There's still time to have your say on industry policy reforms to shape NSW's future

In May 2022, Investment NSW released its Green Paper titled Securing future innovation and global competitiveness in NSW. The Green Paper explores a range of transformative forces driving structural economic change over the next 10 to 15 years which will in turn shape the direction of industry policy reform in NSW.

The Green Paper builds on the NSW Trade Statement released in October 2021 and NSW Industry Development Framework released in February 2022, and is set to be followed by further consultation and the release of a White Paper on Industry Policy in December 2022 that will lay the foundation for the State’s economy over the next 10 to 15 years.

What is Industry Policy?

"Industry Policy" uses targeted government interventions to improve the business environment or shift the structure of economic activity towards sectors or technologies that offer better prospects for economic growth. It operates within the wider set of macroeconomic, trade, environmental and labour market policies, and is one component of the NSW Government’s broader economic strategy to promote the economic conditions in which industries and businesses can thrive.

Earlier policy statements and targets

In the October 2021 NSW Trade Statement, the NSW Government set an ambitious target to double the value of NSW’s exports from A$96 billion to A$200 billion by 2031. The Statement also outlined plans to expand the existing NSW export profile by increasing exports as a percentage of NSW’s economy and by growing and diversifying the nature of NSW’s exports, with five key strategies and 30 actions identified to facilitate these aims.

The February 2022 NSW Industry Development Framework was focused more broadly on how the NSW Government – working in partnership with the private sector, research institutions and other levels of government – will support the growth of priority industries. The Framework outlined the following priority emerging and existing industries which are considered most likely to deliver public benefits and will be the focus of interventions that accelerate growth by enhancing innovation and the uptake of core enabling technologies:

This latest Green Paper is the next step in Industry Policy reform, with the NSW Government acknowledging that the economy is in a state of major transition due to market conditions and disruptions such as decarbonisation, technological change, shifting economic power, demographic change and changing global value chains. The COVID-19 pandemic has further reinforced the urgency of addressing these shifts, with uncertainty in the post-pandemic period resulting in a tighter fiscal environment, meaning interventions will need to be prioritised and focused on measures that lift productivity and promote industry competitiveness.

What are the key transformative forces identified?

The Green Paper identifies the following five key transformative forces creating challenges and opportunities for local industry in NSW:

1. Shifting to an increasingly digital economy. Digital technologies are increasingly helping businesses connect to consumers, interact with suppliers and enhance production processes, including how resources are used and sourced through dispersed value chains, with the advent of automation and big data also creating more opportunities. However, these opportunities may be tempered by challenges such as cybersecurity concerns, the "race to the bottom" mentality (with "gig" workers not receiving equal protection given to formal employees) and global volatility.
2. Capitalising on growing consumer markets in Asia. Despite rising geopolitical tensions, NSW has strong people, trade and investment links with Asia, with the added benefit of being in the same region and time zone. The Green Paper points not just to China and India but also places like Indonesia, Pakistan, Bangladesh, the Philippines and Vietnam, all of which have a fast-expanding middle class. Demand from these places for NSW's resources is therefore forecast to grow, whether it be for agricultural products and minerals, medical devices, food processing, tourism or education, alongside an array of services that NSW can provide as these Asian economies shift production to more sophisticated goods and services.
3. Transition to net zero emissions by 2050. In the pursuit of net zero carbon emissions by 2050, the challenge for NSW is to effectively co-ordinate the transition to, and increase its share of, renewables in the electricity system. This is turn can lead to new jobs in the renewable energy sector along with the emergence of new supply chains, manufacturing capabilities, and supporting infrastructure. The Green Paper notes NSW is well placed to be a leading location for decarbonising industries, due to its highly skilled workforce, strong financial markets, innovation ecosystems and abundance of natural resources, including access to critical minerals and wind and solar resources. However, co-ordinated action across customers, investors, governments and along supply chains will be pivotal in determining the pace and scale of this transition.
4. Building a circular economy. The aim of building a circular economy is to alleviate resource scarcity and reduce waste by promoting an alternative "regenerative" model of production and consumption, rather than consuming natural resources faster than the rate at which they can be regenerated. To do so will require action across supply chains and changes in consumer and industry behaviours, including the way products are designed and services are provided, and how value can be captured from materials that are sent to landfill. As the concepts of circular economies and sustainable growth are adopted globally, it will create additional costs and benefits for NSW industries, with costs diminishing over time as the technologies mature.
5. Harnessing new opportunities and managing risks in global value chains. Global value chains (GVCs) have become a dominant feature of world trade as production activities shift to locations across different countries offering the required skills and materials at a competitive cost and quality. NSW has a strong services sector that has supported and benefited from the growth of global supply chains; however, there are also associated risks with GVCs, including geopolitical events, the pandemic and natural disasters leading to demand and supply shocks. New opportunities also exist with new technologies enabling advanced manufacturing production to be more local, diminishing the former competitive advantages from economies of scale.