The Optimism Economy: A National Framework for Economic Optimism

by Victor Perton, Chief Optimism Officer, Centre for Optimism , Robert Masters AM LFCPRA and Dr Anand Kulkarni

Our country can and should be a beacon of optimism. There are so many opportunities for unparalleled prosperity, drawing on the strength of our number one asset, our people, and turning challenges into opportunities through our infectious optimism, ingenuity, boldness and entrepreneurship.?

“We are at a time of profound global transformation. We are confronted by rising catastrophic and existential risks, many caused by the choices we make. Fellow human beings are enduring terrible suffering. If we do not change course, we risk tipping into a future of persistent crisis and breakdown”. This is the opening gambit of the recent UN Pact for the Future .

?While the pact mentions hope and opportunity, the opening line takes us on a distinctly dark journey. This is compounded in the Australian narrative about the various “crises”, and national emergencies bedevilling the Australian economy, including housing, cost of living, ageing and climate change.???

?We have seen an unrelenting cycle of negativity, as witnessed in the media and public discourse over the recent past.??

?This finds expression, arguably, in a declining trust in institutions, as exemplified in recent data from the Edelman Trust Barometer.??

?An interesting portrayal of viewing things in the negative is found in Hans Rosling’s book Factfulness in which he claims there is a tendency in society to: divide things into opposing camps; emphasise the negatives; believe that things will continue as they have before; pay more attention to frightening things; perceive things out of proportion; generalise; prefer simple explanations and solutions; the blame instinct; and seek urgent responses?

?However, there is a different and better way. The Centre for Optimism has conducted extensive research which has found that optimism is the spark that lights risk taking and entrepreneurship, innovation, creativity and productivity.??

?Optimism unleashes the willingness to embrace the bold and the new, anticipate and seize new opportunities, to think outside the box, to shape and drive the future, and to provide long term solutions to complex challenges.???

The Framework??

The Centre for Optimism’s release of a new Economic Framework for Australia aims at lifting the nation out of its pessimistic malaise.?

?The Framework builds on the Centre’s recently released Optimism Principle declaring that the answer to society’s most pressing question is optimism.

This principle delves into the significance of optimism, highlighting its crucial impact on the collective prosperity of the business and government sectors, as well as individual well-being and that of societies.?

This Optimistic Economic Framework builds on The Optimism Principle and the Framework for an Optimistic Australian National Narrative .

Recent research on The Optimism Effect conducted by Dr Danielle Kent and her team at University of Sydney Business School and published in the Journal of Innovation and Knowledge underscores the role of optimism in driving national innovation and productivity. The study, which analysed 42 countries, found that optimism—particularly among business leaders—significantly boosts innovation and economic performance. The study also emphasized the importance of supportive policies like R&D investment, technological development, and fostering entrepreneurship.?

This research aligns with the views of other influential thinkers who have championed optimism as a key driver of economic success. John Maynard Keynes famously noted that many of our most positive actions arise not from rational calculation but from "spontaneous optimism," driven by human nature’s "animal spirits."??

According to Keynes , "Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits – of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities."?

Similarly, Daniel Kahneman highlighted the disproportionate influence of optimists in shaping the world, asserting that they are the innovators, entrepreneurs, and leaders who make lasting change.?

Kahneman said that?"Optimistic people play a disproportionate role in shaping our lives. Their decisions make a difference; they are inventors, entrepreneurs, and political and military leaders – not average people.”?

?The premise of this piece is that contrary to much of the recent dialogue Australia has much to be optimistic about.??

A Good Country?

?By any reckoning, we live in a country that is vibrant, inclusive and welcoming, and a highly respected member of the global community.??

?Also importantly, from an economic standpoint, is that the nation is a strongly knowledge intensive one, in which the skills and capabilities of its leading firms, workforce and researchers stands out, fuelled by an optimistic zeal.??

?Australia's economy is no longer reliant on outdated stereotypes like the "sheep’s back." The global landscape has shifted towards knowledge creation, application, and diffusion, and Australia has positioned itself to thrive in this new era. Evidence of this can be seen in the country's rankings across several global indices:?

