Preparing Australian cities for the fourth industrial revolution

By Martin Parkinson

June 4, 2018

city connecting digitally
Map pin flat above city scape and network connection concept

This is a slightly edited version of a speech by Martin Parkinson, secretary, Department of the Prime Minister and Cabinet, to the Property Council of Australia last week.

Welcome to Canberra and to Parliament House.

This is a magnificent building and a great home for Australian democracy, and in a city that has evolved dramatically over recent decades.

Cities will be fundamental to Australia’s success in the twenty-first century, so this is a fitting place for an important conversation about the future of Australian cities.

The new Parliament House is celebrating its thirtieth birthday this year. Which is perhaps a good moment for me to acknowledge the traditional owners of this land who have of course been here much longer than that.

I’d like to begin with the basic observation that we live in an era of unprecedented global change.

I am not referring to sudden volatility of the sort wrought by war, pestilence or political revolution.

Rather, a combination of technological, demographic, environmental and social forces are changing developed and developing economies right around the world in an extraordinary manner. And these forces are fundamentally affecting the international strategic balance in our region and beyond.

The ‘disruptions’ witnessed in the Brexit referendum and President Trump’s election highlight ongoing, deeper, tectonic shifts. The significance of these disruptions lies not just in their direct and observable impact but, more deeply, in what they reveal about what has been occurring over long periods of time.

Various megatrends and disrupters are set out in the Property Council’s publication – Creating Great Australian Cities. These are issues I have been writing on for almost a decade now and I commend the Property Council for its initiative in commissioning this work.

It is one of the best applications of this analysis to an industry and sector that I have seen in some time.

Today, I want to discuss how technological change – what has been called the fourth industrial revolution – will impact Australian cities in the twenty-first century.

Let me posit that we are only on the cusp of a new period of technological change, not halfway through it.

In other words, if you think the smartphone is significant, social media important or artificial intelligence exciting if unnerving… well, you ain’t seen nothing yet.

This new wave of technological change will have significant social and economic impacts – presenting both opportunities and real challenges. We’ll need to be smart and collaborative to ensure cities drive productivity, creativity and high quality living against this backdrop.

Scale and pace of technological change

Roy Amara was an American computer scientist, researcher and futurist. He was president of the Stanford Research Institute.

Roy lived from 1925 to 2007 and was part of the great post-World War II computing revolution.

He is best remembered today for a simple aphorism, called Amara’s Law, which states:

We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.

His point was that the development of new technology is accompanied by a period of hype and exuberance – invariably followed by a period of cynicism and disappointment.

After some time, we learn how to scale up and commercialise these new inventions – but by this point we fail to realise the full significance of the change they have caused – in short, we underestimate their long run impact.

This cycle is usually most apparent in retrospect. Of course, some fortunate investors get in at the right time. They regard themselves as unusually prescient; the rest of us just call them lucky!

We’re at one of these points now, where the full significance of a suite of new technologies is barely apparent. Artificial intelligence, robotics, bioengineering, blockchain and better use of data all threaten to radically change our economies and the way we live and work.

Klaus Schwab of the World Economic Forum describes this coming period of technological-driven change as the ‘fourth industrial revolution’. Schwab argues that:

The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.

This presents us with something of a conundrum when we juxtapose Schwab’s remarks with the observation that, over the past decade or so, both productivity and real wages have been growing particularly sluggishly, or not at all, in most of the advanced world.

I think these can be reconciled, but not easily or obviously.

The extraordinary pace of change we anticipate is made clear when you compare it to the impact of previous technological developments.

Henry Kissinger wrote recently, in a piece on artificial intelligence:

Heretofore, the technological advance that most altered the course of modern history was the invention of the printing press in the 15th century, which allowed the search for empirical knowledge to supplant liturgical doctrine, and the Age of Reason to gradually supersede the Age of Religion.

The interesting point is the revolutionary impact of the printing press did not really emerge until several generations or more later.

It was some 65 years from the printing of the first bible in the 1450s to the 31st of October 1517, when a German theologian, Martin Luther, posted his Ninety Five Theses to the Archbishop of Mainz. As you will recall, Luther’s propositions spread quickly around Europe, using the new printing press, which was of course a seminal step in the Protestant Reformation and the enlightenment.

Now I should pause at this point, and admit that I may be the first person to cover the printing press, the Reformation and the Age of Reason in an address to the Property Council!

But the point is that printing, like electricity, like computers, and like who knows what else, existed long before we saw its transformative effects.

The difference today is the belief that new technology, like artificial intelligence, will likely have a more rapid and widespread impact than ever before.

As Klaus Schwab puts it, this impact will be exponential, not linear.

Cities in the fourth industrial revolution

So what does all this mean for cities? What do we need from cities, and, thinking about what our cities need from us…how should we plan for them, during the fourth industrial revolution?

Cities are key drivers of GDP and productivity. They are hotbeds of creativity. But they need also to provide the jobs, amenity and support for families and communities to thrive, for our social compacts to be sustained.

Yet inadequate planning and under-investment in infrastructure compromises these aspirations.

Cities stop performing as we need them to when people are priced out of housing or if, every day, they get stuck in traffic on Logan Road, the M5 or the Monash Freeway.

Cities don’t work if new housing is too far from employment hubs, is environmentally unsustainable, destroys more amenity and value than it creates, or fails to foster social cohesion.

