking about our rich nation. And to levels rarely seen. That boom is not
New South Wales has had more than yet over.
its fair share of this luck.
Yet luck alone only takes us so far.
Sydney (re)gained the title of As our state grows over the next two
Australia’s most populous city in the decades, we need to keep building
early 1900s and has held it ever since. connected and liveable communities,
Its centrality and the rise of air travel prepare people for new jobs and
have helped it to become Australia’s ensure access to services such as
only true alpha3 city, the first stop affordable energy and plentiful water.
for the majority of visitors to our We need to adapt existing industries
shores and the global gateway for and attract new ones.
local businesses. The resources of the
Over the next 20 years, the many
regions beyond the capital and the
elements of the economy that will
resourcefulness of our people, have
drive up our living standards – from
further fed the state’s prosperity.
education, to high-value food, to
energy – should be given the best
possible chances for success.
2
The Lucky Country, Donald Horne, 1964. 3 Sydney is considered an ‘Alpha+’ world city, according
to Loughborough University’s globalisation and world cities research network, which measures the
connectivity of cities in terms of position and influence. According to its model, Sydney is ranked in the
top 10 most connected cities, alongside New York, London, Tokyo, Paris and Hong Kong. Alpha cities in
general have critical links with major economic regions and states that are linked to the world economy.
17The Blueprint has been informed by:
• Research on economic, jobs and
productivity trends, including an
extensive review of previous work
by government (see Appendix 1).
• External consultation with around
50 stakeholders across government,
industry and academia (see
Appendix 2).
Assembling the It argues for two types of actions:
2040 Blueprint • First, we should continue to attack
long-lived problems that slow our
progress, shortcomings particularly
in the state’s systems of tax,
The Blueprint’s twenty-year planning and regulation. The NSW
timeframe, out to 2040, meets two Government is already addressing
goals. First, with this timeframe these issues and work by the NSW
the Blueprint can look beyond the Productivity Commissioner and the
near-term issues that grab today’s NSW Review of Federal Financial
headlines. Second, it can look to a Relations will address them further
time when long-term decisions made in 2020.
today might conceivably have their • Second, the state should implement
greatest impact. Just as 1999 was a the longer-term strategies detailed
sensible time for nations and regions in the final section of this 2040
to consider the impact of issues like Blueprint. We should give the
the internet and population ageing, greatest possible chances for
now is the time to consider how we success to those industries – from
want the New South Wales of 2040 tourism to advanced manufacturing
to look. to water management – that have
the greatest chance of fuelling the
state’s prosperity.
18 NSW Economic BlueprintLeveraging other NSW
strategies and reviews
The 2040 Blueprint leverages the • The NSW Productivity White Paper,
NSW Government’s future-focused due for release in 2020.
plans and priorities that drive place- • The work of the NSW Productivity
based developments and strong jobs Commissioner in identifying six
growth across New South Wales. In priority areas which if addressed
laying out our choices, the Blueprint could boost productivity – including
presents an overarching framework the state’s systems of tax, planning
upon which other strategies can build, and vocational education and
such as: training (VET).
• The NSW Trade and Investment • The examination of revenue in the
Strategy, which will be released NSW Review of Federal Financial
soon. Relations being led by David
• The State Infrastructure Strategy, Thodey AO.
the work of the Greater Sydney • The state’s research and
Commission, the 20-year plan for development performance,
Regional NSW, the Future Transport currently being examined by an
Strategy, the state’s digital plan expert panel overseen by the Hon
and others. Gabrielle Upton MP.
• The next iteration of the NSW • The upcoming New South Wales
Intergenerational Report (IGR), Social Compact outlining the path
due to be published in 2021. forward for human services in the state.
1902.
New South Wales’ resilient
economy has been a driver of
Australia’s growth for decades.
It is the largest state in the country, In manufacturing, we have
with annual output of more than particular strengths, including
$600 billion – a third of Australia’s in innovation and are a major
entire economy. producer and exporter of
agricultural products, food and
Services dominate our economy,
beverages and of coal, nickel,
accounting for around three quarters
copper and lithium.
of activity, similar to economies such
as Singapore and other advanced
economies. Our biggest comparative
strength lies in business services
and particularly three knowledge-
based fields: financial services;
professional, scientific and technical
services; and information, media and
telecommunications.
