StartCon 2019 has now come and gone, with tickets already on sale for StartCon 2020 and the focus now on the next decade of innovation and technological advancement - just as long as we don't blow ourselves up through financial, geopolitical, environmental, nuclear or national political misadventure first.
Humankind has a long and storied history of muddling through, however, and looking around us, at the technological achievements that set us apart from the rest of human history, and you can see we've done pretty well, all things considered.
Of course, politicians and other instruments of government do tend to get in the way of free markets, thinking that they are the centre of the universe, or that they are the ones that are responsible for job creation, when most of us know full well that, as Ronald Reagan so wisely said, government is the problem, not the solution.
So, what did Malcolm Turnbull say in his keynote speech? Well, it's all below, first with the video, and second with the full transcript, but it has to be noted that I don't personally agree with Malcolm Turnbull's characterisation of the NBN.
He implied that only a few wise people could see the coming importance of streaming, or that 100 megabit download speeds were enough, which, of course, completely ignores the importance of upload speeds.
With 4K a reality for many households, and streaming services aplenty able to deliver 4K streams, along with plenty of devices that can display 4K content, never before has the need for high bandwidth able to deliver tens or even hundreds of megabits been more important.
Malcolm Turnbull also noted specific use cases for high bandwidth, but with so many online backup services backing up our phones, computers and tablets filled with tens or hundreds of gigabytes of photos, videos and other data, upload speeds are vitally important, and generally, they're much slower than download speeds - especially on cable networks.
So take a look at what Malcolm Turnbull had to say, and decide for yourself what it all means, and whether or not he could have done a better job while in power.
Here's the video, courtesy of StartCon, and after that is the full transcript - apologies for any typos I or Otter.ai might have made, please see the full video if you want clarity:
Matt Barrie, Freelancer.com CEO:
Welcome to StartCon 2019. It gives me great pleasure to introduce the Honorable Malcolm Turnbull, the 29th Prime Minister of Australia.
As Prime Minister, Malcolm’s first major initiative was to launch the National Innovation and Science Agenda where he committed over $1 billion dollars to increase support for innovative businesses, grow private sector investment in research commercialisation, increase the flow of venture capital to high potential startups, boost STEM skills and literacy and provide support for incubators and accelerators.
What you might not know about Malcolm is that prior to entering politics, he worked as a journalist, lawyer, merchant banker, and venture capitalist. As an investor he has said “When I was in business I did best out of startups”, and many of the VCs in the audience today would be envious of his track record.
Malcolm was the founding Chairman of OzEmail, one of Australia’s pioneering internet service providers, where he turned a $500,000 investment into a $57 million exit when OzEmail sold to Worldcom in 1999.
Ladies and Gentlemen, please welcome Malcolm Turnbull.
The Hon. Malcolm Turnbull, 29th Prime Minister of Australia:
Thank you very much, Matt. It's great to be here. Innovation is the key to productivity, it is the key to success in the modern world.
The times we are living in are unprecedented, in terms of the change that we face, the pace of change is unprecedented in both its scale and its pace. And what that means is that if you want to succeed as a nation or as a company, as an individual, you have to be prepared to embrace those times and you have to be prepared to make volatility your friend.
You can fight against it if you wish, but you'll lose. You have to recognise the times we live in and seize the opportunities they deliver. So that's what the National Innovation and Science Agenda (NISA) was about - my first major economic policy announcement in 2015.
And when I announced it with Christopher Pine and Wyatt Roy, the Minister and the Assistant Minister, I said that I could not guarantee that everything would work because journalists always say, "will you guarantee this will work?"
Well, I said some of these measures will not work, and we'll dump them.
Some of them will be reasonably effective and we'll seek to improve them. And if we see anybody doing something that achieves the same goals better than us, we will shamelessly plagiarise them - you can do that in government. I wouldn't encourage you to do that in software.
So the bottom line was, it was innovation. It was agile, and it recognised the nature of the times.
Now, the Innovation and Science agenda had many elements, two dozen, literally two dozen elements ranging from new funds, the biomedical translation fund, the CSIRO Innovation Fund, which manages tax concessions for early stage investment.
Changes to our corporate insolvency rules so that we had a greater emphasis on business continuity. It's always been a an agenda item of mine, because I admired the way Chapter 11 and the United States encourage businesses to keep going rather than allowing secured lenders to pull the shutters down and wipe everybody else out just so they could get their money back.
But it had a whole range of initiatives. And you know, some have done some of had greater impact than others. There's no doubt about that. But what we do know is that we have today a much stronger innovation ecosystem, and much stronger venture capital ecosystem than we had five or six years ago.
In fact, five years ago, there's was about $155 million raised for venture capital in Australia. In the last two years, it's over 10 times that amount. And you all know that Australia is now seen as a Centre for Innovation.
We are seeing so many unicorns developing, many of them represented here today and many Centurions will go on to become unicorns and startups. It'll become Centurions.
