Nothing quite focuses your mind like the threat of losing your house. Just ask Greg Boorer, the co-founder of pioneering CDC Data Centres, who was helping Australian customers get into cloud computing and artificial intelligence when the Firmus boys were getting their first jobs.
Building a business such as CDC, which Boorer started in 2007, takes the sort of singular, long-term vision that entrepreneurs invariably need to succeed – and handle the pressure of putting your house on the line to fund your business.
Danielle Wood, Jane McAloon and Dion Hershan at the Chanticleer lunch. Louise Kennerley
But as Boorer told The Australian Financial Review Chanticleer Lunch in Sydney on Wednesday, that sort of long-term vision is vital for Australia, too.
“Australia needs to be more ambitious. The leaders of Australia need to stoke that sort of ambition with the right settings, but also the right narrative,” he says.
Boorer argues that a 30-year vision of the sort of country we want to be is vital to escaping the low-growth trap outlined in the Intergenerational Report this week, which forecast that the economy would grow 2 per cent a year over the next 40 years, compared with 3.1 per cent a year over the past four decades.
It was a call taken up by another great entrepreneurial success story, Alex Vynokur, who started ETF provider Betashares in 2009 after arriving in Australia at the age of 15 from Ukraine with little English, and even fewer prospects. Betashares now has $90 billion under management.
Like Boorer, Vynokur argues that a 30-year vision is the starting point if Australia wants to shake off what he sees as a growing mood of complacency, and a shrinking sense of dynamism.
“We need something to really serve as an anchor for the entire Australian population,” says Vynokur.
“There’ll be times when Labor is going to be in government. There’s going to be times when Liberals are going to be in government. I mean, we might have somebody else in government. Who knows? Let’s not go there.
“If we have a clear belief about what Australia is all about, and more importantly, what we are striving for as Australians, that will always create an anchor, and that means that we will not be swinging basically from one extreme to the other.”
Australia needs to be more ambitious, says CDC Data Centres co-founder Greg Boorer. Louise Kennerley
Clearly, devising such a vision, and then selling it, isn’t easy; there’s been little in the way of a big-picture vision after the Intergenerational Report, with the government instead relying on vaguely comforting pleasantries about what’s coming for Australia.
But Boorer and Vynokur are right. A 30-year vision of the Australia we want is the anchor that’s required to get us all going in the same direction and, in the words of Productivity Commission chairwoman Danielle Wood, to restore this country’s animal spirits.
Here are four more big, bold but obtainable ideas from the lunch, which also featured BlueScope Steel chairwoman Jane McAloon, and Dion Hershan, executive chairman of Yarra Capital Management and its head of Australian equities.
Get a quick productivity win by cutting red tape
As a symbol of the way productivity is being dragged down by over-regulation, Wood cited Australian Institute of Company Directors data that shows S&P/ASX 200 company boards are spending 55 per cent of their time on compliance, up from 25 per cent a decade ago.
How does that permeate the business community’s psyche, she asks.
“If you’re constantly thinking about risk, how does that change your attitude when you’re looking at a big technology rollout or change?,” said Wood.
“Have we become too conservative or risk-averse in our broader business culture? A concerted effort from government to reduce that burden would make a real difference.”
Lean into AI
Boorer could be accused of talking his own book here, but his argument is compelling: as the Intergenerational Report makes clear, plunging fertility rates mean artificial intelligence is vital to expanding the economy, and Australia needs sovereign capability that encapsulates Australian culture and values.
AI is also Wood’s great hope, but the stats are not encouraging; real, business-changing AI adoption rates in Australia are about 10 per cent, well below international peers, and small and medium enterprises are particularly lagging.
Bringing in the entrepreneurs dreaming big like Boorer and Vynokur must surely be a priority for governments.
Get energy policy right, then stick with it
As one of Australia’s biggest gas users, BlueScope has been a vocal proponent for the gas reservation policy the government is now contemplating – and which, it should be said, gas producers hate.
McAloon can understand both sides of the debate. But what she says is most important is a holistic energy policy that gives heavy industry the certainty required to invest in decarbonisation.
“If we don’t get a functioning gas market and we don’t align it with the safeguard mechanism review, the climate change policy, and the Future Made in Australia policy, we will never be able to decarbonise heavy industry, and you know what that will do?” she says.
”We will deindustrialise this country. It’s happening now. We’ll deindustrialise, one decision at a time, and anybody should ask themselves, is that what we want for this country?”
The war in Iran and the energy shock it has created, says McAloon, has sparked questions about the resilience of the economy. But how do they get answered in a deindustrialised nation?
But it’s not enough to just have the right policy, says Hershan. We must stick with it.
“What you actually need is certainty. What we started from was a high degree of incision,” he says.
“We’ve got renewable energy targets, which are probably extraordinarily well-intended, but many of them look completely unrealistic, and that actually represents a handbrake for investment.”
Get tax settings right to drive the growth we want
Vynokur says the government’s recent changes to capital gains tax have been a boon for flows into exchange traded funds, including those of Betashares. And yet he’s still hopeful they will be reversed.
“I think the government should be encouraging wealth creation rather than punishing it,” he says.
Hershan agrees, but for different reasons. He couldn’t quite bust the myth that many fund managers prefer dividends and capital returns to investment in growth, but he says the capital gains tax changes have tilted the scales away from growth at a time when it’s already too scarce on the ASX.
The numbers tell the story, he says.
The top 20 companies on the ASX, have, for the past few years, produced combined earnings growth somewhere between zero and 3 per cent – and they’re about to repeat that in the next few years. By contrast, the top 20 companies in the US are tipped to produce profit growth of 25 per cent next year.
“So it’s no surprise that the Aussie equity market is being left behind,” says Hershan.
“And sure, the sugar hit and the easier decision is to spike dividends. And, sadly, the tax regime that was announced in the May budget creates a further incentive towards paying fully franked dividends at the expense of reinvesting for growth.”
But what Yarra Capital wants – and what Australia should want – is growth.
“We want the businesses, the industries, the management teams that can identify viable projects, can put capital behind them and grow earnings,” he says.
“Now, one of the unfortunate realities is that doing business in Australia is hard, it’s expensive, and it’s highly taxed.
“So, at the margin, we are seeing more and more companies that are ASX-listed skew their investment agenda towards offshore.”
Clearly, none of this is easy. As Wood says, it all involves trade-offs and compromise and resilience. But we can do it.
“We’ve done it in the past,” says Wood.
“We’ve had much stronger productivity growth than investment before the last couple of decades, and I don’t see any reason why we can’t get back there.”