20 NSW Economic BlueprintToday’s NSW
economy and
industry structure
In examining the state’s economic 60
future, we should first find out 50
$US per capita, thousands
where New South Wales already NSW was 5% higher than Australia
(on an unadjusted basis)
40
excels. We should find out what
current performance says our 30
state does better than other
20
states and territories and overseas
competitors. Then we can work 10
out how best to leverage these 0
strengths and improve on our United States Luxembourg Australia Germany
shortcomings.
Figure 2: High household incomes in NSW
With the help of stakeholders, a
Household average gross disposable income per capita in four high-
series of comparative advantages income nations, 2016-17.4 Figures in $US, adjusted for payments in kind.
has been identified for New South Source: Organisation for Economic Co-operation and Development.
Wales, starting with our current
high standard of living.
4
Adjusted for payments in kind.
21An enviable
standard of living
The people of New South Wales
have a standard of living that is
the envy of much of the world.
Our average per capita disposable income
(see Figure 2), is around US$40,000. Were New
South Wales a country, the OECD would rank it
behind only the US and Luxembourg5. Sydney is
routinely voted among the world’s most liveable
cities. Our environment is clean, our tertiary
education system is world-standard and our
society is amongst the world’s most diverse.
22 NSW Economic BlueprintThe best performing
state economy...
For most of the last five years, the While average wages growth remains
New South Wales economy has grown subdued, healthy employment growth
at or above the national average (see is driving growth in household incomes.
Figure 3, below) while the jobless rate
has been below the national rate.
NSW QoQ
Figure 3: NSW and
NSW YoY
Australian domestic
AUS YoY
7 final demand
NSW and Australian growth
6 in final demand, year on year,
and NSW growth quarter-on
5
-quarter. Figures by quarter,
chain volume measure,
seasonally adjusted (%).
Per cent, through the year growth
4
Source: Australian Bureau
of Statistics
3
2
1
0
-1
Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19
...with the best state
budget position
By keeping spending growth consistently New South Wales is one of a handful of
below revenue growth, New South state-level jurisdictions with a AAA
Wales has achieved the nation’s lowest credit rating. The others include Victoria,
government debt. Yet we are funding the two Canadian provinces and three
nation’s largest infrastructure spending German states.
program to add to our productive capacity.
30 Figure 4: NSW has
negative net debt
28.4
25
26.7 General government net
debt of Australian states
20 22.8 and territories, as at June
2019. Source: State and
15 territory government
Budget papers. Note:
$ billions
10 Queensland’s reported
net debt is adjusted
for its superannuation
5
6.2 asset treatment, making
0 2.2 2.9 comparisons consistent
across all jurisdictions.
-0.5
-5
-8.8
-10
NSW VIC QLD WA SA TAS ACT NT
5
From the OECD Better Life Index at www.oecdbetterlifeindex.org/topics/income/
23New South Wales is in the midst of an unprecedented infrastructure boom, with public infrastructure investment at record levels. 24 NSW Economic Blueprint
High level
of productivity
New South Wales has a highly- Our productivity also reflects the
productive economy by international state’s high output and employment
standards. In 2017, New South Wales share of productive businesses
produced US$54 per hour worked6, and information services. The 2018
above the national average. New establishment of the NSW Productivity
South Wales’ productivity is assisted Commission was designed to further
by the state’s scale – eight million boost the state’s performance.
people centred around our capital city.
World-leading infrastructure
investment
New South Wales is in the midst of an Public transport and roads received
unprecedented infrastructure boom, $55.6 billion, including funding
with public infrastructure investment for Sydney Metro West. Major
at record levels. The 2019-20 Budget infrastructure projects now complete
provided $93 billion over four years or nearing completion include Sydney
to 2022-23 in infrastructure capital Northwest Metro, which commenced
for hospitals, schools, TAFE and services in May 2019 as Australia’s first
transport. The Government also is fully-automated metro rail system and
contributing $1.6 billion to develop the largest urban rail infrastructure
major cultural infrastructure and investment in Australian history.
creative precincts.
