When I first had the privilege of addressing the National Press Club last year, I began by quoting Charles Dickens from his classic novel A Tale of Two Cities.  This year I am here courtesy of our Universities Australia conference which takes as its theme a paraphrase of another well-known British author: Fleming. Ian Fleming.

Of course all James Bond aficionados know that Fleming’s ultimate British spy wanted his martinis “Shaken, not stirred”, but the UA conference, which began today, has decided to opt for the opposite – stirred, not shaken. So in keeping with the theme, I may indulge in a bit of stirring.

But first I want to look at the shaking the tertiary sector experienced in the recent past.

2013 was a bizarre year for higher education and research policy and programs. Five Ministers – when I spoke here last we were on number three – policy gyrations, and a final twist that somehow seemed a fitting end to the year.

To recap: at around this time last year we were about to be hit with the news of swingeing cuts to Federal funding for universities and student support.  Cuts to universities that would not be limited to 2014 and 2015, but would have a dramatic flow-on effect.  They came on top of earlier cuts to research.  These “reforms” were aimed at saving the government around $3.8 billion over the forward estimates.  I described them at the time as the cuts that keep on giving.

There was little joy from the then Opposition Leader, Tony Abbott, in his keynote address to the 2013 UA conference when he said:  “In a constrained budget environment, to avoid further cuts rather than to win higher funding is often the best outcome that particular sectors can hope for.”

He went on: “Only by getting the Commonwealth budget back under control will we be able responsibly to increase spending on a host of important causes, including general funding for universities.”

As Julie Hare, editor of The Australian’s Higher Education Supplement, later commented about the cuts: “The Labor Government is laying down a very soft landing for a future Liberal Government…”

As it turns out the previous Government did not legislate the cuts before the election. Then, that final twist in December, after the new Government introduced the legislation to give effect to the efficiency dividend cut, Labor decided to oppose their own initiative.

As bizarre a year as it was, 2013 wasn’t all bad: there was some good shaking too.

The new Government made a most welcome commitment that there would be no further cuts to education.

Christopher Pyne, the Minister for Education in the new Government, our fifth and final Minister for higher education for the year, announced that the Government would scrap the cap on the tax deductibility of self-education expenses.

This was followed by the news that the Hon Dr David Kemp and Mr Andrew Norton would team up (again) to undertake a review of the demand driven funding system for universities, and report to the Government this month.

Minister Pyne wasted no time ‘walking the talk’ on deregulation by accepting the recommendations of both the Labor Government initiated Review of Higher Education Regulation conducted by Professors Kwong Lee Dow and Valerie Braithwaite and the April 2013 PhillipsKPA Review of Reporting Requirements for Universities, commissioned by the L.H. Martin Institute and Universities Australia at the request of the Department of Industry, Innovation, Research, Science and Tertiary Education.

Universities Australia commented at the end of last year that these two taken together, “will produce savings over time for Government through increased efficiency – and will help to reduce compliance costs for universities, allowing them to divert more resources to the core business of teaching, learning and research.”

As all years do, 2013 thankfully came to an end, but the shaking continues. We can expect more recommendations for Government to consider relevant to our patch and it’s likely that there’ll be more changes ahead.

But whatever the shaking, and whatever changes lie ahead, one thing has not changed: it is that, as a nation, we cannot do without a strong, robust and vibrant higher education and research system.  This national need has been demonstrated time and time again through objective data.

Those data spell out the story and we have published some of them in UA’s Pre-Budget Submission.

2013 Commonwealth Government modeling by its own Australian Workforce and Productivity Agency (AWPA), found industry demand for qualifications was expected to grow at 3 to 3.9 per cent per annum. That report called for a $2.1 billion increase in public investment in tertiary education above Treasury projections, and found such an increase would, on average, grow GDP by $54 billion per annum and tax revenue by $16 billion per annum by 2025.

The AWPA further noted that each extra $1 invested in tertiary education on average will grow the economy by $26 by 2025.

Graduates and their direct and indirect contribution to the economy are critical. According to the OECD’s 2013 Education at a Glance, university graduates have significantly higher work force participation and employment rates than those who complete secondary school or less.

Australian university graduates too are more likely to be in work, they earn more and they pay more taxes.

AMP/NATSEM’s 2012 Smart Australians report shows that university graduates and postgraduates earn on average between $2.9 million and $3.2 million over their lifetime, whereas those who finish Year 12 or less will on average earn $2 million or lower.

And, as the UA submission notes, university graduates typically pay between $300,000 and $540,000 more in taxes over their lifetime.

Given funding per student typically costs the Government between $40,000 and $60,000 per university course, the increased taxes for Government from university graduates are about eight-fold higher than the upfront amount invested.

These numbers are important, but there is more to the benefits conferred by higher education than that.

