Advancing into the 21st Century: Visions and Challenges Facing the Downunder Economy

Abstract

Long‐term visions serve to focus on essentials for sustained economic and social welfare. We now have to face up to the challenge of globalisation (growing international capital mobility), at a time when we are undoing our historic, self‐imposed protectionism. This also creates new opportunities, in particular in the dynamic Asia‐Pacific economies.There still is a ‘window of opportunity’ before an aging population will become a dominant problem. In the next 25 years, business will have to cope with high real interest rates and major uncertainties that now surround environmental policies.If we are to take on these challenges in constructive and beneficial ways, we have to develop an institutional order that enables the utilisation of knowledge by enterprising people. This requires a simple, transparent and reliable legal and regulatory framework, which supports competitive market processes, and the defence of openness to international trade and capital flows against particular interest groups.It seems plausible that the Downunder economy can grow over the next 25 years at about 3.5 per cent per capita if the right institutional conditions are created. If we fail to do so, a growing share of the capital, the skills and the enterprise made Down‐under will move to offshore locations which encourage a better use of knowledge and capital by enterprising people. This would deprive many of economic opportunity. The central challenge therefore is to develop a system of government and labour relations which makes the Downunder economy internationally attractive.