We are seeing that ecosystem develop. And it is in large part due to the encouragement that the National Innovation and Science Agenda gave. But I think, you know, you know why even more important than the particular measures was the fact that we started talking at a government level, about the importance of innovation.
Now, there are plenty of people that encouraged me not to do that, I might say. There are plenty of people in the political environment who believe that the way to win is to trade off, prey on people's fear of change.
And they said, if you talk about innovation, people will think that means there's going to be a change and someone with a computer is going to take their job. Well, that is a political reality.
And there are people that exploit fear of change in every environment. And this rise of populism, rise of protectionism around the world is a feature of that. But believe me, denying change in denying the importance of innovation is like denying climate change. It's denying reality. The world is changing.
So if you want to live in the past, as a country or as a company, in other words if you want to deny the changes that are around you, then you will get taken over, and you've only got to look at so many examples of businesses, great businesses that denied the changes around them, and then got wiped out by newcomers.
So if you are not prepared to disrupt your own business, to be prepared to, in effect, disrupt the way you're conducting your business, your system, your government, the way you govern, the way you administer the government, if you're not prepared to do that, somebody else will do it for you.
Now, one of the most important things about innovation is providing the ecosystem, the environment that supports it, and I've talked a little bit about the (National Innovation and Science Agenda) NISA and I know Matt and I will talk about it later.
And these, by the way, these measures whether it's legislation or schemes or funds, they've got to be renewed all the time.
You can't just set and forget, in an area like this, you've got to be constantly examining as you do in your businesses, constantly examining the changing environment and saying, well, is this still working?
Okay, it's not still working, we'll do something else.
You've got to treat everything as something from which you learn. You know, this is one of the biggest problems, the fundamental, biggest problems in government. And I sought to change that culture. is that you get this blame based culture, this culture where people are afraid to, quote, make a mistake, afraid to undertake something new, for fear that it may not be as successful or perform in accordance with expectations.
So what? Not everything does, not everything will.
That's why I set the expectations very clearly. You have to be able to say, Politicians have to have the courage to say this, "These measures are the best ideas I have to solve the problem at the moment, done a lot of work. This is the best idea we've got. We believe it'll work. But if it doesn't, we'll do something else. And we'll certainly learn a lot from the process".
You've got to set those expectations, right, this is second nature to people in business, particularly in in startups and in technology and innovation based businesses. But it is still a huge change that we have to confront in politics.
Can I say, talk about ecosystems in another way. One of the biggest undertakings during my time in government was the well over $200 billion investment in the Australian Defence Forces capabilities.
New submarines, new frigates, offshore patrol vessels, a whole range of capabilities across the three forces.
And those capabilities are overwhelmingly being built in Australia. Now that was not because I wanted to sort of pork barrel jobs in one part of Australia or another.
It was because I recognised, and my ministers recognised, and I give a lot of credit to Christopher Pine in this regard, because he really understood innovation. It's a pity he wasn't the Innovation Minister for longer but he had other jobs to do, but the reality is, we recognise that if you have a continuous defence industry in Australia, which is right at the cutting point of technology, obviously, that creates an ecosystem from which will spin off so many other businesses, opportunities, whether it is in advanced manufacturing, per se, or whether for example, it is in cyber security.
I mean, look at the way the cyber security sector has boomed in Australia in recent years.
That is a direct consequence of our cyber security strategy we published in 2016, supported by funding, supported by Aust cyber and other institutions, all of which were designed to create that ecosystem.
Another big part of our ecosystem is liveable cities. Again, you know, the reality is, capital is mobile, and fairly objective about where it goes, humans are less so.
If you have liveable cities, that is a real economic benefit. When we talk about the environment. When we talk about mass transit when we talk about the amenity of the cities in which we live, and we have great cities in Australia, all of that is a massive economic asset as well.
But you know what? The biggest asset the most important asset is all of you. Government policies are critically important. But ultimately, our best assets are not under the ground.
They walking around on top of it, your courage, your commitment, your preparedness to have a go and if it doesn't work out, have another go.
That commitment is what is driving our innovation economy and what is driving our economic future, what is ensuring it, because productivity is the key.
And innovation is what enables productivity. So without you, Australia will not have the bright future that it does. I want thank you for your efforts. Thank you for your innovation, and wish you all the best for the StartCon conference. Thank you.
In a 2012 interview with the Sydney Morning Herald you said that figuring out why Australia earns so little of its GDP from its own ideas is "the issue that keeps you up most at night".
Is this what still keeps you up at night?
Well, you know, nothing keeps me up at night, really. I'm actually a very good sleeper. But, yes, that was a very big issue back in 2012.
When I did a lot of thinking and reading and just talking to people about it. And that's really what the NISA came out of, and my conclusion was that the key has got to be doing everything you can to encourage an innovative, you know, a culture, an innovative ecosystem, which which is not just about startups, by the way, Matt, it is, fundamentally, it's a cultural thing.
