FinTech to create thousands of new jobs in Australia | Address by Senator Andrew Bragg

Address by Senator Andrew Bragg | Liberal Senator for New South Wales

Australian Chamber of Commerce and Industry | Sydney, Thursday 19 December

 

Thank you for inviting me to speak to you at (this almost-Christmas) Chamber luncheon.

I am chairing a Senate Inquiry into FinTech and RegTech and if early submissions are anything to go by there is general optimism about what lays ahead for Australia.

I am very optimistic about Australia’s tech future. We have the smarts, the capital and the track record to be a world beater.

Back in October, the Committee released an issues paper which was effectively a stab at the big issues.

The five big issues are tax, regulation, access to capital, access to skills and culture.

We have asked interested parties - big and small business, governments and civil society groups to pull this apart and strongly agree or disagree - on the condition they give their view on what are the big things that hold us back.

Trying to agree on the big challenges provides a platform for us to progress the review upon a sound platform as we work to a consolidated set of recommendations.

Before we get to recommendations, we have to consider submissions, hold public hearings and prepare a draft report.

The good news is there’s lots of time to engage.

So far so good. Lots of large and small organisations are engaging.

One point I regularly make informally is that we want all businesses to succeed so we don’t want only micro and small businesses to succeed. We also want big businesses to do well. I don’t have any fetish for small business over big business.

Everyone associated with the Chamber knows that big and small business working together is an essential ingredient for our economy.

If we are going to have policies like Four Pillars and the Qantas Sale Act, for instance, then we need to make sure large businesses are innovating. Otherwise we risk large, domestically protected businesses being disrupted by global giants where banks are especially susceptible.

As we all know, the global tech giants can disrupt virtually any industry and therefore protectionism against technology and global commerce is futile.

Australia took too long to learn the lessons about the fallacy of protectionism during the second half of the last century.

Building tariffs walls to hold back competition ultimately failed farmers which the Hawke government dismantled with the Liberal Party’s support.

The end of subsidies and McEwen’s famous “protection all round” led to a world class farm sector and 30 years of growth.

Competitiveness must be our mantra. Unless we are as good as California or Singapore, we risk being forced to take more and more solutions from big global tech.

This is consistent with Treasurer Josh Frydenberg and Communications Minister Paul Fletcher’s statement on the digital platforms inquiry last week:

“The Government’s role is not to protect domestic businesses from digital competition, but rather to ensure the proper functioning of markets and a fair approach to regulation that ensures the rules of the physical world apply equally to the digital world.”

Out of the initial submissions, there are three main touchpoints I’d like to raise with you today.

 

  1. Employment

It’s a myth that technology destroys jobs.

Of course some traditional roles will inevitably disappear but we must have an eye to the many thousands of jobs which will be created to build new skills and capabilities.

We have received a submission from the Australian Computer Society which says, and I quote:

“Australia’s technology sector is forecast to grow by 100,000 workers in trend terms between 2018 and 2024, at an annual growth rate of 2.3% (exceeding overall workforce growth of 1.3%).

 

 

A report from economics firm AlphaBeta says the labour market is changing so rapidly it increasingly requires workers to have digital and technological skills in order to participate in the economy.

They say: “Demand for these skills is set to grow by almost 100,000 by 2023, by which time almost 1 in 4 Australian workers will be employed in occupations that require technology and digital based skills.”

These projections come off a strong base.

More than 5% of the workforce in Australia, or 578,000 people, are already employed in the tech sector.

But it’s interesting to see the breakdown of who Australian startups are employing.

Software developers make up 30%; 17.5% are in business administration;  17.4% in sales, marketing and communications; 13.1% in product and design; 8.1% in operations and service delivery; and 5.9% in AI, ML and Data.

As Chief Executive Iron Ore at mining giant Rio Tinto, Chris Salisbury, recently said, work will continue to be transformed and new career pathways will be created.

Salisbury says the key to any technology is people and that’s why training and recruitment is vital.

He is right when he says: “Our ability to redesign training and development for our people will be key to our success in this competitive environment so that we continue to have the skills and capability required in this digital age.”

While there was fear in the 2016 federal election that technology would kill jobs, this was about as credible as Mediscare.

Technology has been jobs accretive over the long run. It has not been a job killer.

The jobs growth is not guaranteed. It will only happen if we are competitive. Australia has never been able to afford complacency.

You only have to look at the American model to see the pathway ahead.

A recent McKinsey report spells it out in black and white: ‘“New technologies have spurned the creation of many more jobs than they destroyed, and some of the new jobs will be in occupations that cannot be envisioned at the outset.”

“One study found that 0.56% of new jobs in the United States each year are in new occupations.”

“Most jobs created by technology are outside the technology-producing sector itself. We estimate that the introduction of the personal computer, for instance, has enabled the creation of 15.8 million net new jobs in the United States since 1980, even after accounting for jobs displaced.”

