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Made in Australia tag is frayed and falling off

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While most pundits – and some senior politicians – stare in wonder at the size of the mining industry’s windfall profits, they are missing a great tragedy happening under their noses.

The mining boom has pushed the Australian dollar to historic highs and this, in turn, has pushed manufacturing to the brink.

The damage being done by the high dollar to the rest of the economy is actually more than offsetting any gains that the mining industry may claim it is generating for the economy.

As an aside, Prime Minister Julia Gillard and Treasurer Wayne Swan should consider scrapping the watered-down super-profits tax scheme they struck with the three big mining houses and reverting to the original Ken Henry model.

They need to secure that extra $60 billion over 10 years because the government is going to need every last dollar of tax revenue it can get its hands on when the dust has finally settled on the wrecked manufacturing sector.

Manufacturing companies across the country are being ground into the dust by the strong dollar, which has wiped out export markets, profits and jobs as foreign manufacturers steal customers and markets.

A great deal of the pain is being hidden in family-owned companies that do not have to issue regular reports on how they are travelling, but the evidence of widespread trauma in manufacturing is there for all to see.

Take the car industry, where government policy has encouraged investments totalling $2 billion dollars since 2008: Swedish-American automotive safety equipment company AutoLiv is about to close its Campbellfield operation, having already shipped its manufacturing to Thailand last year.

The AutoLiv workforce after Easter will total eight people, and their jobs will be to liaise with local car makers about imported AutoLiv products. Six years ago, AutoLiv employed more than 1000 people.

More recently, German group Bosch announced plans to shut part of its Clayton manufacturing operation and move it overseas – 380 of the 1100 jobs at Clayton will be lost.

These are massive cuts in the manufacturing workforce, which has been under pressure for several years as the dollar has climbed from lows around US50¢ in 2000 to about $US1.05 now.

Perhaps what is most galling about the fate of the manufacturing sector is that it is losing ground to Asian competitors that operate in countries where governments take steps to maintain a relatively steady exchange rate with the US dollar.

China and Japan are the two biggest offenders in this regard, while Australian governments of both persuasions have robotically clung to the World Trade Organisation agreement and its prohibitions against manipulating exchange rates.

The ruination of the Australian manufacturing base is something to be feared. Manufacturing jobs underpin the standard of living in this country.

The prospect of regular hours, negotiated

pay rates and the opportunity to improve skills are features of the sector, features not found in the increasingly large number of casual and part-time positions that are comprising an ever-larger share of the economy.

The shrinking of the manufacturing sector wouldn’t be so bad if there was another sector coming up to replace it, but there isn’t.

Mining generates a lot of revenue and, with commodity prices as high as they are now, even more profits. But much of this gets shipped out to the shareholders of Rio Tinto, Xstrata and other foreign companies and is not reinvested here.

But, despite its outstanding profitability, mining doesn’t generate much in the way of extra jobs. It is even more capital intensive than manufacturing and employs barely 100,000 people.

In contrast, there are just under 1 million people employed in manufacturing. Not all manufacturing companies need to export to survive, but a large proportion of the sector is exposed to import competition. And that competition just becomes more fierce every time the dollar rises.

So what Australia is seeing here is an industry employing about 100,000 people undermining the jobs and living standards of almost a million people in manufacturing.

Australia’s industrial base is being rapidly undermined as company after company realises that it is easier and cheaper to make things overseas in currency-protected markets and ship them back to Australia, where there are no barriers to entry and where nobody seems to be thinking about the future structure of the economy.

Laissez-faire economics got a bad name when it produced eight-year-olds down coalmines and adults working 18-hour days.

Australia appears to have invented a new style of laissez-faire economics, in which the government abandons all the tools that other countries use to protect and husband their economic structures, and lets capitalism and rigged currency markets determine whether or not there will be any worthwhile jobs in Australia in future.

This is not meant as criticism of Innovation, Industry, Science and Research Minister Kim Carr. No minister in recent memory has worked harder to encourage investment and introduce innovative schemes to create jobs.

This is a macro issue that requires leadership from Gillard and Swan. It can’t be that hard to have a look at what other countries do and reciprocate, whether its currency manipulation (China, Japan) or ”voluntary” import quotas (US).

There are plenty of other devices, too. No one except the trade hawks in the WTO and those in the US who espouse free trade, but do not practise it, will complain. But their hypocrisy will not preserve jobs in Australia.


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One Response to " Made in Australia tag is frayed and falling off "

  1. Leugner says:

    The deep geological repository under Uluru cannot come soon enough.

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