The five megatrends that could shape Australia’s future
Global Trade and Investment Megatrends identifies five megatrends that will reshape global trade and investment in the coming months and years in response to the COVID-19 pandemic, with the report offering nine strategic actions for governments and industry to position Australia for economic success.
But what is a megatrend? Why is global trade and investment the focus? And what are some of the key insights to take away?
What is a megatrend
‘Megatrends’ is a phrase used to describe the dramatic intersection of several smaller trends to create some larger, more significant trajectory of change.
“Megatrends occur at the intersection of numerous trends which have tighter temporal, spatial and typological expression, while trends are often classified as geopolitical, economic, environmental, social and technological,” says Dr Stefan Hajkowicz, a senior scientist from the Strategic Insights research team at CSIRO’s Data61.
“Techniques of megatrends analysis typically involve horizon scanning (trends identification) and trends-synthesis.”
In this rapidly changing landscape filled with often unprecedented events, gaining insights on the future is crucial to successfully adapting and advancing.
Why trade and investment
Trade and investment strategies responding to the new normal of the mid/post-COVID-19 world will boost jobs and growth plus speed up Australia’s economic recovery.
Trade and investment are a powerful way to escape an economic slump. Australia’s economy is both export- exposed and export-benefiting. If we read the signals of change early and strike fast, we can harness opportunities, mitigate risks and speed up Australia’s economic recovery.
The 5 megatrends
1 – Digital transformation
We’ve seen a decade’s worth of digital transformation occur within the space of a few months. The digital technology sector is expanding worldwide despite the global economic downturn, with the digital economy showing signs of quicker and stronger growth in the wake of the COVID-19 economic crisis.
It’s the inevitable consequence of economic and social activity being transferred from the physical world to the virtual, with telework, telehealth, online retail, online education, and online entertainment all seeing a significant uptake. Much of this newly virtualised activity is likely to remain so post-crisis, causing long-term structural shifts in global trade.
The key opportunity of this megatrend is the chance for Australian companies to ramp-up digitally-enabled exports and acquire domestic and globally produced digital technologies to improve the efficiency of their operations.
This could enable foreign direct investment (FDI), another avenue that could amplify Australia’s well-established and rapidly growing digital technology sector.
2 – Investing in supply chain resilience
With global supply chains freezing during the COVID-19 crisis, many companies have been unable to source crucial materials needed to provide their products and services. As a result, the need for more resilient, stable, and diversified supply chains has become critical to economic recovery.
International companies are now looking to invest in technologies and innovative solutions to ensure smarter supply chains and logistics systems, providing Australia with an opportunity.
The effective risk management of COVID-19 has allowed Australia to remain a world leader in supply chain integrity, and even though trade and investment are set to contract sharply over coming months and years, there is an opportunity for Australia to capitalise on the safe-haven effect.
The emergence of new information and telecommunication technologies such as artificial intelligence (AI), additive manufacturing (eg, 3D printing), 5G, blockchain and Internet-of-Things (IoT) and their effectiveness in achieving cost-effective, reliable and quality objectives will only complete Australia’s ‘safe haven’ reputation.
3 – Staying closer to home
COVID-19 has caused much of humanity to increasingly look closer to home for solutions.
In the short-to-medium term, we are likely to see governments and citizens worldwide turn to local options and trusted countries for tourism, manufacturing, and services. A much stronger economic, trade, and cultural connection to local places during and after the pandemic is expected.
Business models that respond to this trend will benefit, with tourism and education the two largest industries requiring an overhaul.
Domestic tourism is anticipated to recover quickly in Australia once the health crisis is resolved, with Australia’s ‘safe haven’ drawcard making it an alluring international destination once global tourism is safe to resume.
Collaboration and investment attraction to the education and research sectors will be critical for the sector’s post-pandemic recovery, especially if the current contraction of the international student market continues.
Arguably the most promising avenue for Australian universities to continue offering a digitised and remote learning version of their renowned programs to international students.
There is scope to substantially grow, diversify and improve the quality and quantity of online learning, while there may be opportunities to provide offshore campuses, which negate the need for overseas students to cross international borders.
4 – A changing economic landscape
This megatrend explores the changes in the world economy with implications for a post-pandemic recovery strategy. Australia is well-positioned to translate the challenges of the economic situation into opportunities for growth and access to new export destinations.
Compared to other nations, Australia has done well in terms of COVID-19-related health impacts. Because of this, the nation might be in a better position to start the economic recovery.
However, a generation of Australians will train, work and live in an economy primarily concerned with rebuilding and recovering from the economic shock of COVID-19. This will be exacerbated by pre-pandemic factors that are now developing into trends – ongoing low growth, low productivity, gender inequality, trade tensions, and corporate debt to GDP.
But there are numerous opportunities to seize. The financial technology sector has the potential to become a lucrative export, while Australia’s digital goods and services market, which made upwards of $6 billion in exports in 2018, making it Australia’s fourth larger export sector, could be worth $19 billion by 2030.
The crisis has highlighted the importance of the digital economy and the need to ‘bridge the digital divide’ in connecting regions and population groups to digital opportunities such as e-commerce.
Other opportunities associated with this megatrend are chances to attract science and technology talent from overseas, with people looking for a healthier and more economically stable place to live and work.
Even though current economic conditions are extremely challenging, there are good reasons why the Australian and global economies can bounce back.
5 – The ‘new normal’
Following the disruption caused by a devastating 2019–20 summer bushfire season, the global COVID-19 pandemic, escalating cyberattacks, and rising international tensions, a ‘new normal’ is being used to describe Australia’s immediate future.
While at first glance it may look bleak, with rising unemployment, restricted social and recreational activities, and economic challenges, such large-scale disruption provides the opportunity to shift the status quo in more positive directions.
During the pandemic fatalities from road accidents decreased, global armed conflict continued to decline, and investment in sustainable and collaborative smart cities has increased.
Harnessing the opportunities highlighted in this report to avoid returning to the ‘old normal’ will be key in determining Australia’s recovery over the next several years.
As we enter the new normal, there is an increased need to be able to see what’s coming and reset strategies to take advantage of new sources of opportunity and mitigate new sources of risk.
As the competitive landscape reshapes over the coming months and years, early and strategic actions to achieve first-mover advantage will be necessary. Global Trade and Investment Megatrends identifies nine key strategic actions for Australian businesses, sectors and industries to lead by example, starting on page seven.