First Nations economy reimagines capital

Capital is often discussed in narrow, financial terms. But in a modern, connected economy, that definition is expanding.

Human, social, and natural are forms of capital. Early in the 21st century, major developed economies began to invest more in (conventionally defined) intangible assets, than in traditional tangible assets.

In Australia, few areas illustrate the breadth of capital and untapped opportunity more powerfully than the First Nations economy.

Australia’s productivity has stagnated, and demographic tailwinds are slowing. But the First Nations economy is not merely keeping pace with national trends — in some respects, it is outpacing them.

Between 2018 and 2022, the sector recorded faster revenue growth than total new business entries, a sign of above-average productivity in an economy otherwise searching for it.

This is not a marginal story. According to current market data from Melbourne University, it’s estimated that Indigenous-led businesses generated $A16 billion in annual revenue in 2021.

A new ANZ-Deloitte report suggests that figure could exceed $A50 billion by 2035 — if we invest in the right forms of capital. The social reasons to do this are longstanding and obvious. We are just beginning to understand the economic benefits.

At its current pace the First Nations economy will increase 1.9 times by 2035. The number of businesses per 100 people in the First Nations economy will also jump from 1.6 to 7.6. But this still falls well short of the current Australian average of 9.7.

However, the most ambitious scenario in the report models what happens when markets become more broadly accessible, natural capital such as land rights are properly leveraged, and the social capital is distributed through business networks and shared knowledge. With better access to existing resources, the First Nations economy helps drive economic growth.

These tailwinds result in the First Nations economy becoming 2.3 times larger by 2035. The number of businesses per 100 people leaps to 10.6 by 2050, as increased scale and new businesses gain traction.

Businesses don’t just grow in isolation if we leverage intelligently — they become more interconnected, and opportunity spreads. For First Nations businesses this is a natural strategy of connectedness, community and even sectoral diversity, expanding the pie for everyone. As larger businesses become more common, scale will deliver even more benefits to a wider economy.

These improvements will be particularly welcome in an Australian economy where the supply side (productivity) rather than the demand side (interest rates) are the headwind to higher living standards. Australia’s challenge is not cyclical. Unlocking underused capital is one of the most critical levers we have.

Further, the First Nations population is younger and growing more rapidly, when the national population is ageing inexorably. Forty-three per cent of the First Nations population is aged under 20 against a national average of 26 per cent. Young populations drive participation and help sustain economic activity per person for an ageing Australian workforce.

This is not just a different model of business – it is a different mindset and a different approach. First Nations businesses tend to be more collective, long-term oriented, and sustainability focused. As these principles scale up, they offer a roadmap for a more connected, inclusive and productive national economy.

The payoff is not limited to Indigenous Australia. As the report makes clear, First Nations business is a driver of national growth. The economic benefit is widely shared — across supply chains, employment markets and community networks. For every dollar invested in a First Nations business, the social return can exceed four dollars. This is the best of positive-sum games.

If we can broaden our definition of capital, and reduce barriers to its deployment, we won’t just unlock the potential of one part of the economy – we’ll redefine how the entire economy can grow.

Richard Yetsenga is ANZ Group Chief Economist