Julie Bishop, our great friend, used to say the reason I was so keen on innovation was because I got bored quickly.
That may well be an element in it. But the bottom line is, if you're in an environment that is changing all the time, you have got to be prepared to review what you're doing.
You've got to have that culture of innovation, and it has to, it has to pervade every part of our society and not just, you know, and obviously, startups, I guess, is at the pointy end of it, but I think we're doing a lot better.
There's no room for complacency. And I think some of the NISA measures, for example, have been, well obviously, all the financial ones have done very well. The funds have done well. I was in San Francisco at the landing pad, actually just a week or so ago. Very impressed with what I saw there. I'm glad they're working.
You are arguably the most technology focused Prime Minister we have had in this country.
I knew how to turn on a smartphone.
You committed over a billion, a billion dollars to...
My reputation for technological knowledge is so exaggerated. But everything is relative.
You committed over $1 billion to drive a suite of 24 policies across 11 portfolios designed to fuel an “ideas boom”, and I can go through a few of them.
- Over $100 million in tax incentives for "angel" investors
- $75m to the CSIRO's data research arm Data 61
- $30m for a Cyber Security Growth Centre
- $15m to set up a $200m CSIRO Innovation Fund to co-invest in businesses that develop technology from the CSIRO and Australian universities.
- $10m to set up a $250m Biomedical Translation Fund, in partnership with the private sector
- $48m Science Technology Engineering and Mathematics (STEM) literacy program
- $14m to encourage women and girls into the sector
- $51m to promote "digital literacy”
- $10m to set up the Australian Computing Academy which helps teachers implement the Digital Technologies Curriculum in classrooms around the country.
I don’t think however that you got enough of a run to do what you really wanted to do and you were hamstrung by both conservative members of your own party and the nationals.
If you had your time again and free reign to execute, what would you have done to drive innovation in this country?
Well on innovation, you've just got to keep on reviewing what you're doing, staying very close to the sector.
And, as I said earlier, it's pretty basic. If something's working, if it's really adding value, then do more of it. If you feel it's not working or it's not having an impact, then then dump it into something else.
I mean, there's no place for set and forget in any area of government policy, but particularly in this area, because everything else is moving.
So, governments have a tendency to think they're the centre of the universe, right? And they think that they make changes, and then everybody else adjusts.
Well, the reality is, the world is changing. I mean, the, particularly in the digital area, virtually every digital company has got a global reach.
But some are gigantic, Facebook has 2.8 billion accounts, right? That's what is that a third of the world? I mean, it's massive. So governments have got to recognise that they're up that they're operating in a dynamic environment as well as everybody else and be prepared to adjust their policies accordingly.
In the lead up to the election you said in a speech:
“All Australians, not just economists, know we need to innovate and build new industries and strengthen existing ones because the mining construction boom has ended and the economy must transition to create new sources of growth and jobs.”
What do you think are the key industries that we should be building in this country that we are not?
Well, I think we've got to recognise that labour intensive industries are ones that we do not have a comparative advantage in because we're a high wage economy. Really knowledge based industries, right across the board, are ones that we should be leading in.
Whether it is in bio science, you know, whether it is in software, you know, whether it's in artificial intelligence, I mean, there is no limit. We're limited only by our imagination, and we have our biggest comparative advantage.
We've got like, I will tell you what our comparative advantages are, in my view.
One are people, well educated, innovative and becoming more so.
Two we have the most successful multicultural society in the world.
Don't forget this. Think about it. We're in a world where tensions between people of different religions and races and backgrounds and cultures is... appears to be getting worse in Australia.
We have around just under 30% of people in Australia, who call Australia home, were born outside of Australia. Over half of one parent born overseas. And it is, so we have the highest rate of immigration of any developed, comparable developed country, and yet we get on very harmoniously, harmoniously, and well, that is a huge asset.
We're also in the same time zone as the fastest growing part of the world, you know, East Asia and particularly Southeast Asia.
And I'd say also, Matt, we've got a huge opportunity, I believe in energy. We have reached an inflection point in energy where we can become a very, very cheap, clean energy economy.
We're going to move away from coal, I know there are some people who are sentimentally attachment to that.
We are now in a position. I look back to when I was Environment Minister in Howard's government and cost of renewables was huge, vastly higher than conventional sources of power.
We're now in a position where the cost of variable renewables, particularly solar, keeps on coming down, coming down and there's a lot lot further to go as the folks over at UNSW will tell you, they're leading the world and some of the best research in that area and we've got huge landmass, great solar resource - that is going to become a big opportunity.
We will switch from being a high cost energy country to being a low cost energy country and a low emission energy country and you know, this happens.
Technology does that to you. Look at the United States, it was an oil importer, and a gas importer.
And then then technology discovered fracking that people may have horizontal drilling and fracking - people may have different views about whether it was a good idea from an environmental point of view. But that was literally America's energy profile was changed, turned on a dime because of a technological breakthrough and innovation.
