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Benefits and challenges of globalisation

By Peter Costello - posted Wednesday, 15 August 2001


I think the answer is that as people see decisions taken in far-off countries that affect their lives but which they have no influence over, it tends to lead to a sense of powerlessness, maybe resentment or anger.

I am not sure if the individual has less control or influence in modern society than they did 20 or 50 or 100 years ago. But I am sure that they want more. Expectations are rising.

Because we now have immediacy in communication people expect more consultation. They have the capacity to put views on daily events and they expect them to be listened to.

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Elections occur only every three years. People want a say more often than that hence the proliferation of vote lines, 1800 numbers and daily talkback radio. People can decide who took the best catch in a Test Match or who should be evicted from the Big Brother home so why not have more important decisions determined on the same basis? Decisions that are made outside the country or outside the broadcast area seem to be much harder to influence again.

Despite the publicity given to individual foreign takeover proposals, the proportion of Australian equity owned by non-residents has remained steady at around 29 per cent since 1993-94.

On the other side of the coin, Australians have become large owners of overseas business assets. Since 1993-94 around $A30 billion has been invested in direct interests in overseas-located companies. Tomorrows icons may well come from these overseas business interests as much as from Australian based companies.

What we know of investment is that departures are visible and arrivals are unnoticed. This is of the nature of media which can film a closure together with individuals affected by it. It is much harder to film potential beneficiaries of new investment. And it is not nearly as interesting a story. News thrives on a sense of crisis.

A recent arrival in Australia is ABN AMRO Australia, which employs around 750 staff in Sydney, Melbourne and Brisbane.

Architectural services provides an example of Australians capitalising on global opportunities. The world market for architecture is perhaps A$3 billion a year. Australia is currently a small player, but off-shore earnings from architecture is some 16 to 20 per cent of Australian architects' fees. Denton Corker Marshall, a leading Australian design practice, and the youthful Sydney architectural firm of John Choi and Tai Ropiha, are enterprises that have both taken advantage to win spectacular successes overseas.

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Size does matter if you are selling goods or services, or raising capital. Australia is a market of almost 20 million people and about US $200 billion in terms of private final consumption expenditure. In comparison, the EU is a market of 375 million people and almost US $4600 billion, and the North American Free Trade Area is a market of 400 million people and over US $7500 billion.2

There is strong pressure on Australian companies to gravitate to the large markets of the Northern Hemisphere and to seek capital from the savings of the large block of affluent people who live in the Northern Hemisphere.

But keeping up with the competitive game will require a whole range of pro-investment decisions on labour relations and monetary policy and skill development. And most of all a determination not to run from the rest of the world, but to adapt and change and harness the best opportunities that it offers us.

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This is an edited extract from an address to The Sydney Institute on Wednesday, 25 July 2001. Click here for the full transcript.



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About the Author

Peter Costello AO is a former, and longest serving, Commonwealth Treasurer. He is a company director and a corporate advisor with the boutique firm ECG Financial Pty Ltd which advises on mergers and acquisitions, foreign investment, competition and regulatory issues.

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