Channel the corporate raiders to boost productivity: PwC economist urges business to get overseas while the going is good

Australian business has been disappointingly slow in expanding overseas and must better prepare themselves for the end of the mining boom, PwC partner and economist Jeremy Thorpe says.

Thorpe says business needs to think – and act – like the corporate raiders Australia has sometimes decried.

“When the dollar has been low here, people bought our assets and many bemoaned them as ‘corporate raiders,’” Thorpe says.

Now the tables have turned, Thorpe says smart companies should be capitalising on discounted prices overseas and our high local currency to snap up assets in new markets.

“We’re not seeing enough of that.”

He points out that while some firms might have just cause for caution when thinking about investing or buying overseas, there’s little room for complacency when it comes to productivity. The mining boom will come to an end in the next decade and expose badly performing firms.

The comments come as PwC’s productivity scorecard shows labour productivity in the December quarter rose by 0.7%, rebounding from a 0.6% fall the previous quarter. This means that productivity lifted by 1.1% in the year to December 2011.

The report finds that labour productivity has declined for the past decade, in part because of the lag between the investment phase in mining and increased output.

Thorpe urges businesses to dump their wishful thinking, or “optimistic bias”, that the Australian dollar will return to its historical average of under US80c.

“If we don’t become more productive in the non-mining sector, as the boom falls away we won’t have the companies to step up,” he says.

“Two-thirds of our GDP figure is attributable to 20% of the economy [resources]. Take that out, and our GDP performance is nowhere near acceptable.”

According to Thorpe, the best-case scenario is the companies that survive the next decade of the mining boom will be well placed to compete internationally, having survived the local currency trading at $US1.05.


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