Australian cities are among the fastest-growing in the OECD.

On current trends, by 2050, Sydney and Melbourne will each be approaching some 8 million people. Three quarters of the growth in Australia’s population to 2050 will occur in our cities.

The age profile, and typical households, will also change too. By 2054-55, more than one in five Australians, nearly 25 per cent, will be 65 or older.

In a competitive, globalised world, we simply cannot put up our shutters and say ‘we’re full’. Even if our city populations failed to grow, many of the challenges outlined in Creating Great Australian Cities would still exist.

So we have to get our cities right – for tomorrow and for a range of future scenarios.

This means making the most of technology.

Embracing ‘mobility as a service’

It is impossible to predict, let alone fully comprehend, the impact of new technology on our lives – or, relevantly for today, on cities. But it is possible to make some well-informed observations about how we should plan for cities during the fourth industrial revolution.

The first point is very simple. We need to get our macro policy and regulatory settings right to maximize the benefits of technology and address the risks.

Regulation needs to find that sweet spot between supporting effective markets, protecting people and values, and unleashing innovation and enterprise.

There will be a tendency to over-regulate. If governments surrender to this tendency, we’ll miss out on the immense opportunities that technology offers to make lives better.

Cities and communities that embrace “mobility as a service”, for example, by harnessing the opportunities of ride sharing, autonomous vehicles and integrated public and private transport networks – and of technologies and platforms we don’t even know about today will have a competitive advantage over those that don’t.

But I’m not here to blithely proselytise technology. We need to ensure its benefits are spread widely. The technological revolution must be a human one – one that makes people lives’ better, instead of leaving some people stranded without the skills and support they need to thrive in a changing world.

Good regulation – that is well crafted and directed at the general welfare – usually helps markets work best. And smart, effective regulation will be needed for some new technologies, like artificial intelligence for example, to be accepted and used by consumers and the community – essentially granting artificial intelligence a social license.

As Australia’s Chief Scientist, Dr Alan Finkel, argued recently: “we want rules that allow us to trust AI, just as they allow us to trust our fellow humans.”

As I have said elsewhere, technology can drive the next wave of jobs, and growth in productivity and living standards – our collective challenge is to harness technology to build and sustain a just and productive Australia, one consistent with our human dignity and Australian values.

The second point is that we need to get the governance of cities right. All levels of government have a responsibility to work together to support the development of great Australian cities.

For anyone who thinks cities policy is only a state or local issue, take a close look at the Western Sydney City Deal.

The deal harnesses the Western Sydney Airport at Badgerys Creek — in which the federal government is investing $5.3 billion in equity — and the new North-South rail line through Western Sydney, linking the airport to major residential and employment hubs. These big projects have the capacity to transform Western Sydney.

Through the City Deal, different levels of government are working together to ensure these investments have a transformative and lasting impact on jobs and opportunities in Western Sydney.

We’ll need to find and fully exploit models that allow different levels of government to collaborate in other creative ways to benefit cities.

Beyond better government collaboration, the contemporary governance challenges requires governments, as well as business and the community, to adapt to the changing nature of the Australian polity.

In Australia, as in many similar countries, citizens report a steady decline in trust in government, business and other institutions.

Expertise no longer commands the same respect. In today’s public square, shrill partisanship and ideology gets more ‘likes’ than principled debate.

Circling back on the importance of maintaining a robust social license… urban planning, residential development and major infrastructure proposals are not immune from the buffeting winds of populism – as I’m sure this audience is well aware. While the Western Sydney City Deal is a positive and forward-looking example, we’ve also seen the visceral and litigious community backlashes directed to proposals such as amalgamating local councils to lift scale and capacity, zoning for increased urban density around major transport routes, and compulsory acquisitions to facilitate new roads.

All this makes reform difficult but no less imperative.

We need to work hard to earn back trust. Whether we’re working in government, with government or outside it, we need to find new ways of influencing, engaging and collaborating to achieve our big ambitions.

And now, more than ever, we need clear-eyed, sensible and evidence-based discussion to support good policy; and contributions like Creating Great Australian Cities can only help.

Finally, governments themselves need to use new technology in the design and operation of our cities, as we advance into the ‘metropolitan century’.

As head of the Australian Public Service, I’m keenly aware of the contribution it can make to national productivity and outcomes through better using technology.

In the cities space, for example, we already using data more effectively through the National Cities Performance Framework to better benchmark city performance and understand community needs, and feeding this back into our policy formulation.

Combined with artificial intelligence and machine learning, big data should in the future give governments better insight into what is going on in our cities and improved capacity to meet energy needs, run transport systems, combat crime and deliver support services, to name but a few. In short, to offer the predictive services citizens will increasingly demand as a counterpart to their demands on firms as consumers.

I am heartened by the innovation I already see in the Australian Public Service.

At the same time, I strongly support the Government’s recent announcement of a major review of the Australian Public Service. This review – the first ‘root and branch’ analysis of its kind since the Coombs Royal Commission of the early 1970s – will ask how to ensure the Australian Public Service remains fit-for-purpose for the coming decades.

It will consider the transformational change that we need to best serve governments and the public in the coming decades.

I encourage the Property Council and indeed all of you to engage in the APS Review.

Innovation, collaboration, adaptability, creativity – these are the sort of attributes Australia is going to need to build great Australian cities during the fourth industrial revolution.

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