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Forget the budget deficit. Forget the current account deficit. Australia's real problem, says The University of Western Australia Business School Accounting and Finance Professor Ray da Silva Rosa, is a brains deficit.

It wasn't so long ago that politicians were talking about a creative economy, a knowledge nation, a country founded on innovation. In the 2001 election campaign, Opposition Leader Kim Beazley outlined his vision for Australia, promising to create a knowledge nation through increased investment in research, higher education, and biotechnology.

With the 2010 election over, Professor da Silva Rosa is calling on the political parties to focus again on Australia's future as a knowledge economy by committing to increased investment in higher education.

‘My view is that the great issues in Australian politics revolve around the best way to deal with the country's five systemic deficits: a brain deficit, a baby deficit, a labour deficit, a capital deficit and a budget deficit,' he says.

‘To make my point clear: a brain deficit doesn't imply that we have no brains in Australia, just not enough relative to our needs.  What we need - as several major reports have noted - is to train and replace an ageing academic workforce.'

This was a problem recognised by then Education Minister Julia Gillard at the Universities Australia Conference in March last year. ‘In an era when investment in knowledge and skills promises to be the ultimate determinant of national and individual prosperity, Australia is losing ground against our competitors,' she said. ‘Our academic workforce is ageing and many of our best are being lured overseas.'

The problem of an ageing academic workforce was highlighted again this year, when a study by Melbourne University found that a quarter of Australia's senior academics would be retiring within the next five years, and 5,000 would have retired within a decade.

Professor Lynn Meek, who co-authored the study, said that it was becoming increasingly harder to attract and retain senior academic staff. ‘Over the last 15 years there's been an increase of the staff-student ratio from around 13 to 22. At the same time, funding to Australian universities has actually fallen in real terms between 1996 and 2004,' he explained.

The loss of academic staff will be felt far beyond universities. A 2001 report to the Chiefley Research Centre found that Australia was investing far less in education and research and development (R&D) than other Organisation for Economic Co-operation and Development (OECD) nations.

Such underinvestment resulted in Australia being ranked last among comparable OECD countries when comparing the contribution of local information and communications industries to the national economy. Australia's trade deficit in knowledge-intensive goods, the report found, and was then contributing to the expansion of our foreign debt.

So much for the knowledge nation.

Investing in universities is the first step in creating a skilled workforce, says Professor da Silva Rosa. ‘The labour deficit is widely acknowledged, yet the sole policy response of both parties seems to be about identifying a way to increase skilled immigration without scaring the natives,' argues Professor da Silva Rosa. ‘What we should be thinking about is increasing productivity per capita.  Increasing the supply of labour simply makes it easy to avoid increasing labour productivity.

‘Increasing labour productivity is not about decreasing wages and increasing the flexibility of employees to fire workers. It should be about encouraging workers to make the personal investments in skills to enhance their productivity. This may well mean increasing their security of tenure. After all, why would one invest in one's skills if there is no assurance that they won't be used?'

As an example, Professor da Silva Rosa cites the lack of incentives for postgraduate research students. ‘We don't have anywhere nearly enough people in PhD programmes or attracted to academic life to replace the ones who will be retiring over the next few years,' he says. ‘The best long-term solution is to invest to make academia more attractive.'

The sentiment is shared by Universities Australia, the vice-chancellors' organisation, which last week called on the political parties to commit to an increase in tertiary education funding in order to boost the number of PhD places available.

Last year, speaking after the delivery of the Bradley Review of Australian Higher Education, Julia Gillard told us that we needed to raise the proportion of Australians with tertiary education qualifications. ‘Australia has reached a critical juncture,' she said. ‘As a nation we failed to make the boom years pay. We underinvested. We lived off the human capital accumulated in previous decades. In higher education we now have a choice. We can address these problems, regain touch with the top-ranked nations or watch our prosperity decline.'

Professor da Silva Rosa is now reminding the new government that the brains deficit must be addressed. ‘The budget deficit gets a lot of attention,' he says. ‘The reality is that we don't have much of a problem with the budget deficit at all. This election, it has been said that both political parties are playing it safe and don't have grand ideas. We can spend $20 billion or thereabouts on insulation. Why not half that amount on improving universities?'

Invest in higher education, create a knowledge economy and avoid a deficit. That is the Accounting and Finance professor's vision for Australia's future.

Media references

Heather Merritt
Director, External Relations
UWA Business School
T: +618 6488 8171
E: [email protected]

Verity Chia
Communications Officer
UWA Business School
E: [email protected]