You then proceed to win the 2016 election but by the smallest majority since 1961 - a single seat. Almost overnight innovation was blamed...
Not sure that's true, by the way, but anyway, but doesn't matter. Yes, it was a narrow, narrow majority. Julia Gillard didn't even have a majority.
But still, a win is a win.
Almost overnight innovation was blamed for not “resonating” with voters.
Industry, Innovation and Science Minister Arthur Sinodinos said that the government took an election "shellacking" because it's objective to drive a more entrepreneurial society did not resonate with everyday Australians.
Well, Arthur said that, and I really wish he hadn't said that. And he was completely - I love him dearly, right, he's one of my best friends, but I winced when he said that. It was not, honestly, that wasn't a correct analysis.
But anyway, here's the problem, Matt. This is the difficulty. You can go along. And maybe you can win elections by telling people what they want to hear.
Maybe you can win elections by actually lying to people. It's not unknown.
Truly it isn't. Bill Shorten nearly won but didn't win. He did well in 2016 by telling people I was going to sell Medicare - ludicrous, right?
But the bottom line is, if you want to maintain Australia as a high wage country with a generous social welfare safety net, you have to embrace innovation.
If you don't, you'll fall behind. It isn't rocket science. It's screamingly obvious. And so as I said, denialism might be a short term political advantage. But if you deny reality long enough, it mugs you.
Do you think Australians know that we need to innovate as a country?
Well "all Australians" is a big, big term. There's a lot of people, I think it's really important to explain that innovation is not just about some smart people, like, folks in this room coming up with great ideas and making billions.
It's a question of staying ahead. I think we've done a better job, frankly with trade, than with innovation in terms of people understanding the importance of trade.
There is a there is a global wave of protectionism and it's fuelled by xenophobia, in some places racism. It's a complex phenomenon. It's fuelling sort of right wing, authoritarian, populist movements in a number of countries.
We've managed to avoid that in Australia and we managed to do things like keep the Trans Pacific Partnership alive after Trump pulled out and with general support.
So I think people understand, particularly in regional Australia how important trade is but you know what? It's the vomit principle, you know what I'm talking about?
Okay, well it's an old political principle, it says, at the point where you have said something so often you feel that if you say it again, you will vomit, at that point, maybe you're getting through.
So, you have to be persistent and you can't sort of drop the ball, you've got to be prepared to keep on making the case for whatever it is: innovation, trade, open society, whatever.
So, while we're talking about trade, one of your predecessors, Paul Keating, famously said that if Australia continued to muddle along “selling a bit of wheat or wool” and “let the sophisticated industrial side” of the economy fall apart that Australia could become a “banana republic”.
Australia now ranks 93rd in the Harvard Economic Complexity Index, a measure of economic sophistication- how many different products a country can produce and how many countries are able to make those products. We rank behind Mauritius, Oman, Moldova, Botswana, Saudi Arabia, El Salvador, the Dominican Republic and Guatemala.
Manufacturing as a share of GDP has dropped from 15% in the 1990s to 5.8% - on par with a financial haven like Luxembourg or Panama- and a little more than half that of the US, UK, Canada and New Zealand.
And while we don’t have one dominant export- in the case of a banana republic, we have one dominant export partner. 38% of everything we produce including what we dig out of the ground now goes to that single export market - China.
Do you think we are on the right path?
Well the answer is "yes", but qualified.
The fact that we, China is our largest trading partner is hardly surprising. China is many countries' largest trading partners. In fact, you find most countries in our region, China's the largest trading partner,
Not to the extent of Australia. I mean, it's more like if you go to Africa and you see the extent of dominance, that we see in Australia.
We have a we have a big competitive advantage in a couple of commodities. But we also have our third biggest export is education. And that is one which is where we don't have a comparative advantage and it's not a commodity export, I mean we have a we have a comparative advantage, but it is one that we have earned.
Right, it's not one that you know as the stroke of good fortune or natural endowment.
I'd say the in terms of manufacturing, I think you'll find manufacturing has been increasing in recent years. Clearly, there are a lot of industries that have closed because they were simply uncompetitive, I mean, the auto sector is a classic case, and textiles, anything that requires scale and the needs both scale and is very labour cost dependent, very labour intensive. We're going to be at a disadvantage with, but you'll find there are examples of great Australian manufacturing, but it is more in the advanced manufacturing area.
And I mean, this is critically important thing to develop. That's why again, why the defence industry plan is so important. We should be making sure that those advanced manufacturing skills are developed in Australia, and that will then, you know, spill over into other other parts of the economy.
You said in 2005 that "Coding is not just about learning a new skill – it's about learning how to think critically and solve problems. These are the most important skills to have in the 21st century”.
Domestic enrolments in information technology are down 15% from 2001 to 2018 despite one of the most transformational booms in history with software and the internet. Electrical engineering is down 53%. Female enrolments in electrical engineering are down 63%.
