Automation a win-win scenario for Australia



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There is a win-win scenario possible for Australia, where we capture the benefits of automation for the country as a whole, and also ensure that those benefits are broadly shared across the Australian workforce, McKinsey & Company Associate Partner, Hassan Noura told a CEDA audience in Melbourne.

“Our overall perspective here is that automation holds great promise in rekindling the kind of growth that delivers better living standards for Australia, higher wages, more consumer choices, higher standards of life and quality of living,” Mr Noura said.

“Automation will do that by freeing up a lot of resources in the economy that are currently doing lower value-add, routine, repetitive tasks.

“In terms of what the benefits from that would be, well they’re potentially enormous. 

“Starting with productivity, a boost to the annual rate of productivity growth of anywhere between 50 per cent, up to 150 per cent if Australia adopts automation technologies very rapidly. 

“That in turn could add up to $600 billion per year to the Australian economy and most importantly put up to $15,000 per year into the pockets of ordinary Australian workers. 

“Which to put that in proportional terms, is a potential 25 per cent increase from what it would otherwise be in 2030. 

“So potentially this is a very large and meaningful opportunity, not just for the economy as a whole, but for individual workers. Provided of course that the gains are shared with workers.”

Mr Noura said there’s no shying away from the fact that automation, like many other previous waves of structural and technological change, will be disruptive.

“It will destroy some jobs, it will create many others, but I think it will also change profoundly almost every other job regardless of whether it is a new or existing job,” he said.

“This is not unprecedented for Australia. We’ve seen this with the embrace of globalisation, with the embrace of the internet and technology. 

“So we’ve done this before, and we’ve done it relatively successfully, in a relatively inclusive way.

“However, those positive scenarios won’t magically happen on their own. Automation as an exogenous technological force is not going to be inherently benign in and of itself, and if we just leave it to its own devices, it does have the potential to cause painful disruptions. 

“For example, anywhere between 1.8 to five million people, depending on that mid to rapid pace of automation, may have to not only change jobs, but actually change their entire occupation or profession in order to find a new job.”

Mr Noura said that given the likelihood of increasing churn in the job market, there is a higher risk of unemployment during that transition phase; and depending on the pace of that automation, and how flexible Australia’s labour markets remain, the increase in unemployment could be as high as two percentage points. 

“To put that in relative terms, our models show an increase from about five per cent unemployment to about seven per cent unemployment during the peak of the transition which we see as happening in the middle of the next decade, around 2025,” he said. 

“And automation left to its own devices has the potential to increase income inequality by almost 30 per cent. That arises because the impacts of automation will be uneven across different skill sets. They will on average hit lower-skilled, lower-paid workers harder, whereas they will favour job creation for higher-skilled, higher-paid workers. 

“Those converging wage pressures left to their own devices, and all other things being equal, could mean higher income inequality.”

However, Mr Noura remains optimistic that Australia can achieve a positive win-win scenario.

“This will require simultaneous efforts on two fronts,” he said.

“On the one hand, employers and the government and other stakeholders need to do everything that they can to actually accelerate the pace of automation; at the same time working together to ensure that they implement effective policies to help workers transition and to ensure that the gains from automation are broadly shared.”

Also speaking at the CEDA event Australia Post Chief Executive Officer, Christine Holgate, said if Australian companies don’t invest in automation they won’t grow efficiently. 

“We need our biggest employers, our biggest companies, to grow, so that jobs can grow, so that wages can grow," she said. 

“If we don't invest in automation, they won't grow efficiently. So, if you want to protect your jobs, if you want to grow your companies, you want to be more efficient, you want your shareholders to be happy, if you want to get more of that global market out there, we have to be more efficient.”

Speaking about the job threats from automation, Ms Holgate said major companies have almost a moral obligation to think about how they repurpose jobs. 

“I have a view that as a CEO of a company that indirectly employs over 80,000 people, we have an obligation as a leadership team to help those people keep their jobs,” she said.

“For every person that we employ, we know from economic research two more jobs are created in the economy.

“Sixty-five per cent of our people work out of metro centres, so if we just go and close down a delivery centre and cut 300 jobs, that's probably 900 jobs in a small town which would have a massive impact on that society.

“We have trained in the last 18 months something like 30,000 people in customer service training, because, actually, when you're knocking on the door, they have to have some interpersonal skills.

“So, it's not about taking people from being the postie to data analytics, it's taking that person from being a postie to being a delivery person who actually has some customer service skills.” 

Melbourne Business School Dean, Professor Ian Harper, said, as a country, Australia has always been concerned about the distributional aspects from changes like automation, and deliberate government intervention can be used to make it possible for people to reorient their lives.  

“I can't imagine that in this day and age, frankly, a party of either political persuasion would be allowed to get away with the government just turning its back on this sort of massive transformation,” he said.

“The government already lends people money to get trained, whether it's in the VET system or in the higher education system, but they do it at the beginning in one lump.

“All this change is saying you’ve got to be trained throughout, you're going to go in and out and the education system has to respond to that.

“And for the government to assist that, you need access to a HECS loan, or its equivalent, that you can pop in and out of throughout your career. 

“That's a change the government can make, I think, relatively easily, without increasing the debt that the Commonwealth incurs. You're just changing the term over which these arrangements take place.”