Largest exporter of
services in Australia
New South Wales is the largest Tourism already is a substantial source
exporter of services in Australia. Driven of export revenue (ranked third
by rising Asian demand, tourism and behind coal and education), but there
education exports made up over half is potential for growth to accelerate.
of the state’s services exports in 2018, Nature-based and eco-tourism have
with their value up by around 30 per special potential given New South
cent between 2015-16 and 2017-18. Wales’ pristine national parks and
Education exports encourage local coastal environments. Excellent arts
consumption and build a pathway to and cultural experiences and world-
skilled migration. Exports class cultural, sporting, entertainment
Exports of education of education alone were and conferencing venues and
alone were worth worth $12 billion in 2018; it institutions are well known globally
is now the state’s second and attracted 13.6 million cultural and
$12 billion in 2018 largest export, behind heritage visitors to New South Wales
coal. The University of Sydney and in 2018.
the University of NSW are ranked
inside the top 75 institutions globally7.
6
Figures in 2010 prices, on a Purchasing Power Parity basis. 7 Times Higher Education, 2019.
25Figure 5: NSW tourism and education exports have grown rapidly
Annual average growth in overseas enrolments and short-term visitors (%).
Source: Australian Bureau of Statistics, NSW Treasury.
Enrolments
Visitors
25
20
Annual average growth, per cent
15
10
5
0
-5
-10
Jun-05 Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Jun-19
A highly educated
workforce
New South Wales’ workforce has NSW Innovation and Productivity
particularly strong representation in Council8 data shows that if it
healthcare, infrastructure, construction were a country, New South Wales
and financial and professional would rank fourth in the world
services. The state hosts Australia’s for percentage of workers with
largest group of science, technology, tertiary qualifications: 48.6 per cent,
engineering and mathematics 97 per cent of them employed.
(STEM) graduates.
A productive and growing
manufacturing sector
New South Wales is home to highly New South Wales manufacturers
innovative, competitive and world produce almost a third of the
leading manufacturers that are vital country’s total manufacturing output,
to the diversity and strength of the generating around $33 billion in gross
Australian economy. value added and directly employing
253,000 people, or a third of jobs in
the sector countrywide.
8
NSW Innovation and Productivity Council Scorecard, September 2019.
26 NSW Economic BlueprintExtensive trade and Sydney, a finance hub of Asia...
investment links with Asia Sydney is the financial capital of Australia
Our shared time zones and supportive and ranks tenth on the Global Financial
pattern of historical migration have Centres index10. Total superannuation assets
reinforced strong cultural, economic in Australia totalled $2.9 trillion11, the fourth
and political ties between New South largest retirement saving pool in the world.
Wales and our major Asian trading Much of the sector’s activity and Australian
partners. Japan remains the state’s arms of most major global financial service
largest single export destination; China organisations are headquartered in Sydney
is second and is the largest source of and it is an official trading hub for the Chinese
both tourists and students entering the renminbi. The Australian Securities Exchange,
state. The state’s open and transparent headquartered in Sydney, is the 16th largest
business operating environment makes stock exchange in the world by market
it an attractive destination for foreign capitalisation. It employs nearly 40 per cent
investment. It is ranked first out of of the more than 445,000 financial services
the states and territories for Chinese professionals working in Australia.
foreign investment.
...and magnet for global workers
Abundant natural Sydney is the second highest ranked city
resources and food exports in the Asia Pacific region for innovation12.
New South Wales is the start-up capital of
Large and diverse mineral and gas Australia13, ranked fifth highest in the world for
deposits, exploration projects and entrepreneurship14. Sydney is also the highest
a burgeoning renewable energy ranked capital city in Australia for quality of
sector make mining, resources and life15. Sydney is the only Australian city in the
energy important parts of the NSW top 10 most attractive cities for the global
economy. Asia’s quest for cleaner workforce16. Australia is ranked fourth in the
air and growing global gas demand world for protection of intellectual property,
will make renewables and gas larger ahead of the UK, Germany and France17.
elements in that mix over the next two
decades. New South Wales’ generally
favourable climate for growing crops, Expanding creative industries
world-class food safety regulation New South Wales is Australia’s leading state
and transport and logistics systems for creative industries and they are a growing
position us to meet demand from piece of the NSW economy. Many thousands
emerging markets for premium, of creative businesses employ around 42
provenance-protected food goods9. per cent of the sector’s workers and have
exports worth $2,963 million – 70 per cent
of Australia’s total creative services exports18.
