Are we behaving like the boiling frog?

Remember the story of the boiling frog? You put a frog in a vessel of water and start heating the water. As the temperature of the water rises, the frog slowly adjusts its body temperature according to the increasing water temperature. Just when the water is about to reach boiling point, the frog cannot adjust anymore and decides to jump out. Unfortunately, at this point it has lost all its strength and it dies.

Is Australia experiencing the boiling frog syndrome right now? Are we impacted by significant issues that we do not recognize as pertinent to our future? Is the heat rising but we are waiting until it’s too late to take action?

One could almost think so when looking at these three major trends impacting our lives right now:

-         Contrary to what we heard in the election campaign just a few weeks ago, Australia’s economic outlook is far from great. Our reliance on natural resources and services industries and our lack of economic reinvention/diversification are catching up with us. In addition, we are affected by significant global uncertainty which Christine Lagarde from the International Monetary Fund (IMF) described as a delicate moment in the global economy. This is due to trade wars, geo-political tensions, the rebalancing of relative weights in the global economy, and precarious growth forecasts in many of our trading partners. Joanne Masters, EY’s Chief Economist describes the Australian economy as having the “slowest growth since 2009” with growth at “effectively zero when excluding government spending and net exports”. Consumer sentiment tumbled from net optimism to pessimism after the recent RBA rate cuts and we have yet to see whether consumers will use tax cuts to reduce their debt or whether they spend it. The former will not stimulate the economy.

-         Technology changes are regularly leading to job losses as a result of automation, for example recently at Telstra. Recent surveys show that most industries are now focused on getting the efficiencies offered by automation and the cumulative impact of job losses is starting to be noticeable. No doubt new technology driven jobs also get created but so far they are not making up for the numbers lost. As always there are a range of views on what the future of work might actually look like. A just released report by EY shows that while investment in automation in Australia is increasing, little is being done to transition workers to the new environment. It found that Australia is at a tipping point with significant new investment in technology but high complacency about how to construct a meaningful future of work. Importantly it rightly stresses the fact that the “future of work” is here now and is not something to put off dealing with. It recommends the whole education ecosystem work closely together, led by the relevant government agencies and involving industry in developing a way forward. In contrast, other reports posit the view that technology will not replace but enhance human activity in the workplace and lead to a more educated workforce in non-routine, cognitive based jobs. A new report by the Centre for the New Workforce at Swinburne University acknowledges the significant disruptions underway while emphasising the importance of “soft competencies” in the future workplace: “From collaboration, empathy and social skills to entrepreneurial skills, these social competencies are less vulnerable to being displaced by AI and automation.” Just last week we saw reports that thirty million manufacturing jobs will disappear across the world and that South Australia and Victoria are most vulnerable to the impacts of automation. Whatever position their authors might take, all recent reports acknowledge that significant disruption to the workforce is underway with more to come. What we need is a systemic plan for how to deal with the inevitable impact on our economy and society – and that plan is currently non-existent. 

-         Climate change, is now prominently on the agenda of business leaders as demonstrated in a recent survey by Australian Institute of Company Directors. It is recognised as presenting ever increasing challenges with extreme weather events more frequent and an expectation of adverse economic impacts that potentially threaten financial system stability. Just this week a new report revealed that nearly a billion people are facing climate change hazards globally. The Asia-Pacific region includes twice as many people living in areas with high exposure than all other regions combined. More than 2.4 million Australians “live in areas with high or very high exposure to climate hazards including cyclones, floods, bushfires, desertification and rising sea levels”. The really chilling fact is that we have known about climate change and the altering effects of human activity since 1979 as the book Losing Earth – A Recent History by Nathaniel Rich points out. The Paris agreement hoped to restrict warming to 2 degrees Celsius, a goal that seems less and less likely to be achieved. And let’s be clear: 2 degrees still requires us to deal with sea level rises by several metres and the extinction of tropical reefs. Over the years there were many attempts to move to action but we are now at a point of real urgency – or as Ken Caldeira from Stanford university puts it “We’re increasingly shifting from a mode of predicting what’s going to happen to a mode of trying to explain what happened”.

These are issues that directly impact our lives right now but they are not – yet – highly visible in the public discourse and in most citizens’ minds. As previously pointed out there was lack of explicit discussion of these crucial issues evident in the recent election campaign. At a time when we need Government to take a lead in addressing these issues at a whole-of-society level, we saw virtually no discussion on the global interconnectedness of our economy or the prominent impact of technology on our labour market and economy – and certainly no concrete steps to address climate change.

The CSIRO released a warning last week asking “What kind of country will Australia be in 2060?” It presented two options: the “Slow Decline” and the “Outlook Vision”. To achieve the latter – a repositioning of Australia - it recommends action across five major “shifts”: industry, urban, energy, land and culture. All of this requires deliberate public debate, long-term planning and careful implementation.

Are we ready for this? Are there signs that we understand the need for change? Some analysts described the outcomes of the recent Australian election as a vote for the status quo. There are many ways of interpreting the current Australian zeitgeist but I believe it reflects a growing nervousness about changes that are intuitively perceived without yet having been given full expression. It is an underlying nervousness rather than adrenalin charged fear. 

Let’s not behave like the boiling frog, just feeling a distinct level of discomfort but going along with it without taking decisive action.

That’s why EY will host a series of roundtables involving business and government leaders as well as citizens on these topics in coming months. These discussions will be designed to explore their impact on Australia’s economy and society and encourage joint action on key topics affecting our future. Let’s draw on the Australian spirit of coming together when there is a crisis. The good thing is the water isn’t boiling yet – there is still a chance to work on solutions and to galvanize citizens, business and government into collective action. But there’s not a lot of time!