• Australia is ranked 23rdth in the world in the Global Innovation Index, which includes: being 8th in the world on tertiary education; 5th on use of, and access to, ICT among other things; 18th on knowledge workers; 17th on knowledge creation; and 18th on online creativity;?

• 8th in the world on the Global Talent Index, which measures, among other things, a nation’s ability to enable, attract, grow and retain talent, and 10th in the world according to the UN Human Development Index;?

• Six Australian Universities are in the top 100 Institutions in the world, according to the Times Higher Education Rankings, meaning that the country is punching well above its weight when considering its global share of population, share of global GDP and overall number of institutions of higher learning;??

• A dynamic entrepreneurial ecosystem, with Australia boasting higher new business registration rates than OECD and high-income countries. Australia ‘s diverse and strong corporate base is driven by inspiring entrepreneurs across diverse fields. Data for new business density from the World Bank, which indicates new registrations per 1000 people, shows that at 17.3, Australia scores higher than the OECD (4.5), High Income Countries (5.2) and the world (3.4). A 2020 Deloitte Touche Venture Support assessment of the top 500 fastest growing Technology enterprises in the Asia Pacific Region found there were about 100 Australian firms in this group.

• The business enablers, which allow firms to undertake their activities and plan with confidence and certainty, are sound. For example, according to the Worldwide Governance Indicators of the World Bank, Australia is above the 90th percentile for all of the key variables of voice and accountability, political stability, Government effectiveness, regulatory quality, rule of law and control of corruption. It should be noted that in the latest Chandler Good Government Index, based on 2022 data, that Australia is ranked 15th in the world, however its score on leadership and foresight is the weakest of all the determinants.?

Optimism: The Foundation of Resilience and Growth?

Optimism serves as the cornerstone of resilience. It enables individuals, businesses, and society as a whole to foresee better futures, seize opportunities, and drive meaningful change.??

Australia is confronting challenges like housing affordability, an aging population, climate change, and slow productivity growth. However, with an optimistic mindset, these challenges represent opportunities for innovation and problem-solving, rather than crises.?

Resilience?

In its Future of Jobs Report , the World Economic Forum (WEF) measures, among other things, economic resilience, which is the capacity of an economy to withstand and bounce back from shocks.?

According to the WEF, Australia is ranked 6th globally on the resilience indicator. In an analysis of recent economic performance, the ABS noted that economic growth had bounced back after an estimated $158 billion loss in GDP due to Covid-19.

A Vision for the Future?

The Centre for Optimism’s Optimistic Economic Plan outlines several initiatives to help Australia navigate these challenges and achieve long-term success. To this end, the Centre’s Plan, whose development and implementation would be a collective effort of Governments, business and employees, has the following key features:?

