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Whatever happened to Australian manufacturing?

Kevin Rudd and his Federal Government ministers have lately taken to uttering the catch-cry that they "want Australia to be a place that makes things". However, this will not happen in a world of slave-labour economies, until the abandonment of protectionism, supported by both the major Australian political parties, is reversed.

Surprisingly this harmful policy began in the years of the otherwise largely economically nationalistic Whitlam Labor Government.

Martin Feil writes in his opinion piece in the Age newspaper of where this has led Australia three and a half decades later:

In the past 30 years, the manufacturing sector's share of Australia's Gross National Income has fallen by almost two-thirds. Some academics (including the Productivity Commission) argue that its employment numbers are the same but this facile argument ignores the increases in both the population and labour force.

...

The biggest employer in Australia is aged and health care. It employs about 1.4 million people or 12 per cent of the Australian workforce. The next biggest employer is retailing, which employs about 1.3 million people. While we have to look after the sick and the old and love to shop we must realise that we are not making much of anything.

No doubt not far behind would be other unproductive categories such as finance and land speculation. Property development, including construction, whilst superficially appearing to be a productive economic activity, merely facilitates adding more to our population for which sustainably productive employment has yet to be created. The same applies to the construction of roads, and other infrastructure to service the areas in which the new arrivals will live.

Whilst Premier Kevin Rudd and Queensland Premier Anna Bligh apparently believe that these activities can indefinitely continue to be a major component of Australia's economy, common sense tells us that they cannot.

Martin Feil continues:

The money that pays employees in those industries comes from income earnt in other industries, from taxes on earnings, from money borrowed from overseas and from assets sold to our overseas creditors or investors. Money is not internally generated and self perpetuating.

Mining is not the next big thing for the Australian economy. It doesn't employ many people and most of the industry is already owned overseas. The dollars look great, but most of them don't end up in Australian pockets or taxation revenue. Mining helps pay the interest but it won't earn enough to reduce the debt unless we begin to add value to the ore by further processing.

See also: "Whatever happened to Australian manufacturing?" by Martin Feil in the Age of 20 May 10.