The recent cyberattacks by a “state-based cyber actor” on Australia underscores the necessary public policy shift the centre-right must make in relation to the role of industry policy in 2020. 

By announcing  the Cyber Enhanced Situational Awareness and Response (CESAR) package and the 2020 Defence Strategic Update and 2020 Force Structure Plan  yesterday, the Morrison Government has sent a strong signal of intent to protect the national security and economic interests of Australia. This week the government also announced that they will be boosting munitions manufacturing capability in Australia. 

As a country we need to view the cyberattacks as our “Sputnik moment“; the launch of Sputnik 1, the world’s first artificial satellite, by the Soviet Union in 1957. The event shocked the United States public, rocked the political and defence establishments and led to the formation of the National Aeronautics and Space Administration (NASA) in 1958.  

The government needs to go beyond a “package” approach however and establish a long-term high technology industry policy. This policy would involve direct government investment in priority areas including R&D infrastructure combined with a facilitating rather than obstructionist regulatory regime. 

As a former investment banker who worked on government privatisations, my small government policy perspective is informed by being an implementor of small government policies, not a theoretician at a think tank. 

To no longer support a high technology industry policy focused on the long-term national security and economic position of Australia, is to place Austrian economic theory of the 1920s ahead of the increasingly mercantilist reality of the Indo-Pacific in 2020.  

Republican Senator Marco Rubio outlined a centre-right industry policy in 2019: 

What I am calling for us to do is remember that from World War II to the Space Race and beyond, a capitalist America has always relied on public-private collaboration to further our national security… This kind of collaboration is not a rejection of capitalism. It is a call to encourage and harness the dynamism of our economy’s most productive private industries to further our national security and ultimately our national economic development.

The urgency of this situation for Australia is magnified by the increasing sovereign risk attached to the United States as it descends further into a cultural civil war. Australia can no longer rely on the United States as our security guarantor, regardless of who is in the White House after the Presidential election.  

In advocating a high technology industry policy, this does not mean Australia should compete against the United States, Russia, China and France in every high technology areas as this will fail. We do not have the human capital, industrial base nor financial resources to compete across every high technology domain. 

An optimum policy is focused on high technology areas where we already have world-leading research and development capability onshore and world-leading researchers working offshore. These areas include quantum computing and synthetic biology. 

The adoption of quantum computing in the future will likely render redundant the established global digital order and Australia’s established national security infrastructure. Google tested a quantum computer in October last year and in releasing the results stated “Our machine performed the target computation in 200 seconds, and from measurements in our experiment we determined that it would take the world’s fastest supercomputer 10,000 years to produce a similar output.” Consider the implications of this technology from a hacking perspective. 

Australia already has significant capability in quantum computing, with UNSW researchers currently ahead of Google and IBM in a key technical aspect to enable large scale commercialisation of the technology. This should be a focus area in the federal government’s high technology industry policy. 

Synthetic biology is the application of engineering principles to biology. One of the biggest industries impacted by this technology will be the agriculture sector which was worth around $69 billion to the Australian economy in 2018-19. Australia again has significant capabilities in this area centred around Macquarie University. Synthetic biology should be a focus area in the federal government’s high technology industry policy. 

The standard argument used against a high technology industry policy is that government should not be picking winners.  

The reality is that the federal government is already picking an industry winner and has a low technology industry policy. The winner picked is the residential investment property sector. The low technology industry policy is called negative gearing and the cost can be measured in the billions.  

What would be a better investment in the long-term economic and national security of Australia? Subsidising speculative property flipping or investing in targeted high technology areas where we have an existing capability? 

Malcolm Turnbull at least attempted to put technology investment at the forefront of government thinking. His emphasis, though, on what the economic benefits of technology investment meant for the Australian economy was never going to be a political winner in 2016.  

A better political strategy would have been to focus on what a lack of technological investment means for the national security of Australia.  

The cyberattacks mean that investment in high technology industries is no longer an esoteric policy issue reserved for the rôti de bœuf au jus and sparkling mineral water crowd at a CEDA lunch.  

The Australian public increasingly wants to know how government is going to defend our national security and economic interests. 

This is our Sputnik moment. 

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