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The Forum > Article Comments > The Dutch Disease has infected the Australian economy > Comments

The Dutch Disease has infected the Australian economy : Comments

By John Töns, published 17/8/2011

How strong would our economy be without mining? The Australian government needs to remember that with every boom, there comes a slump.

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A good analysis, Jon.
I would just add my incredulity that no one seems to question the "inevitability" of the mining boom.
All sides of politics treat the demand for minerals etc. as something that must be met, and so grand programmes for enlarging the labour force by whatever means necessary are mounted, in order to keep up with demand and capitalise on the boom.
But how do we capitalise on it? In the form of growth; we grow our economy, which means we grow our population, demand for infrastructure and services etc., while all the while the excess accumulates nicely in the pockets of those who have invested in the enterprise.
There is no real qualitative difference made to the existing society; all this prosperity is converted into extending rather than improving or enriching, and certainly no consideration is given to imponderables such as sustainability, of the environment or of the burgeoning population, once the boom ends. New and lucrative enterprises will of course take over from the mining boom and in their turn continue to grow our economy (economic growth is material growth) ad infinitum.
I would posit the question: why must we respond with such alacrity to demand if our present population and needs can be satisfied while conserving and husbanding our resources for future prosperity, thereby also mitigating the negative economic effects of the boom Tons points to?
It's insane. Australia cannot sustain endless growth and extraction, and we have no qualitative need to expand. The raison d'etra is profit for a few rather than prosperity for all. An increasingly unwieldy western-style population means collapse is just a matter of time.
Just because we can satisfy demand and grow, doesn't mean we should.
The "logic" behind economic growth is so ingrained we don't question it. There is no logic!
We should be husbanding our resource (and manufacturing) wealth, and selling it with restraint in the global market, conservatively and as genuine "need" dictates, not in some knee-jerk reaction to "demand" (halloed be thy name!)--a rallying call for expansion and profit! Not prosperity, and certainly not maintainable!
Posted by Squeers, Wednesday, 17 August 2011 9:00:15 AM
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Jon you have hit the nail right on the head.
One of the things that could be done is to subsidies some of the small businesses that are being moved offshore.
An example is the food processing plants in Country Victoria and Tasmania that are being closed down to “rationalize” them.
In effect the parent companies can get cheaper labour elsewhere and increase their profit.
It would be beneficial for Governments to provide finance for a buy out of the plants to be run by a workers Co-op.
And if necessary to provide a subsidy for their operation to help offset the cheaper labour costs of the overseas countries that they would be competing against. Not only would this give Australia food security but it would help to retain the skills needed to operate this type of industry.
The day will come when we will have to fall back onto our own resources and not have the skills to do it.
Posted by sarnian, Wednesday, 17 August 2011 9:27:51 AM
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Yep,

Absolutely

See my piece

The Australian Dutch Disease and the Norwegian Cure

http://forum.onlineopinion.com.au/thread.asp?discussion=4053&page=0

Of course I think it more likely we'll see the second coming before the present crop of politicians take this seriously.
Posted by stevenlmeyer, Wednesday, 17 August 2011 9:35:04 AM
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A prime example of the problem was a WA steel fabricating company CO interviewed on radio this morning.

He stated that they are having real difficulty competing with Asian engineering companies, for contracts for construction of sections of the gas plant now being developed at Dampier.

High wages, & material costs, brought about by the two stage economy are killing them.

Now I totally disagree with a super profits tax. Not only is it unfair, it would put even more money into the wrong hands, the government.

However there would be nothing wrong with a little clause in mining & processing permits requiring 60% of plant fabrication be done in Oz. This would still allow overseas competition, to prevent excessive pricing, & would encourage overseas heavy engineering companies to transfer some of their manufacturing to Oz.

What a change that would be. Could we call that on-shoring, as against Off-shoring?
Posted by Hasbeen, Wednesday, 17 August 2011 10:10:55 AM
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Hasbeen, we can have long discussions about solutions.