• Development of a Unified National Vision for the Next 30 and 50 Years: This initiative seeks to establish a long-term, bipartisan agreement, or alternatively, a group of citizens capable of rising above political divisions. By setting a collective vision, Australia can position itself as a global leader in areas such as energy solutions, sustainable food production, and urban design. Similar to other national vision projects like Saudi Arabia’s Vision 2030 and Singapore’s Smart Nation , this effort would inspire optimism, encourage investment, and drive innovation. Strategic foresight tools should guide this vision, ensuring engagement from government, businesses, and communities, and fostering collaboration across sectors for long-term success.
• Development of a National Fourth Industrial Revolution (4IR) Plan: The 4IR is fundamentally transforming industries, firms, and nations through technologies such as Artificial Intelligence, 3D printing, and soon 6G networks. The Albanese Federal Government’s "Made in Australia" programs, supported by allocated budgets and departmental resources, are contributing to domestic manufacturing and technological innovation. These programs aim to strengthen local production and reduce reliance on imports, aligning with the adoption of next-generation technologies. By integrating the "Made in Australia" initiatives with 4IR advancements, Australia can enhance productivity, support job creation in automation and advanced manufacturing, and maintain a competitive edge in global supply chains.
• Managing Transformation and Embracing Change: In any major transformation, there will inevitably be business churn, with both winners and losers emerging. Rather than slowing down these shifts through short-term protectionist measures, it is vital to implement large-scale, well-designed policy initiatives. These should focus on rapid reskilling, upskilling, and fostering entrepreneurship to absorb new capabilities within firms and the workforce. As outlined in The Optimist's Checklist for Success in Transformation and Change, the keys to navigating change successfully include creating an optimistic culture, promoting strategic foresight, and enabling the workforce to embrace new skills. According to the World Economic Forum Future of Jobs Report, big data analytics is expected to be a major driver of job creation in Australia. The core skills of the future—analytical thinking, resilience, flexibility, agility, and creative problem-solving—are closely aligned with optimism, making it a critical trait for navigating this transformation.
• Promoting ‘Opportunity Engines’. It is recommended that a series of “opportunity engines” be promoted which provide real and tangible solutions to the complex challenges mentioned earlier, so often thought of as “crises”. For example, these opportunity engines could include: innovative and affordable new, sustainable housing design and a re-configuration of urban spaces to balance housing and other needs, including better uses for office blocks; stronger support for the care sector to address challenges of ageing, including culturally sensitive ageing; mitigation and adaptation capabilities in tandem, and in concert, to address climate change, through such things as new building design and sustainable materials; and a holistic, integrated approach to the health sector, which cuts across territorial boundaries, and addresses fundamentally mental and physical health needs. These engines would be consistent with what Mazzucato refers to as “the Mission economy.”
• Enhancing a competitive environment is essential. This will mean, among other things, a regulatory environment that is “joined up” in the sense of identifying the full costs and benefits for business and the broader economy of any laudable regulatory changes, with supporting institutional arrangements and benchmarks to promote co-ordination, consistency and certainty. The World Bank’s Business Ready Report focuses on 3 elements consistent with our Vision for?Economic Optimism: Regulatory Framework, Public Services, and Operational Efficiency. It urges a whole of firm lifecycle approach to tailor policies to each stage of a firms’ activities.
• Embracing Institutional change. As flagged in the narrative released in 2022, institutional change would support these policy initiatives. Institutional changes are key to achieving this Optimistic Vision. Strengthening collaboration between and within government, businesses, and the workforce is crucial.

The key elements of this would include:?

• Widening the remit of the National Cabinet;?
• Improving Vision making capabilities in Government agencies;?
• Mechanisms to promote collaboration between Government, industry and the workforce, and ensure that the interests of local and community players, where a great deal of innovation is generated, can be heard;?
• Building on the Federal Government’s previous work in articulating alternative measures for economic prosperity, including the need for instrumental measurement of National Optimism as a key benchmark to frame policy.?

Collaboration for a Prosperous Future?

Maintaining a competitive business environment is essential to this Vision, and the regulatory framework must support innovation and long-term success. The World Bank's Business Ready Report recommends a balanced regulatory approach that benefits both businesses and society, a sentiment echoed in the Centre’s economic plan.

The World Bank’s Report contains a telling statement - “Human ingenuity works instead through the miracles that occur when governments, private enterprises, and individuals act in ways that benefit entire societies. That depends on conducive conditions, cultivated by a measured blend of rules and practices...... For too long, though, the focus has been too much on what governments can do for the good of business—and not enough on what businesses can do for the good of all. This report marks a crucial first step to correct that imbalance”.???

The 2024 Commonwealth Heads of Government Meeting (CHOGM), in its Samoa Communique highlighted the importance of optimism in its declaration that “Heads reaffirmed their commitment to include, respect, understand, support and strengthen the voice and agency of the youth - an integral part of the Commonwealth - and to restore hope and optimism in our common future.”?

Optimism Should Be the Backbone for the Economic Agenda?

Ultimately, optimism should form the backbone of Australia’s new economic agenda. By acting together, government, businesses, and communities can drive a prosperous and sustainable future. Our Vision reflects this.?

Above all, optimism as an enduring principle, should be the backbone of a new economic agenda.?

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Join the Centre for Optimism to make this economic vision a reality. ?

Warm Regards from ?

?Victor Perton, Chief Optimism Officer, Centre for Optimism

Robert Masters AM, Chairman Centre for Optimism

Dr Anand Kulkarni Chief Economist, Centre for Optimism?