The state’s open New South Wales is recognised as the leading
and transparent state for screen production, with 56 per cent
of the Australian screen industry employed
business operating in New South Wales19 and a Disney-owned
environment makes Industrial Light & Magic studio setting up
it an attractive in Sydney, one of only three studios outside
North America.
destination for
foreign investment
9
www.nswfarmers.org.au/NSWFA/Content/IndustryPolicy/R_and_D/Supply_chain_transformation_and_export_readiness.aspx. 10 www.
longfinance.net/programmes/financial-centre-futures/global-financial-centres-index/ 11 The Association of Superannuation Funds of
Australia, Ltd.12 NSW Department of Industry. 2019. Sydney Innovation and Technology Precinct The Future Made Here. 13 2018 Startup Muster
Annual Report available at www.startupmuster.com/reports. 14 The Global Entrepreneurship and Development Institute. 2018.15 Mercer,
Quality of Living Survey, 2019. 16 Global Talent Survey 2018.17 atr-ipri2017.s3.amazonaws.com/uploads/IPRI_2019_FullReport.pdf. 18 BYP Group
estimates based on analysis of Australian Bureau of Statistics. (2017 & 2011). Labour Force, Detailed, Quarterly, May 2017 and Census 2011.
Australian Bureau of Statistics: Canberra. 19 Screen Australia Drama Report, 2015-16.
27Aspirations for
New South Wales
in 2040
03.
We are operating in an
era of rapid change and
unprecedented uncertainty.
We don’t, for example, know It would be unwise to try painting
whether cars will be flying by a precise picture of New South
2040; indeed, we don’t even know Wales’ 2040 industry structure.
how many will be driverless. The New industries could emerge that
nature of our jobs is changing are beyond our imagination today.
rapidly. A recent study by Deakin Existing industries that now seem
University20 suggested “cyborg on solid ground may wither.
psychologist” as a future job21 Nations not currently among the
in Australia. state’s major trading partners
may jump into view.
28 NSW Economic BlueprintIn 2040, our economy will be 70 that New South Wales’ population
per cent larger than it is today, will be around 30 per cent larger
even if we grow at our potential by 2030, at around 9 million
growth rate – around 2.5 per cent people and headed towards
in real terms – from here. The 11 million by 2040.
industrial structure delivering
To avoid the risk of getting precise
this growth will have changed.
predictions wrong, we have
Services will make up an even
developed sensible aspirations
larger share of our Gross State
about the NSW economy and
Product (GSP), particularly in
society of 2040. This chapter
healthcare, education and ’caring
addresses these in the context
industries’ such as aged care.
of seven overarching economic
Mining and manufacturing may and wellbeing categories: the
both represent less of our economy, our people, cities, the
annual output. regions, business, the environment
and performance of government.
We can more easily project the
make-up of the state’s people:
that depends on births, deaths
and interstate and overseas
migration. The government’s
population projections assume
20
100 Jobs of the Future report, 2019: 100jobsofthefuture.com/report 21 Cyborg psychologists would
help “people who have synthetic organs, robotic limbs and body implants” to come to terms with their
new body parts.
29HIGHER GROWTH INDUSTRIES
• The NSW economy should move
in the next two decades towards
higher growth industries such as
advanced manufacturing. That said,
services will remain the dominant
contributors to the state’s output –
particularly education and healthcare,
but also tourism and financial and
The nation’s first other professional services.
A MORE DIVERSIFIED EXPORT BASE
trillion-dollar economy • Coal remains the state’s largest
single overseas export commodity,
but the state should aspire to grow
a more diversified export base over
The NSW economy will time. The changing climate means
be the nation’s first the economy increasingly will move
to non-fossil fuel exports, including
$1 trillion state economy hydrogen. The state’s service
by 2030 and the first exports also should become more
$2 trillion economy after diverse, with a broader base
of overseas education exports,
2040, even if it grows only in particular.
at its long-run average
DIVERSIFIED TRADING PARTNERS
nominal rate from here. • Similarly, over time, the state’s
We should aspire to pass these marks trading partner mix will change.
more quickly, including by undertaking An ageing population means that
the actions and strategies outlined in Japan, currently the state’s largest
this 2040 Blueprint. single overseas destination for
commodities, may take a smaller
FASTER GROWTH IN PRODUCTIVITY
share of total exports. Other
• As Nobel prize-winning economist economies, including China and
Paul Krugman has said, “productivity India, may take a higher share. There
isn’t everything but, in the long run, it also is scope for higher exports to
is almost everything”22. Putting aside previously untapped markets.
changes in the working population,
growth in productivity is what drives ATTRACTIVE TO FOREIGN
New South Wales’ economic growth. INVESTORS
Sustainable growth in potential GSP • New South Wales already attracts
will ensure high living standards for more foreign investment than any
a growing population. other state, but we can aspire to
be even better. Development of
WE SHOULD ASPIRE TO HAVE THE
innovative, fast-growing industries
NATION’S FASTEST GROWING
of the future will attract investment
ECONOMY ON AVERAGE OVER
capital from overseas, as will growth
THE CYCLE
in GSP above the national average.
