The recently released NSW 2040 Economic Blueprint highlights the continued and increasing attractiveness of NSW as a place for domestic and foreign companies and investors to do business. It also emphasises the NSW Government's commitment to fostering business growth, particularly through supporting and rewarding innovation. The Blueprint provides food for thought for businesses and investors as they consider how they might fit into the NSW landscape as the State develops over the next two decades.
The current position: NSW is doing well, but…
The Government suggests that NSW is currently in a strong economic position, citing factors such as the State's high employment, population with above average disposable income, budget surplus and AAA credit rating. NSW's highly educated workforce has fuelled growth in service industries, such as education and tourism, which has proven lucrative.
Despite this success, there is still much room for improvement. The Blueprint outlines a range of challenges facing NSW, including inefficient taxation, overly restrictive regulation, poor regional connectivity, congestion, and poor collaboration between large business and higher education, all of which hamper greater productivity and growth for the State.
Technological innovation the key to future success
A recurring theme throughout the Blueprint is the disruptive power of technology. The Government highlights that as technologies such as automation, robotics and artificial intelligence evolve, industries and jobs of the past will change and risk becoming obsolete unless they adapt. To remain globally competitive, Australian products and services must advance in economic complexity, which is driven by investment in research and development (R&D), employing high-skilled workers and creating extensive domestic supply chains. Harnessing changing technologies to innovate and value-add to existing industries will therefore drive a stronger economy in NSW.
To encourage this innovation, the State Government will focus on eliminating inefficient taxes such as transfer duty, easing regulation (particularly in areas of fast evolving technology or business models where regulation is hindering innovation), and implementing R&D incentive schemes, such as providing seed funding, grants, tax concessions and support for new commercial partnerships.
One particular initiative of interest is the creation and development of new innovation precincts, such as the existing Sydney Startup Hub and the planned Sydney Technology and Innovation Precinct. These precincts will foster innovation by providing affordable work spaces for start-ups and early stage companies, encouraging collaboration between businesses and universities, facilitating greater knowledge-sharing and the commercialisation of research, and concentrating areas of investment to facilitate further Government investment in training and R&D.
What does this mean?
Businesses that demonstrate their commitment to innovation are more likely to be eligible for NSW Government funding and participation in initiatives such as the innovation precincts. This could mean, for example:
- investing in R&D, employing high-skilled and upskilling existing workers, and value-adding to their existing products or services;
- using technologies such as blockchain and cryptocurrencies; and
- exploring quantum computing, autonomous systems, artificial intelligence, the circular economy and advanced instrumentation.
Given the NSW Government's enormous purchasing power and its desire to adopt more evidence-based decision-making for its procurement decisions (rather than merely assessing matters based on cost), it is clear that the private sector should take heed of the above and incorporate more innovation into their daily practices.
Further future-proofing proposals in the pipeline
Businesses should also be aware of the further work that the NSW Government will be pursuing over the next few months, and consider how to leverage that work to benefit industry.
The NSW Productivity White Paper
Due to be released in late 2020, the NSW Productivity White Paper will give final recommendations to the NSW Government on its productivity agenda. The discussion paper preceding the White Paper identified six priority areas to improve productivity:
- Building human capital for a modern and evolving economy.
- Reliable, sustainable and productive use of our water and energy.
- Smart ways to get more from our infrastructure.
- Modernising our tax system to help our economy grow.
- Planning for the housing we want and the jobs we need.
- Forward-looking regulation to support competition and innovation.
In the first half of 2020, a Green Paper that refines the priority areas and policy options will be released, alongside ongoing consultation with the business community.
The NSW Review of Federal Financial Relations
This paper will announce the findings of the review panel appointed to assess the NSW revenue system as it relates to federal funding and its interactions with the state tax system.
The NSW Research and Development Plan of Action
The NSW Government has set up an Advisory Council to investigate how to accelerate R&D investment in the State. The Council is slated to release a Plan of Action later this year to answer two key questions:
- How do we get the most out of NSW Government’s R&D activity?
- How can NSW Government support and improve the R&D and commercialisation ecosystem more generally?
The NSW Intergenerational Report
In 2021, the next iteration of the NSW Intergenerational Report will be released. This report is published every five years and projects demographic, workforce and housing trends across NSW over the next four decades. It also provides a long-term projection of the State’s economic and fiscal position.