Higher education is a catalyst for change and has a critical part to play in building the economy to come. As well as teaching and nurturing the men and women who will fill the jobs created in a changing economy, universities play a pivotal role as the powerhouse that provides knowledge and innovative ideas through research, helping to secure Australia’s international competitiveness.

It is well understood that innovation stemming from research and development is a key driver of per capita income growth, productivity growth and better living standards.

For example, in a 2010 report the OECD commented: “Innovation drives growth … and holds the key to employment generation and enhanced productivity growth through knowledge creation and its subsequent application and diffusion.”

Some years earlier the Productivity Commission found 65 per cent of Australia’s economic growth in the 40 years to 2004-2005 was ultimately attributable to multi-factor productivity growth, which was driven by innovation and a better trained and educated workforce. The Commission found innovation to be critical to Australia’s growth and its preparedness to meet emerging economic challenges.

Finally, a large number of studies conducted in a wide range of countries over a 30 year period to the mid-90s have consistently found the rate of return on public investment in research and development is high, and in the range of 20-50 percent.

So the data are in. And, fortunately, the imperative for Australia to have a strong, robust and vibrant higher education and research system, working with industry and business, is well recognised across the board by politicians, industry and the community.

As the Prime Minister told Parliament in December when talking about the fundamental strengths of our country: “We have enormous strengths in research and development, in higher education and in biomedical science.”

Or as Jennifer Westacott, CEO of the Business Council of Australia, told last year’s UA conference: “The kind of transition we see now will put the role and effectiveness of our educational institutions front and centre if we are to build on the great success we have had as a nation, particularly over the last 20 to 30 years.”

Or tune into any parliamentary debate that involves higher education and similar sentiments are expressed on all sides of politics.

And despite what one might read from time to time, the importance of universities is also understood in the broader community. Here are the facts. Based on a survey of a representative sample of Australians undertaken by Universities Australia in 2012, 90 percent of Australians agree that a well-funded university system is critical to Australia’s economy and growth, and 90 percent agree that research is an essential part of what a university does.

So the critical importance of higher education to the country, to the economy, especially at this time in our history, is understood by key influencers and policy makers, by business and the general public.

But here’s the question.  If all this is so, if the returns on the taxpayer dollar are that good, if it makes such good economic sense to make the necessary investments in higher education and research, as required to support the growth in the Australian economy, then why is it that the rhetoric – the passionate rhetoric even – about the importance of higher education and research is not always translated into long term, steady investment action?

When all that we know points to the fact that such a long term view and commitment to strategic investment will deliver a sound return on the Australian taxpayer dollars spent by Government, and when we know we need more skilled graduates, better productivity and more innovation to be internationally competitive in a changing world economy – when we know these things – when we have all the data, and we pretty much all agree – and with nothing less than our national future at stake – why is it so hard for Governments to undertake the necessary recalibration of our national education and research investments that promise to give life to the Australian economy to come?

Of course, it’s easy to shrug and rely on the usual refrain of the short-termism of modern politics, driven by election cycles or even the media cycle, impacting on politicians and policy.

Then, more potently I’d like to think, there is the issue of a highly constrained budget. For the current Government, the prime directive is clear – it is fiscal repair. As Treasurer Joe Hockey said at this very venue on December 17 last year, the current budget outlook is not sustainable.

This is a big issue and a big commitment by Government, and I’m not underplaying that, but in making the tough decisions, policy makers must give weight in their thinking to expenditures that produce a long-term dividend to the nation, that will help build the Australia of 2025, 2035 and 2050. There is a difference between an investment and a spend.

In thinking about why it is that it seems so hard to make the forward investments that will build the economy to come, to prioritise those investments especially in the context of a constrained budget, I have begun to wonder whether the way we have viewed ourselves and our economy is holding us back.

Are we trapped by the very language we use – and the behaviour that language invites? What would happen if we turn phrases on their head as we have done with James Bond’s recipe for a perfect martini?

A few years ago, in a meeting with a group of senior people in Singapore, I made what I thought was an obvious comment that the city-state was a developed economy.  The meeting was aghast and corrected me to say that Singapore is a developing economy, that their economy is in formation. “Always developing” said one businessman with a grin. I would suggest that at a similar gathering in Australia the opposite would be true and the gathering would be aghast if you were to suggest our country was a developing economy, even though we know we need to change.

My point is, I wonder if here lies part of the explanation of the trauma and denial and the reluctance in some quarters in Australia to really attend to the fact that the future really will be different than today and requires different national, business and industry investments to platform that different economy.

I wonder whether, at some deep, even subconscious, level we have been acting on the basis we are ‘done’ somehow, we are developed, and this accounts for the fresh shock on display whenever we are faced with the latest high profile event triggering economic structural adjustment of one type or another.

The truth is we are most definitely not ‘done’ – we are developing, just like every other economy in the world.