• There will be periods when other Moves to address complicated
states grow more quickly than planning and regulatory systems will
New South Wales – particularly the keep New South Wales number one
resource states of Queensland and for foreign investment inflows.
Western Australia – but sustained
growth in GSP above the national
average will ensure that employment
keeps growing and that living
standards are rising.
30 NSW Economic BlueprintHealthy, productive people
The main aspirations here are that HIGH STANDARD OF LIVING
the citizens of New South Wales can • The state enjoys a standard of living
improve their current high standard above the Australian average and
of living, that they be well-educated adaptation to the demands of the
and skilled for the higher-income jobs of the future should allow this
jobs of the future, that they be to continue. Cost of living pressures
flexible enough to adapt to changing from areas like housing and energy
workforce needs. will have to be addressed.
SUSTAINABLE POPULATION HIGH INCOME AND
OF NSW AND SYDNEY SUSTAINABLE JOBS
• This means having the transport, • The emerging industrial structure
education, health, housing and other of the state should deliver high-
infrastructure and public services value-added jobs for an educated
necessary to support the growing workforce. That in turn should
population and particularly the keep workers in high-paying jobs.
increased population in the major Increasingly, these jobs will be in the
cities, including Sydney. services sector, but industries like
A WORLD-CLASS EDUCATION advanced manufacturing, defence and
SYSTEM aerospace will also provide them.
• We should aspire to provide world- SUPPORT FOR THE VULNERABLE
class education from pre-primary • Not everyone in our society is able
right through post-graduate and to work or study as productively as
vocational studies, as well as they wish. As a high-income society
opportunities for life-long learning with an egalitarian ethic, we should
as workforce needs change. This aspire to support the vulnerable
aspiration means having even more and disadvantaged.
talented and dedicated teachers.
FIRST NATIONS WELLBEING
NIMBLE AND AGILE WORKFORCE AND INCLUSION
• The state has a well-educated and • First Peoples make up 2.9 per
skilled workforce, but we face rapid cent of the NSW population. The
change in skills demand as the aspiration here is that the state’s
state’s industrial base changes and First Peoples have opportunities to
technology and increased automation self-determine and have access to
disrupt workplaces. Skills shortages the same level of services as all New
are already making construction South Wales citizens, particularly in
projects more difficult to execute. education and healthcare.
22
Paul Krugman, Professor of Economics and International Affairs Emeritus at Princeton University and a columnist for The New York Times.
31Liveable and connected cities
The state’s infrastructure planning agile and agnostic in its technology
assumes that New South Wales will choices. The world’s most liveable
have five major urban centres, the and connected cities rely on good
three cities of Sydney (Eastern, Central communications, so the state should
and Western Sydney), Newcastle not lock itself into technology that
and Wollongong. The following risks becoming obsolete quickly.
characteristics form the underlying The efficiency of connectivity also
aspirations for the five major cities is dependent on fast and reliable
of the state in 2040. transport networks.
ENHANCED LIVEABILITY INFRASTRUCTURE TO MEET
• Sydney has been voted one of OUR NEEDS
the world’s most liveable cities • The recent national audit of
(Figure 6). We should maintain Australia’s infrastructure23 needs
this standing with careful planning found that even with the current
that includes joined-up leadership record level of spending there would
across government and extensive still be infrastructure shortages into
infrastructure provision. Increasingly, the future.
citizens of New South Wales may
SYDNEY AS A GLOBAL CITY
choose to live outside the Sydney
area to enhance their lifestyles, • Sydney’s reputation as a great
with better housing affordability global city already draws millions
and access to jobs. A focus on the of tourists. We should aspire for
arts enhances liveability and makes Sydney also to be known as a hub
places more desirable. for education and innovation and for
financial services in Asia.