Our universities up until this year were booming, but educating international students at the expense of domestic. There are about twice as many international students enrolled in IT than domestic students.
To your credit, your $10m in funding of the Australian Computing Academy in 2016 resulted in 134,000 primary and high school students taking part in computer science challenges and we have subsequently seen a lift in domestic enrollments in IT of 21% from 2016 until 2018. But we are still down 15% on 2001 numbers and the funding for the ACA will run out next year.
Why do you think we have neglected educating our own citizens in the skills of the future?
Well, I think the real the real question is why are young people not enrolling in those courses? I find it's a very hard question to answer because it seems to fly in the face of, of what's actually happening in the market.
I think that in a way, we need to promote the value of digital literacy as a, in a sort of an academic endowment in and of itself, in other words, I think being digitally literate is an advantage, regardless of whether you go into coding or software or, you know, in some form of technology business, yourself.
It's like numeracy. I mean, I'm a lawyer, right, originally. Sorry about that. I'm a recovering lawyer, that the everyone hates lawyers, of course, but I always encourage kids not to do law, unless they want to practice law - obviously want to be if you actually want to be a lawyer, then you've got to do law.
But a lot of people do law because they think it's a good sort of background degree. And I'd say, well, if you want to do get some do, if you're not quite sure what you want to do, and you wanted a class and skills that are general applicability, look at anything that is quantitative, you know that and that might be computer science.
It might be some engineering subjects, it might be maths, it might be a financial subject.
So I think we need to make that case stronger. The big problem however, the big conundrum is that is the relatively low percentage of women doing computer sciences and engineering.
I remember talking to Sheryl Sandberg about it not so long ago. And she was saying that in Silicon Valley, the percentage of women doing these courses is lower than it was a generation ago now, how crazy is that?
Julie Inman Grant has her own theory which I will leave her, I won't spoil her punch line, invite her next year and she can give you her theory.
But I think that is a big issue. Now, we put some put some money behind that to promote you know, women in STEM. But that is a big issue. And again I struggled to understand why it is so, because you see in so many other professions and disciplines, you see very high percentages of women.
I mean, when I went to university in the 70s, veterinary science was was all full of guys in mole skins and the elastic sided boots. Right now, the student body is is majority female, and similar changes in law and medicine and so many other professions, but the engineering and computer science and related disciplines is not the case and I think that's a big challenge.
How do you rate Scott Morrison's performance on innovation?
Well, Scott, I mean, look, it's not his comfort zone to be sure. I mean, in the sense he doesn't have the background or enthusiasm for it that I did or do.
But Scott was the treasurer when we agreed on the National Innovation and Science Agenda.
So that wasn't just something that popped out of my head one morning, that was a process that we worked on together and came out through a full cabinet process.
So, so I think, but I do think you need persistent advocacy, but it's got, it helps if you actually have a background in it and have a, an understanding.
I think for a lot of people, they find technical areas baffling, and they can't get their head around it, something like the significance of virtualisation, in the telecom sector, particularly - so profound, and yet it's remarkable how very, very few people in government, either here or internationally, understand its significance.
And that's just one. That's just one example that's relevant to the 5G debate, of course.
Well, I just on that topic on backgrounds, so I mean, as prime minister, one of things I didn't envy in your position, and one of the tough things that you have to do is form cabinet and appoint ministers for various portfolios. Unlike in a company where I can come along and appoint a vice president of engineering or Chief Financial Officer, I can pick, hire anyone.
As Prime Minister, one of the tough things that I didn’t envy was that you had to form cabinet and appoint ministers for various portfolios. Unlike in a company, where if you want to appoint say a Vice President of Engineering or a Chief Financial Officer you can hire anyone, Section 64 of the Constitution requires that a minister must be an elected member of parliament. So instead you have to figure this out from a pool of people that are generally lawyers, consultants or career politicians. For example in the current cabinet we have:
A political advisor
A public servant
A newspaper editor
A management consultant
A public servant
A career politician and lawyer
A career politician and lawyer
A career politician
A political advisor
A proprietor of a building consultancy
A police officer
A management consultant
A management consultant and lawyer
A political advisor
A mechanical engineer (Karen Andrews)
An economist (Matt Canavan)
A management consultant
Aircraft pilot & taxation officer (Sussan Ley)
An Army Officer
A rose grower
An Army Officer & recruiter
It must make it really tough to figure out who is in charge of trade or innovation, science & technology - in this case it’s the only engineer, Karen Andrews. Do you think that the Prime Minister should be able to select their executive from anywhere, like they do in the United States, Germany or Indonesia, so we can get the very best people?
Well, I don't. A lot of people made that case. I'll make a little footnote to what you said, Matt, this sort of principle of the Westminster system I think works best when the parliament is larger.
So if you think it's an issue in the federal parliament where there are 227 members of the Parliament hundred, 151 MHRs and and 76 senators, the, imagine what it's like in State Parliament where you might only have a few dozen people to choose from, if that.