The complete picture here is that technology has and will displace some workers. When that happens it is incumbent upon government and industry to prepare for the transition and to retool workers.

But we are well placed to do this, and Atlassian co-founder Mike Cannon Brookes agrees, he said this:

“Fortunately, Australia in the 21st Century should have the tools and experience to make this period of disruption less painful than the transitions prior.”

 Also it’s why we are investing in Vocational Education Training (VET).

Earlier this month the Minister for Employment, Michaelia Cash announced major changes to vocational education to provide more flexibility to the qualifications system to meet student and employer demand.

We want to make it easier for Australians to move between vocational training and higher education.

As the Minister said: “These reforms will cut red tape and improve the operation and quality of education in Australia.”

 

 

  1. Consumer Choice

We want the Quiet Australians to get a better deal.

It’s a fact that better technology means improved choice.

Australians can only benefit from being given wider choice - whether it’s in open banking, an open telco sector or open super.

The benefits of open banking, for example, include improved customer experience, new revenue streams and a sustainable service model for underserved markets.

To quote McKinsey again: “While open banking stands to benefit end users as well as to foster innovation and new areas of competition between banks and nonbanks, it is also likely to usher in an entirely new financial services ecosystem, in which banks’ roles may shift markedly.” 

Shifting towards the consumer, of course.

I have met with so many neo banks during the course of this review which are hungry for new customers. In response, the larger banks are trying to keep their customers with new technology. This is exactly the type of competitive tension we want to promote with open banking.

And just as open banking is expected to be a game changer for Australian banks of all sizes by helping people to easily switch, “open super” could revolutionise the country’s pension industry just by changing the way funds interact with members.

According to KPMG, the combination of the New Payments Platform which allows for fast payments and the passing of the Consumer Data Right will pave the way for a positive disruption of the sector.

 As the funds start to invest and apply technology they will inevitably improve service, drive costs down through automation and make it simpler for participants to access and use information.

KPMG says “open super” will lead to real-time member contributions, streamlined member withdrawals and enhanced personal financial management.

But more importantly members should be able to switch from an underperforming fund and the government intends to pursue that agenda. How could we not promote competition in a sector that’s compulsory?

 

  1. How good is Australia?

Australia is good at technology. There are Australian FinTechs which are now exporting their ideas and in the process of employing more Australians. Think of Atlassian, WiseTech, Afterpay and AirWallex. These are all great businesses, supplying Australian and global businesses whilst employing Australians.

We want more Australian businesses to think about and adopt technology. As Prime Minister Morrison said in November to the BCA:

“What we need is for a greater proportion of our businesses in all sectors of the economy to apply the digital technologies at the frontier… This is as much about a local plumber or a small manufacturer as it is about a tech start-up at a warehouse somewhere.”

And:

“Operating at the technological frontier in the digital world is a necessity for our trade exposed sectors to keep pace with global competition.”

Wherever possible, we would love Australian business to be underpinned by Aussie tech.

That will be a big challenge but the record shows we have been able to develop great businesses against the odds.

As Seek co-founder Paul Bassat said in October:

“Why do global businesses so frequently beat local businesses in a world of software-driven business models? The internet enables global access and near-zero costs of distribution, but the scale required in technology spend can be enormous. As an example, Google spends over $US20b on R&D each year.”

The pressure is on and it should be on.

The good news is a large crop of highly successful Australian technology companies are beginning to reach maturity around the same time.

Heading into 2019, graphic design firm Canva was Australia’s only private tech company valued at more than $US1Billion (Unicorn milestone).

Heading into 2020 Airwallex and Judo Bank have also joined the club.

There are also firms like Envato (digital downloads) which has stayed private and grown to a valuation likely in excess of $US1Billion but hasn’t sought funding.

Together these billion dollar businesses are just the crest of the wave.

A substantial swell of new tech firms is rising quickly behind them.

At the same time we have seen rapid growth of publicly listed Australian tech firms.

Atlassian, Australia’s biggest tech company is now worth around $45 billion, making it one of the top 10 largest Australians firms by market capitalisation.

ASX listed tech stocks have also begun to significantly outperform the market in recent years, with many of the most prominent young tech firms seeing meteoric share price rises.

  1. Conclusion

Ultimately, the challenge before us is to think globally whilst developing locally. After almost 30 years of growth, our economy is still growing and creating jobs.

The process I am chairing will deliver a complete picture of where we stand and what we need to do. Like any government process, the report will only be as good as the implementation. I know we have the right people in the key jobs to lead the reforms that are required.

The Prime Minister is a big FinTech enthusiast and drove the establishment of the New Payments Platform and our Consumer Data Right framework as Treasurer. The PM has laid down a world-leading formula for us to build upon.

The Treasurer is a productivity man and the Assistant FinTech Minister Jane Hume is our first Minister for FinTech, who’s much loved in this sector!

We have the right people, we have a good process. All we need now is your best ideas.

The next wave of jobs depends upon it.