But do you see any signs that Gillard, Abbott or Brown even recognise the problem?

In fact I would say the REAL problem is not the Dutch disease at all. It's the inability of the political class to understand there is a problem in the first place.
Posted by stevenlmeyer, Wednesday, 17 August 2011 10:55:10 AM
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stevenlmeyer I believe you have hit it on the head right there, none of the political organizations identify with the problem. They are daily encouraged by the media to deliver bread and circuses, and deliver.

We have a PM who was considered a good candidate, because of her parliamentary performance. It remains her only strength.

Abbott is caught having to constantly respond and play an opposition, but can only act on the government's lead, he cannot set agendas, only the government can. He gets no attention if he is not playing an opposition role. Imagine how much attention he would get if he agreed with everything the government does .. zero, irrelevance.

When Abbott gets into power, will he be able to shed the media driven combative role he has adopted? Like many, I think it's our only hope to recover from the wrecking the ALP Coalition is doing.

I don't think the ALP can or will change, they have long ago set themselves on this course and unfortunately for us, it's heading for a brick wall with no way of changing direction. The only good thing that will come out of it is all the greenies and indies glommed onto them, will hit the wall at the same moment.
Posted by Amicus, Wednesday, 17 August 2011 11:28:26 AM
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Almost agree with eveything here.

The biggest proviso would be that I wouldn't be relying on Abbot to turn things around.

While things may not get any worse if he were PM, I doubt they would get any better.

Unfortunately professional politicans motivation for power and to retain power tend to overide what is good for the common wealth of Australians.
Posted by Neutral, Wednesday, 17 August 2011 11:59:27 AM
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I do like stevenimeyers thoughts about a sovereign wealth fund. I do agree with one of the critics ideas that (at least some of) the wealth should be invested in generating creating wealth (ie small business).

Thanks John for the piece, I'm sure you are right in your analysis.

I wonder if those with better economics than mine can come up with a way for citizens to invest in a solution to this kind of thing. This is well beyond my abilities.
Posted by Evan Hadkins, Wednesday, 17 August 2011 12:04:39 PM
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Well done Jon,
Seems like we are going the same way as the United States where they exported all their industry to China and kept lawyers, coffee shops and hair dressers. They are headed for depression and we will too when China stops buying.

A govt fund to ensure the mining money does not raise the Australian dollar would help.

The long term of every Australian mine is to leave us Australians with a hole in the ground. Best make intelligent use of the wealth while we can. Tax the mines HARD!
Posted by Michael Dw, Wednesday, 17 August 2011 3:52:38 PM
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Lets hope the day never comes “when Abbott gets into power”.
It was the Coalition under Howard (Abbott’s Messiah) who eagerly bought into the globalization scam and also signed the “free trade agreement” with the US.
A chip off the old Thatcher block.
It needs a new broom to sweep all the old corrupt agendas away.
I agree that the Gillard, Abbott, Brown trio are not the way to go and their respective parties are not going to change the status quo.
What is needed is a fresh look at the whole system.
First cab off the rank is to block the power of the corporations in pulling government strings, no matter what government.
Without that all bets are off.
Posted by sarnian, Wednesday, 17 August 2011 4:59:24 PM
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'Putting all of our eggs in the mining basket has reduced the rest of our economy to a basket case.'

That's the problem in a nutshell.

Stevenmeyer, I agree with your previous suggested solution 'The Norwegian Cure'.

As to where we need to place our investment overseas. .. well our politicians have also already supplied the answer.

The current future fund is domiciled overseas for exactly the reasons you noted.

BUT there again the explicit purpose for that particular future fund is for the funding of our politicians and our bureaucrats superannuations.
Posted by imajulianutter, Thursday, 18 August 2011 6:19:50 AM
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I'd add a simple solution.

Put a GST on exported minerals and coal. No it's not a tax on industry it's a tax the consumer pays.

I reckon our major competitors would very quickly adopt such a tax.

The other benefit our major Australia manufacturing industries would have is that they'd automaticly have a natural price advantages over imports.
eg. Cheaper produced power, cheaper rare materials, very low comparative transport costs.