So, that is an issue. In Westminster, of course, you know where this was all cooked up, the House of Commons has 650 members and they've got they've got even larger number and the House of Lords and of course can always appoint someone to the House of Lords, so that the British Prime Minister has got more options.
I'd say though, that often the qualities that a minister needs and not necessarily technical ones - it's important to have somebody that is enthusiastic, that is open minded, and that focuses on the right policies. I mean, this is simplistic, but it's not too far from the mark.
There are people in politics, and they tend to be people like myself who come into politics later in life, after a career, and so they're not lifetime politicians, who will look at policy issues and say, right, what is the best policy?
What do we need to do to get the economy to grow or promote innovation or preserve, do a better job on water conservation, or whatever the issue of the moment is.
And then having identified that, then work out how to politically sell it. The other approach is the highly political one, and you get lifetime politicians, tend to be like that, and they often tend to be politically successful.
And they will say, what is the most politically saleable thing I can come up with that will get people to vote for me? And they go for that.
Now, you've got to get a mixture of both. But if you only do the political approach, and you literally go from day to day, week to week trying to win the political headlines, then you can end up, you may end up being politically successful in sense of winning elections.
But what have you actually done? You got to actually you've got to be able to sit back and say, are our policies successful?
Are they successful in a substantive real sense, as opposed to being popular, momentarily, because no policy is going to be popular, if you end up with slowing economic growth and you know, people not being able to get a good job or have a successful business.
I mean, you wanted Australia to be a republic. And so as a republic that's got an executive that can be chosen with all of you wanted,
Well, I don't want to pull you up on that but I mean, a republic in the Australian context simply means having an Australian citizen as head of state rather than the Queen.
Whether you have a directly elected executive president who chooses his or her own cabinet like they're doing the United States is not really a, is I mean, yes, that's a republic.
But a republic doesn't have to be like that. There are plenty of republics that have parliamentary systems.
Germany is a good example, there's plenty of others.
It's important to remember that the US Constitution was designed in the 18th century and modelled on Britain, but at a time when that person who ran Britain was the king. So the President is modelled on a monarch, not on a prime minister. And so, you know, has enormous power with all of the consequences and controversies that we're seeing at the moment.
Okay. John Howard also reflected on this a little bit on this, this morning, in today's newspapers said that there ‘existential challenges’ facing both Liberal and Labor becoming composed predominately of people who are not sufficiently representative of the people in the community that we want to vote for us’. Given the composition of cabinet, for example, would you agree?
Ah, I think well, I think that oddly enough, the Liberal Party and the National Party have a more diverse party room than the Labor Party. When when I was a kid, I was a political correspondent in the State Parliament, New South Wales, in the mid 70s.
And in those days, the Labor Party's members were mostly trade unionists, but they were trade unionists who become union officials, who had started off on the shop floor.
So there were boilermakers and bricklayers. And train drivers and people had actually worked. You look at the Labor Party today, it is essentially an apparatchik class. Many of them have come through the union movement, but they went university, got a job in the Union, got into parliament or went to university, got a job with a politician, went into parliament.
Now there's plenty of those in the Liberal Party too, by the way, but we are nonetheless still more diverse. But yes, I agree it is a problem. When I joined the Liberal Party in 1973, it was a much more diverse party membership than it is today.
And this is the point Howard was making about his own experience. So, as party, political parties get, you know, more estranged from the electorate or the people they are actually seeking the support of, then you end up with policies and attitudes that are out of step and, you know, may ultimately prove to be politically unsuccessful. And there have been plenty of examples of that in recent times. Yeah.
While you’re here I have to ask you a question on the NBN. Despite spending $50 billion to build the largest infrastructure project in the nation’s history, today Australia is ranked 62nd for global broadband speed, 40% slower than the global average.
Those, those those statistics are absolutely BS, Matt, absolutely BS. I mean, there is no country, comparable developed country, which has as ubiquitous availability of high speed broadband as Australia.
What about the United States, there are places in the United States yet where there's gigabit speed broadband, but there are plenty of places in the United States where you're flat out getting dial up. I just want to say this in defence of the NBN, I mean, let me just give you the quick cassette on the NBN.
Ubiquitous broadband is a really good idea. The way Labor went about it was instantly certifiably insane. The New Zealanders did a much better job. But what I had to do it, I inherited a mess. And I had to make the best of it. And you know what?
The project is nearly complete, and it will keep on getting upgraded forever, and anyone that think anyone that thinks there's a set and forget in telecom, networking technology is as wrong as thinking as a set and forget and government policy.
I agree with that. And so let me continue. The problem with the NBN being slow isn’t the mixed fibre and copper network- 6 million of our 10 million households could today get speeds of 500Mb to 1Gbps with just a line card and modem upgrade.
The issue with NBN speed is an accounting problem which you inherited.
