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Focus on security, population and resources

WHAT type of future do you want for your children and grandchildren? What sort of place is Australia going to be in 10, 20 or 50 years? How do we shape this future today (or do we just leave it to chance)? How do we address the multitudinous options available to us as individuals, as companies and organisations, and as governments and a nation? Considering Australia’s future development requires comprehending and balancing a wide spectrum of options, often involving apparently conflicting and contradictory choices. Decision makers can be faced with seemingly profound complexity and ambiguity. Understanding the linkages and wider implications of single-issue decisions can be fundamental to whether a policy or investment decision will be soundly based or may generate unforeseen complications or benefits.

Future Directions International (FDI) has been working on some practical ways of thinking about Australia’s long-term future. We decided that a systems approach was the key to understanding that everything is linked to and affects everything else. There is a global system of which Australia is a small element. We are part of a regional system. Australia is itself a complex system, of which Western Australia, also a system, is a component part, and so on. Between and within these systems there are multifarious connections and confluences of issues and relationships.

In order to make sense of profound, systemic complexity, FDI decided that a contingent approach using a simple matrix framework would provide a useful analytical tool (see information box). Applying this intellectual construct in a practical sense engenders a multi-disciplinary and strategic way of identifying the linkages between complex issues. For example, in a recent FDI Research Committee ‘brain storm’ about Australia’s national development, with emphasis on the north, we identified some key issues for the focus of our research efforts. These included:

p Population: Australia’s population is unevenly distributed geographically and demographically. Key issues for integrated research include our ageing population, fertility rates, immigration, biomedical research, optimising intellectual capacity, international intellectual engagement, the value and role of professional services, and the social condition.

p Sustainability: Some critical issues for development of the north include water and mining development, and linking back into the issue of population.

p Energy, particularly oil and other fossil fuels: Important factors that need to be understood include Timor Gap development, gas pipelines, Kyoto and climate change, and oil vulnerability. Energy also has strong links back into sustainability and population.

p National security: Critical issues for development of the north include governance and State borders, safe and reliable operations, maritime security, and engagement with our regional neighbours and the wider global marketplace. As with all of these issues, national security links strongly back into energy, sustainability and population. The exercise of thinking about the north highlights the complexity and interconnectedness of developing the future. Some important national issues are briefly outlined below to further demonstrate the complementarity and confluence of strategic agendas for Australia’s future.

Population

The Commonwealth Treasury recently released a discussion paper titled Australia’s Demographic Challenge (ADC), which follows the 2002 Intergenerational Report (IGR) that presented a primarily economic view of Australia’s ageing population. The ADC continues the IGR straight-line trend analysis. The report states: “The number of Australians aged 65 and over is expected to increase rapidly, from around 2.5 million in 2002 to 6.2 million in 2042 ... from around 13 per cent ... to around 25 per cent ... In 2002 there were more than five people of working age to support every person aged over 65. By 2042, there will only be 2.5 people.” The ADC argues Australia’s economy will experience significant ageing population-related budget deficits within the next 40 years unless certain policies are adopted. Four policy choices are offered; in summary: do nothing and leave the problem for others to solve later; cut government expenditure; accept increased national debt; or grow the economy.

The latter option is the one preferred by the Government. In order to grow the economy the ADC suggests Australians will need to become more productive, primarily by working longer. The only levers available to change our population size and demographic profile are natural growth, with fertility rates now below the replacement rate and continuing to fall, and immigration. The ADC reminds us that immigration will not solve the ageing population problem because people come to Australia from across the demographic profile.

The ADC also makes mention of social, health and education aspects of demographic changes. However, wider issues such as national security, sustainability and significant infrastructure growth are not addressed.

At FDI we consider there may be value in moving beyond straight-line trends analysis to take an integrated approach to considering some lateral options for Australia’s population.

