Austrade's chief economist outlines keys to economic prosperity

Speaking at the summit, Harcourt responded to visiting Harvard Graduate School of Business Administration, Professor Richard Vietor’s, who has put together a political economy tract on ‘How Countries Compete’, view as well as the factors and markets which will influence Australia’s future.

Harcourt said, Vietor’s work is important as it highlights the interplay between openness to trade and getting your economic institutions right.

“Vietor’s research shows that it is important for an economy to be open to trade and investment. However, it’s necessary but not sufficient to create economic and social prosperity in your own country,” Harcourt said.

“Australia is also a good case in point. Starting with the float of the dollar in 1983, and the reductions in protection, we did the right things in terms of opening up the economy.

However, we also worked hard on getting social institutions right as well, in terms of education and training, labour market adjustment and national savings through the introduction of superannuation and regional development.

“Australia’s reforms in opening up the economy came at the same time that the focus of the world economy shifted to the Asia Pacific and we found ourselves in the right place at the right time. We are the lucky country but we made our own luck,” Harcourt said.

However, Harcourt said despite these positive initiatives there was still a lot of work ahead and there is a greater need for investment in human capital through education and training.

Similarly, more work was needed on the supply side of the economy in terms of infrastructure and building Australia’s global capabilities.

“The global economy is in its best shape since the 1970s. It’s firing on all cylinders and there are more cylinders to fire on with the emerging markets in Asia, Eastern Europe, the Middle East and Latin America playing an important role.

“But despite the sub-prime mortgage market issue, the US economy remains strong and is an attractive market for the 9,000 plus Australian exporters. It is also significant for the emerging Australian global companies who are moving beyond traditional exporting and importing activities to investing from within the US market itself.”