The NBN was costed at $43 billion, industry said $70 to $90 billion, and you did a good job bringing it back to $50 billion. But this huge cost- $30b of equity and $20b of debt is legislated to have a financial return, in this case $700 million a year in interest payments on the debt. So when retail service providers buy access they are not buying enough because it’s too expensive and so there is congestion.
Essentially it costs 70c per Mb/s per month right now to get data from LA to Sydney but $11-14 per Mb/s per month to get it from your local NBN exchange to your house. So because it’s mandated to generate a financial return, the NBN is slow. To speed it up, we need to make it cheaper to run.
Given where we are there are not many levers to pull. The cost to run the network will continue to be fairly flat at about $3b a year.
The question for you is - given that the NBN is forecast by their own plan to deliver $10.4b in additional GDP in 2021, do you think that it is reasonable that a monopoly network that has a fixed cost to operate, built with cheap government financing, should be forced to generate a financial return for the government?
For example the $20b of debt has to pay the government $700m a year at an interest rate of 3.96% which is pretty much what I as an individual can get a home loan for.
This is what the government is charging the NBN for that.
So you could refine it. I mean, the last Treasury auction was at 92 basis points.
So you could refinance that maybe at... I was speaking to Stephanie Glass at Southern Cromwell, who does the paperwork for a lot of these issuances. And she says you could probably finance this at 50 basis points over of the current cash rate. So that would bring down the cost of running a network by about half a billion dollars a year. I mean, should we try and find ways to make the network more efficient? Is it reasonable?
What know what you're really saying is... Well, the IRR that the government is estimated to get is only about 3%.
Yeah. So... which...
That's on the equity component.
Yeah, but that's on the government's investment. Yeah, that's right. Now that presumes that the debt will be able to be repaid from the debts sound, money good, but which I'm sure it is.
But look, this is a vexed issue is the, are the other wholesale costs of the NBN too expensive?
The people that complain about that, about the retailers. The thing that I learned about broadband and I made it a really detailed study of it globally, the economics of it, is that one thing that people will not pay, they will not pay a premium for line speed, which, really data rates, is what we should talk because you know, speed is the wrong term, as you know, I mean that we understand that.
But they won't pay a premium for data rights above that level, which gives them the functionality they want. I learned that actually quite a long time ago studying the history in Korea, where Korea Telecom at that time, this is going back in the early 2010s had two products.
They had a 100 meg product and a 50 meg product and the difference was 3000 won a month, which is not very much at all. People were churning from 100 back to 50, because they'd worked out they can get, do whatever they wanted to do with 50 rather than 100.
So, the problem is that people will not pay much if anything of a premium for high speeds and the, this is most people, there are obviously people that have got particular use cases.
So, the economics of it is challenging, the assumptions underneath broadband have changed. If you go back when Rudd announced the NBN and back in 2008, we were talking about how long it took you to download a file, download a movie.
What we've now got is a world of concurrent streaming.
So instead of people needing intermittently a very high data rate, you've got, at particularly times of the evening, you've got everybody wanting, needing the site, you know, a substantial data rate. It might be, you know, with a number of devices it might be 25, 30, 40 megs, it might be 10 megs.
But the bottom line is that has put so much more demand on the network. Look, the NBN has cut their prices, they have responded to that. They're best able to defend their pricing. We beat up the NBN, and I gotta say about the NBN, and they've done a terrific job, from an engineering point of view and building the network.
They have been hopeless at PR, if I've said this to Bill Morrow many times, "Bill, if you were one 10th as good at PR as you are everything else, you'd be much you'd have a much better image".
And the the fact of the matter is that you've now got to a situation where there are well over, my last check, 10 million premises that can get access to the NBN.
Now that's that is a hell of an achievement. They are literally activating 30, 40,000 premises, i.e. new customers such signed up, customers a week.
So it's an enormous achievement. And I think, given the state of the challenge, given how well they have done compared to many other countries, I think they've got a lot to be proud of.
So I am really proud of the achievement of the NBN in very, very difficult circumstances, but I gotta say there are going to be big challenges with the satellite. Bbecause you've got obviously limited capacity there.
I think we need to get to a point with the satellite of something I've argued for for a long time but hasn't been able to be achieved technically or with IP rights, you've got to, going to have to get to the point of having distributed localised caching.
I think with the satellite, and you're going to have to have similar answers, I think with fixed wireless, because there you actually have a finite amount of bandwidth, and the demand because of the streaming phenomenon is just increasing at a rate that had not been anticipated other than by some very wise people, until recently.
The other alternative is to convert the debt to equity. If we could take the speed limiters off, half the network would run at 100 Mbps to 1 Gbps and half at 70Mbps, where today the network runs on average at 30Mbps.
But Matt, they may will be able to have the capacity to be at 500 to a gig, technically, but I don't believe they would pay for it. That's the point.
You know, I remember having a discussion in Tokyo, was it Tokyo? It was one of the big Japanese telcos and they had a two gig domestic residential broadband product and I was talking to them and I said "two gigs, that's amazing, why two gig?"