We have no difficulty with the conclusion that continuing growth of the Australian economy is an important objective. However, economic growth is linked directly to the size of our population and productivity of our workforce. The ADC acknowledges the importance of an educated workforce. Will current approaches to through life education and training provide all Australians with the opportunity to reach their potential? Are we applying sufficient resources to early childhood development (are there lessons from the Japanese approach), and to mid and later-life training opportunities to enable people to remain productive in a changing world? Can more be done to stabilise and even reverse the downward trend in fertility rates? Instead of portraying single parent welfare dependent families as a national burden, perhaps the overall value to society of raising children could be given greater recognition. Greater societal support for families (of all kinds) with children and their carers (including childcare workers) could be encouraged.

Australia is a developed, Western country with a mature economy. However, in many respects we are under-developed, with parts of our vast natural resources yet to be tapped, while acknowledging the need for sustainable and environmentally responsible approaches. For example, the vast land areas of the Kimberley and Pilbara contain considerable natural resources, including water, minerals and energy, yet currently support only a few thousand permanent residents.

There is enormous potential for development in the north of Australia if we apply our national will and creativity in that direction. Will New South Wales Premier Bob Carr’s Sydney-centric view that Australia cannot cope with more immigration prevail, or are there wider considerations?

In concert with other areas of national development, Australia urgently needs a well thought through, flexible and dynamic national population policy that takes the long view. We need to change the paradigm from being a victim of circumstance, as outlined in the Government’s ADC report, to where we emphasise the positives and seek to exercise control of our own destiny.

Water

Water is another critical national issue. Authoritative analyses suggest that Australia’s total sustainable yield of water is approximately 71,000 GL/year, with current water use of approximately 22,000 GL/year, or 31 per cent. The challenge is that water is not always available where and when we need it. Surface water resources in some parts of Australia are already over-allocated. About 70 per cent of water is used for irrigation (the proportion is around 40 per cent in Western Australia) of which only 77 per cent reaches users due to seepage and evaporation. Domestic water comprises only 8 per cent, however this has tended to receive most attention from policy makers.

Notably, northern Australian water resources are under-utilised and the potential is yet to be fully assessed. Of an estimated divertible yield from the Kimberly to Cape York of 46,000 GL/year (from an average annual run-off of 178,000 GL/year) only 650 GL/year, or 1.4 per cent, is currently used.

The idea of piping water from the Kimberley to Perth has been studied but dismissed on cost-benefit grounds at $5.50/KL, compared with about $0.65 currently paid by domestic users, and an estimated $1.50 for desalinated water.

In WA, investment in water investigation has declined from $2 million in 1990 to $300,000 in 2003, despite the fact that the hydrology and ecology of the abundant water resources in northern Australia are not well understood. When combined with climate change predictions that rainfall in the south-western Australia is expected to reduce by up to 20 per cent, there is reason to be concerned at research priorities. Greater focus needs to be applied to national development in the north rather than simply diverting resources south. Australia does not have a national water policy despite considerable attention by the Council of Australian Governments (CoAG) since 1994. In 2003 CoAG agreed to develop a National Water Initiative with the details expected to be announced mid-2004. The likely key elements are: a national framework for water access across all States and Territories; efficient water markets; efforts to ensure best practice pricing; transparent water accounting; reinforcing the need for improved urban water management; and funding to address the Murray-Darling Basin over-allocation problem.

The National Water Initiative is likely to be too narrowly focused on the Murray-Darling Basin and urban water users. CoAG will have again failed to look to future issues such as the development of new irrigation areas in northern Australia.

Energy (particularly oil)

Australia does not have a national energy policy despite significant national and international energy related issues emerging in the near future. The CoAG Ministerial Council on Energy, established several years ago, has so far concentrated on relatively minor issues like electricity market reform on the east coast.

The International Energy Agency (IEA) estimates that $US16 trillion in investment will be required between 2001 and 2030 to meet the world’s projected energy needs. According to the IEA, global energy reserves are sufficient to meet estimated demand but will become increasingly expensive to develop as the most accessible reserves run down.

Concomitantly, Australia is facing a decline in the proportion of oil that can be supplied locally. CSIRO estimates that the 80 per cent of local oil in 2002 will decline to about 52 per cent by 2005. Australian Bureau of Agricultural and Resource Economics estimates Australia’s energy consumption will grow by an average 2.1 per cent annually over the next 15 years.

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