Australia is too reliant on the resources industry, according to Wesfarmers chairman Bob Every, who is heading a Business Council of Australia panel on the decline of value-adding and manufacturing.
Mr Every, speaking at a lunch in Sydney on Friday, said the percentage contribution of value-adding to Australia's economic growth had halved in the past 50 years, and he was "really concerned about a hollowing out of the economy".
"We're more of a quarry now than we were 50 years ago," the Wesfarmers chairman said.
Mr Every will lead a "chairman's panel" for the Business Council on strategies to improve value-adding in key sectors of the economy, part of a long-term vision document to be released mid-year.
Mr Every, who also chairs Boral and is a former chief executive of OneSteel, said while he was optimistic about a US recovery, and believed that Europe would "bumble through" its woes, Australia could not rely on China to drive its economy.
Wesfarmers former powerhouse resources division, which includes the Curragh and Bengalla coal mines in Queensland's Bowen Basin, is barely profitable and has been a drag on the company's earnings.
Mr Every said the non-resources sectors of the economy were
struggling and Australia, which had high labour and energy costs, had to face up to challenges including an ageing population by embracing taxation and industrial relations reform.
He said in recent years, Australia's labour laws had "gone back 10 to 15 years", though adding, "we probably went a step too far with WorkChoices".
Oz Minerals and Incitec Pivot director Rebecca McGrath, who also spoke at the lunch, said "for manufacturing to survive and
prosper, we need to have access to competitively-priced energy".
Noting the loss of refining capacity in Australia, Ms McGrath said the country was a "backwater" in global energy markets and should not take its access to imported fuels for granted.