And he looked at me as thought I was a complete idiot. And he said "two gigs - twice as good as one gig".
And the reality is for Mr. and Mrs. Watanage, there is nothing they can do with two gigs that they can't do with one gig and in all probability, nothing they can do with the gig they can't do with 100 megs. And you know what, they're not paying a premium for it.
One of the great fallacies in broadband economics is the assumption that the amenity, that's to say the use or the utility to the customer, of broadband increases with the data rate in a linear fashion.
It absolutely doesn't. But that is the sort of assumption and a lot of people in the tech sector just kind of blithly assume that because, I don't know why, but it's simply not, it simply isn't right.
And this difficulty of getting people to pay, getting people to pay for higher speeds is a fundamental one.
But look, again, as far as the NBN is concerned, and broadband generally is concerned, as technology evolves, as demand evolves, you got to keep on upgrading it.
What we wanted to do with NBN was get to ubiquitous connectivity, for high speed broadband as quickly as possible. And we knew that with the old plan of fibre to the premises everywhere, that simply wasn't going to be able to be done in a reasonable time frame or at a reasonable cost.
I mean, if this project would cost $80 billion I mean, remember, don't forget this Kevin Rudd, God bless his cotton socks, Kevin said the NBN is going to be such a great financial deal, Mums and Dads will be lining up to invest in it. I don't think so.
Two quick questions because I know we're running out of time.
First here's a bit of a fun question.
I always expected as Prime Minister, the day you get sworn in, they take you into the room, they sit you down. And they tell you this is what really happened in the world over the last hundred years. Does that happen?
No, not really. Well, there's always security briefing on whatever the hot national security issues are.
It's not quite as dramatic as that. It's not like being ushered into a room and being told, "by the way, we're broke". Not the case.
And the final question is, how do we get innovation back on the national agenda?
Well, I think you can't rely on politicians to do everything. And, I mean, if I was at different times an effective advocate for innovation, that was because I had a fairly unique background for someone in politics.
You know, I went into politics when I was 50. I went into politics the same age Scott Morrison is now, so I was a grown up.
I started many businesses, some of them have been very successful. You mentioned one, others were buried late at night, moonless nights in the forest, because I they were so humiliatingly unsuccessful. So I had a very different background.
But I think you need to get organisations like this, conferences like this, to get out and make the case more strongly.
I mean, one of the good things that we did with the NISA was we got innovation on the agenda, and you started to see Australian institutional investors investing in it.
Look, you and I have been around for a while. Back in the 90s, there was literally no money for tech at all.
Now, I'll just conclude with this little bizarre anecdote. So in the mid 90s, I had a couple of deals going on.
One was OzEMail. I was helping Sean Howard. Sean was the founder of OzEmail and I was one of his investors and like his in-house deal person. And so we couldn't raise money for OzEmail.
It was the biggest ISP in the country, it had thousands of customers, it had real revenues it was on was on a track to profitability, it was a real business on any test.
On the other hand, I had no difficulty raising money for a gold project in the middle of Siberia, three and a half hours north by plane from Irkutsk, which you probably haven't ever heard of.
So to say it was in the middle of nowhere was an understatement. Australians were prepared to take risks on natural resources in the scariest and hardest of places, but they weren't prepared to do it in tech.
Now, the good thing is that has changed. In the last 20 years or so, 25 years or so, there's been a big shift, and particularly in recent times, and institutional money isg oing into technology and innovation generally.
And, of course, all of the unicorns, whether it's Atlassian, or Canva or so many others, have all demonstrated that they're successes.
I mean, there weren't a lot of successes out of the 1990s tech boom in Australia. OzEmail was one, yeah, and then it struggled, right. So people became very skeptical, but I think now you've got proven success, and the institutional money is there.
But I agree, we need to talk about innovation more, and you need to get it on the agenda.
And believe me, if there are parts of the tax or regulatory framework that are not working, and I've been reading some of the industry literature on this recently, and clearly there are concerns, then you've got to make, you know, make that case to government, make it in the media, make it publicly because what government has to do is recognise and I think I probably recognise this more than my predecessors or successors have done because of my business background - what government's got to do is recognise that everything has to be reviewed all the time.
That frightens people, terrifies people in Canberra, but you just cannot assume that the tax regime you had that was working five years ago, is still going to work today.
The world has changed.
So you guys are at the coalface, to use an outdated term that might fight might find favour with the National Party perhaps.
But you're really at the the pointy end of it all. And you should be making that case to government that above all, get it out there in the media so that people are aware of it, and I'm obviously always very happy to help.
I believe our future, our children and grandchildren's future depends on you. And this sector, the innovation sector thriving and going to even greater heights in Australia.
I mean, literally, nothing less than the future of this country depends on you. If we fall behind in innovation, we will fall behind in every other respect. And that's in a very competitive world. That's a very grim prospect.
Malcolm, great talking with you.
Great talking to you.
Thank you, gentlemen, the Honourable Malcolm Turnbull.