Think about the shock felt about the demise of the car manufacturing industry. This will have dire consequences for whole communities with a difficult period ahead – for them and for us. But just because for 66 years Australia has had a car manufacturing industry, doesn’t, nor should it mean that our economy must always have one.

Malcolm Maiden, writing in the Fairfax newspapers two week ago, cited some interesting figures as he commented on what he called the “implosion of one of the manufacturing sector’s linchpins”, that is the car industry.  He wrote that in November 2000 there were just over nine million people employed in Australia and between then and November 2013 jobs in the manufacturing sector fell by 140,000 or 13 per cent, but total employment rose by 29 per cent to more than 11.6 million.

Our economy is changing.  It is developing and we must both recognise and embrace the changes, or at the very least stop being surprised by them. While it is too much to say we risk – in Lee Kwan Yew’s memorable phrase of more than 30 years ago – becoming the white trash of Asia, the fact is we simply must do everything required to avoid the comfort of confidently recreating the economy of yesteryear as the world hurtles past us.

There is an economy to come. It is under construction and being created now by the choices we make and those we fail to make, and that economy-to-come goes to high skills, innovation, transitioning to the digital age, an economy that is adaptable and finds what we can do more competitively than others because of our innovation and our well-trained and highly educated workforce.  It is a place where research and development, learning and teaching, business and industry are joined across many locations, domestic and international, where these things coexist and interpenetrate.

Our economy-to-come needs to be “anti-fragile” in the Nassim Taleb sense, where he categorises economies as fragile, resilient, having the ability to buffer changes and survive, or anti-fragile: the idea that change will be met with the strength to benefit from the change, to thrive and move ahead even more strongly. That simply cannot happen without higher education and research firing on all cylinders.

We also need to change our attitude to the rest of the world particularly in the Asia Pacific. We have to totally rethink the way we interact with our neighbours.  This is as true in the higher education sector as elsewhere. We need to take seriously the idea of moving out from our cloisters in Australia – institutions, students and staff – to truly engage.

We need to build authentic partnerships so we may learn from others at least as much as others may learn from us.

The New Colombo Plan is a mighty step in the right direction and the first tranche of funding was announced earlier this month.  Think about Australians having, as a right of passage – and that is Minister Bishop’s intent – the capacity to spend time studying, gaining work experience and establishing networks in Asia and consequently seeing Asia, its peoples and ways of doing business as familiar rather than exotic – no more challenging or extraordinary than doing business in Brisbane from Melbourne or in Sydney from Adelaide – and then those Australians building the connected economy to come.

If the goals of the New Colombo Plan are realised, it seems to me that, in cultural terms at the very least and in economic terms most probably, this will prove to have at least as significant an impact on Australia as the post World War II opening up of our country to immigration and the broader migration waves that followed.  These migrants changed Australia irrevocably and so much for the better, as will our purposeful embrace of our region in true partnership.

We are, as a nation, on a journey of self-discovery.

So imagine we can change our minds and embrace the reality of a developing Australia. What does this demand of higher education and research policy and of our universities?

A key objective must be to achieve a steady policy focus and a level of public investment in higher education and research that is of the scale and scope to platform Australia’s developing economy.

For example, it would be foolish to risk losing some of our best and brightest by failing to adequately support early and mid-career researchers.

Finding ways to encourage entrepreneurs and new start-ups is important to capitalising on Australia’s research effort. We need policy settings and programs that enable this activity.

It is a no-brainer that the country must have a national scheme to support collaborative development and deployment of strategically important research infrastructure. NCRIS, CRIS – whatever it is called – a collaborative scheme is both efficient and cost-effective.

And with no funding committed from mid-2014 for international research collaboration, apart from the Australia-India Strategic Research Fund, we risk isolation from the funded strategic collaboration effort of the rest of the world.

It is also a no-brainer that we need to have the financial capacity to offer high quality learning and teaching programs, featuring the sort of experiences that the New Colombo Plan promises. This will deliver the women and men who will build the Australia of the future and generate export revenue.

On the export revenue front, there can be no doubt that universities are entering an era of hyper-competition with some of our fiercest competitors getting serious and some of our biggest markets pouring money into developing their own tertiary institutions.

Furthermore, we simply must find a way to forge closer links with industry and business, certainly as partners in research and research training, but also in creating the new economy and providing the skilled workforce that will be needed.

Let me quickly add I am not talking about universities simply responding to industry and business nor about visiting upon industry and business what universities think is important. There needs to be a potent new alliance, with industry, business and higher education working together to determine, as best we can, what skills will be needed and where; with research being funded in part by industry, with researchers in business, business in research across the broad sweep of disciplines and, importantly, across disciplines, including a focus on Rumsfeld-ian “unknown unknowns” that will surely drive innovation.