SUSTAINABLE LAND USE PATTERNS
DISTINCT CULTURAL IDENTITY
• We should use our infrastructure
more efficiently and sustainably and • Research24 shows that leading
with lower disruption by locating global metropolitan regions are
more housing around existing built capitalising on the ‘experience
up areas. economy’, fostering engagement
and emotional connections
RELIABLE AND FAST CONNECTIVITY with public space, tourist sites,
• Technology is changing so quickly commercial areas and places of
that the state needs to remain cultural and historic significance.
Economist
Rank Monocle Mercer
Intelligence Unit
1 Vienna, Austria Zurich, Switzerland Vienna, Austria
2 Melbourne, Australia Tokyo, Japan Zürich, Switzerland
3 Sydney, Australia Munich, Germany Vancouver, Canada (=3rd)
4 Osaka, Japan Copenhagen, Denmark Munich, Germany (=3rd)
5 Calgary, Canada Vienna, Austria Auckland, New Zealand (=3rd)
6 Vancouver, Canada Helsinki, Finland Düsseldorf, Germany
7 Toronto, Canada Hamburg, Germany Frankfurt, Germany
8 Tokyo, Japan Madrid, Spain Copenhagen, Denmark
9 Copenhagen, Denmark Berlin, Germany Geneva, Switzerland
10 Adelaide, Australia Lisbon, Portugal Basel, Switzerland
Sydney, Australia (13th) Sydney, Australia (11th)
Figure 6: Liveability rankings by city
Source: Economist Intelligence Unit, Monocle, Mercer.
An Assessment of Australia’s Future Infrastructure Needs, Infrastructure Australia, August 2019. 24 Culture, Value and Place Vol 2: Greater
23
Sydney Case Study. By Dr Tim Moonen, Professor Greg Clark, Caitlin Morrisey and Jake Nunley. The Business of Cities Ltd. August 2018.
32 NSW Economic BlueprintProductive, vibrant regions
Around 40 per cent Populations of some smaller REGIONAL TRANSPORT
regional towns have, however, INFRASTRUCTURE
of the residents been shrinking recently, partly • By 2040, a more efficient state
of New South because large cities provide transport infrastructure should
Wales live outside more long-term employment allow more agricultural products,
opportunities. The state should in particular, to reach more
greater Sydney aspire to have sustainable overseas markets more quickly. The
regional communities underpinned Western Sydney Airport will help
by productive employment and high communities and businesses at
class public services, connectivity either end of air links; more distant
and infrastructure. producers need closer transport
VIBRANT REGIONAL ECONOMIES and logistics hubs.
• We should aspire to have growing WORLD-CLASS TRANSPORT LINKS
populations within our communities. • The state covers 800,000 square
That will require sufficient employment kilometres, more than 10 per cent
and educational opportunities of Australian territory. That leaves
for people to remain in these us with obvious challenges in
communities, with people moving maintaining high-standard regional
to the regions as well as away from infrastructure. By 2040, however, we
them. This is particularly so for should aspire to have our regional
migrants, who tend to congregate areas as liveable as the major
in the major urban areas. urban areas.
AN AGRICULTURAL INDUSTRY ENHANCED CONNECTIVITY
SUPPLYING THE GROWING
• The tyranny of distance will continue
MIDDLE CLASS IN ASIA
to present a challenge to regional
• The pool of middle class citizens in transport and communication service
Asia will continue to expand (see levels – but, by 2040, the current
chapter 4). Aiming to be Asia’s ‘food wide gap in standards should be
bowl’ is unrealistic given the giant narrowed. We should aspire to
continent’s huge food needs25. But make the regions better connected
New South Wales can and should with the major urban centres, both
aspire to be ‘Asia’s delicatessen’ electronically and physically.
– a trusted source of high-quality,
high-value products.
25
Estimates suggest that all of Australia currently feeds about 60 million people; Asia contains around
4,600 million people.
33Innovative, world-class
businesses
New South Wales has a
productive manufacturing
sector that employs
hundreds of thousands
of people.
As in most regions of the developed
world, manufacturing has maintained
output growth but fallen as a share
of total production. It now represents
just 5.4 per cent of state output, down
from almost 11 per cent in 1990.