As a step in this direction, I am pleased to announce that UA has been working with the peak bodies of industry and business on a joint commitment to strengthen our partnership. UA and the Australian Collaborative Education Network (ACEN) have signed a statement of intent with the Australian Chamber of Commerce and Industry (ACCI), the Business Council of Australia (BCA) and the Australian Industry Group (AiGroup) to improve the breadth and value of work placements and projects as part of accredited university study. Such work integrated learning delivers real benefits all round. Students gain valuable experience and can expect better employment prospects post-graduation. Employers looking to innovate and become more competitive gain exposure to the energy, skills and fresh ideas of students. And the signatories have committed to work closely with the Chief Scientist and government agencies to engender an environment where collaborative relationships thrive.

But it isn’t just about what others can do with – and for – universities.

Our universities are amazing places. While some outside of the sector may feel they know universities, having been a student 20 or 30 years ago, the here-and-now truth is that these are vibrant, engaged, innovative and productive institutions doing a vital job for the country, including earning valuable export income.

There is no doubt that the sector is contributing massively to Australia’s economic development, but we can not, we dare not, conclude that we do not need to change.  The economy as a whole is being shaken and so too is the tertiary sector.

Of course, there are Massive Open Online Courses or MOOCS and the rise of online learning technology; and there are debates about virtual infrastructure versus bricks and mortar; ‘quality versus quantity’ and the demand driven system; about homogenous versus distinctive institutions; the fee structures and what students have to pay, what they should pay and the willingness and ability of government to adequately fund education and research.

Universities, even in our modern form, are in a process of reinvention even as the policy and regulatory (or should I say de-regulatory) environment is being re-crafted. We are no more ‘done’ than the Australian economy. Just like governments, business and industry, we have to operate on ourselves with vigour and with the longer term in mind.

We have got to have the debates about all these issues, to be prepared to stir the possum as the old Australian expression puts it.

We must not be afraid to examine areas where universities do not necessarily agree. We must not be afraid to explore controversial ideas.

We must not be frightened off by everything being shaken and stirred.  After all, hasn’t that always been a core task of universities – to explore, question, challenge, innovate, research and create better and deeper understanding?

We have to look forward, not back.  It’s a short road to nowhere if preservation is our goal. That would be as foolish as seeking to recreate the Australian economy of years gone by.  We have to create a higher education and research system that is fit for purpose so that we do not get left behind by developments elsewhere on the globe.

So to conclude, as a nation and as a sector, we need to be a bit more humble and much more open to new ideas as we set ourselves on a structural adjustment path that will prove essential for the Australia to come, to our competitiveness and our place in the world.

The challenge is great, but the signs from the Government are good. As well as the welcome, early focus on de-regulation, Minister Pyne and the Government have made plain their commitment to higher education and research and building the economy to come. As Minister Pyne put it last week: “Higher education is an investment in the long term future of our nation…”. Or the Minister’s statement from November last year: “If Australia is to continue to produce ground-breaking research outcomes, ‘eureka’ moments and Nobel Laureates, then a strong investment in research is needed.”

And Minister Pyne isn’t alone in his view. Recent comments by the Prime Minister, the Treasurer, and the Communications Minister, respectively, have gone to the promise of better jobs to come  and the importance of both technology-led innovation as the basis for new manufacturing  and providing strong support for science and research : And just this week, the Prime Minister commented on government’s duty to reduce less productive spending in favour of more productive spending. All essential ingredients for the Australian economy to come.

I have one more story before I finish. I’ve always been struck by the allegory of Plato’s Cave, and if I can distil it into a few words imagine being chained in a cave unable to see outside except for shadows reflected on the cave wall. You hear snatches of conversation and noises but can only relate to them through the distorted images playing on the wall. Your total knowledge of the external world derives from those shadows and noises. It is how you understand the world. Imagine then that you are freed and go outside. At first the light dazzles you, and then you see the reality of the world beyond the shadows.  And even though you would have developed an elaborate understanding of your shadow world – the only world you ever knew – you learn that your understanding was partial, a distortion, that does not represent the new, more complex reality you must now confront. You can never believe in the world of shadows again.

It is time to engage with a new, complex and emerging reality. Let’s prepare to be shaken, to be stirred by how different our world has become, to recognise that our economy – like everyone else’s – is developing. And development of this scale, at this moment in history, means wholesale change – new approaches, new relationships, new priorities and new national investments.

So to return to where I began should it be “shaken not stirred” or “stirred not shaken”? I think it is both.  We should be shaken about the changes not only to the tertiary sector but also to the social and economic aspects of our own lives, our country and the world and we should not be frightened but rather embrace the need to stir, to debate, to seek new ways, to be innovative.

It is an exciting time we live in and I believe an incredible – in all senses of the word – an incredible future we face.  We don’t have a moment to lose.

ENDS