Like all of Australia, the state faces EXTENSIVE SERVICE EXPORTER
significant cost disadvantages, • We should aspire to be a significant
particularly in production phases exporter not just of education and
exposed to global supply chains. tourism, but of other high-value
The aspiration is for more of the activities like financial services and
state’s industrial activities to be in professional services such as
high-value added activities like architecture and business
design, where the state has administration. There also is huge
comparative advantages. upside for exporting health services,
particularly to the growing Asian
INNOVATIVE INDUSTRIAL BASE
middle class.
• Rapidly changing technologies,
including automation, robotics and ATTRACTIVE DESTINATION
artificial intelligence, mean our FOR BUSINESS
industries must be flexible to keep • We should be recognised as a
up with change. Innovation is the standout destination for cultural
key: in the years to 2040, the level tourism, major events and creative
of spending on research and industries, being a showcase in
development needs to lift significantly. global content ranging from screen
We should aspire to export new, production to major cultural events.
high-value technologies to the world.
WORLD-CLASS CENTRES OF
GROWTH INDUSTRIES ARTS AND TECHNOLOGY
• By 2040, the state’s industrial base • Deliberate and strategic co-location
should have transitioned towards of culture and creative practices
higher-growth industries with within the state’s emerging centres
elevated research and development of technology and innovation will
inputs, highly-skilled workers and create vibrant ‘live-work-play’
extensive domestic supply chains. environments that attract and retain
skilled talent.
34 NSW Economic BlueprintSustainable environment
and resource management
Without a sustainable environment, there are no liveable cities, productive
jobs and high living standards, nor an innovative industrial base. Rising
temperatures will require determined action in NSW to mitigate potential
threats, particularly around our energy and water supplies.
RELIABLE AND
AFFORDABLE ENERGY
• New South Wales is a major exporter
of coal, much of it for power
generation in China and Japan. By
2040, the state will likely have to
diversify its energy sources to a
more sustainable mix that includes
renewables (wind, solar and wave)
and alternatives in a technology-
agnostic fashion. Alternative export
industries should emerge by this
date, such as hydrogen.
SECURE WATER SUPPLIES
• Climate change means the state will
confront more frequent and more
severe droughts26. Well before 2040,
the state should aim to transition to
more secure water storage options
and expand desalination capacity
and other alternative sources of
supply. We also should look at
more efficient uses of water by
households and industry.
FLEXIBILITY TO DEAL WITH
CHANGING CLIMATE
• By 2040, the aspiration is that the
state will take the steps necessary
to mitigate emerging risks from
climate change. The actions of the
Commonwealth Government and
other jurisdictions will play critical
roles here.
26
Commonwealth Government (2019) Drought in Australia: Australian Government Drought Response, Resiliance and Preparation Plan.
35The NSW Government is the largest single customer in Australia and probably still will be in 2040. 36 NSW Economic Blueprint
Enhanced performance
of government
The NSW Government is the largest AN ENVIRONMENT CONDUCIVE
single customer in Australia and TO INVESTMENT
probably still will be in 2040. Its • Regardless of financial assistance,
enormous purchasing power can we should aspire to create an
drive innovation and create extensive environment that makes businesses
production chains in New South Wales. want to invest and create jobs here
The state also has significant power to rather than interstate or overseas.
control public sector employment.
EFFICIENT DELIVERY OF
A MORE EFFICIENT TAX SYSTEM GOVERNMENT SERVICES
• By 2040, the state’s tax system • New South Wales should always
should be much more efficient. aspire to deliver public services to
PROCUREMENT TO DRIVE an acceptable standard in a cost-
INNOVATION effective and sustainable manner.
This basic imperative will become
• The Government should by 2040
even more important over the
be using the power of government
next twenty years as demands on
as a customer to drive innovation
public services grow – particularly,
and value chains by making
as the population grows and ages,
procurement decisions strategically,
in healthcare.
rather than simply on the basis
of cost. POSITIVE EMPLOYMENT IMPACTS
LIGHTER-TOUCH REGULATION • The NSW Government is the largest
single employer in the country. The
• By 2040, approvals for key areas
Government should use this power
of activity should be expedited.
to promote a diverse public sector
More of the state’s underused
workforce, particularly for people
natural resources should be
living with a disability and for
unlocked. We want Sydney in
First Peoples.
particular to be known as the place
to come for jobs of the future.
INNOVATION AND AGILITY
IN PLANNING
• The planning system cuts across
all aspects of economic activity
and can either enhance or curb
creativity and innovation. We should
aspire to world-class standards
and governance arrangements as
well as joined-up leadership
across government.
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