If other countries do the same to us ... well so bloody what... we'd have to return to producing for our own needs.
Posted by imajulianutter, Thursday, 18 August 2011 6:28:55 AM
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The biggest proviso would be that I wouldn't be relying on Abbot to turn things around.
Neutral,
What do you propose ? Bring back Kevin ? The only way to get us back on track is to reduce the Public Service wage & introduce a non-military national Service & move gradually towards a flat tax. The riots around the world are a clear indication that inequality is the root of all the uprising. A flat tax would remove inequality in one single stroke. It also wold encourage people to get up & go rather than what we have now. The hierarchy doesn't understand that people simply get tired of working for next to nothing while those who do nothing get the handsome rewards. Just look at the Public Service.
Posted by individual, Thursday, 18 August 2011 6:45:14 AM
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What an excellent piece. It begs a few questions though, such as how a politician can get elected without promising lots of handouts to the preferati; how an elector can make a meaningful vote in an era in which the parties are essentially indistinguishable on genuine issues and elections are fought on sideshow matters that have little relevance to the things that will happen when Parliament sits; how a politician can make the tough decisions when their seat is dependent not just on convincing the electorate, but on doing what the Party line demands.

What the Party line demands, increasingly, is that decisions must come with a quid pro quo for the Party. Thus, the BER program had to be done by a few large firms because these firms will assuredly help to fill the ALP coffers before the next election. A lot of small firms would be much less likely to do so. Ditto for the NBN, which has no genuine reason for existence but will provide some "jobs for the boys" and some funding for the Party. Of course this was dressed up as "efficiency", but we all know the real reason.

Furthermore, in today's environment it is large corporates that pay essentially all the net tax. Individual income tax is more than consumed in redistribution to individuals and the administration of that redistribution (about $155 billion collected and about $165 billion spent). Very many people on good incomes pay essentially no income tax at all. On top of that are the large sums spent on the various social engineering programs so beloved of the Left. Someone has to pay and that someone is the large corporations.

Welcome to the wonderful world created by "lobbyists". It's amazing what rubbish is supported by government solely because of the squeaky-wheel lobbying of a couple of well-placed whingers and it's all because we have lots of money rolling in with no real connection to the productivity of the nation as a whole.

My advice, "privatise the profits" and be prepared to leave.
Posted by Antiseptic, Thursday, 18 August 2011 7:11:47 AM
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individual, I made no such proposal so do not presume to imply one.

My position should be clear enough. Abbott is no different to any other professonal politician where election cycle myopia blinds them to a long term vision for Australia.

Your advocacy for a form of national service has merit.

That the public service is forever expanding is nothing new. Labor are merely continuing the Howard tradition. Of course there is some obvious low hanging fruit that could be plucked without too much trouble.

The once independant public service was politicised under Howard and is now used a weapon by Labor. I doubt any party has the collective acumen to make significant and meaningful change without increasing the current dysfunction of the political duopoly. It would take a kryptonite proof and tungsten coated business person from the real world to whip it into shape.

Tax reform is essential. However again, both parties either have missed their opportunities and/or are ignoring the recommendations of official reviews.

At least you have some ideas individual. I wouldn't rely on a partisian position though, as both major parties are in decline.

If the Liberals would not ignore the recent review undertaken by Peter Reith into the 2007 election loss and implement the more imperative recommendations they perhaps could regain relevancy.

However just like Labor I wouldn't hold my breath waiting for any political professional to ameliorate anything that may threaten a personal silo or vested interest
Posted by Neutral, Thursday, 18 August 2011 8:33:29 AM
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I find myself agreeing to most of the posts here to my amazement.
One thing that I would advocate is a tax on the export of gas.
Our oil is rapidly running out and gas is the logical replacement as a transport fuel.
If we continue to export it in huge quantities it will eventually become scarce even though we have a large amount at the moment.
I really think that the oil and gas industries should be nationalized but there would be no chance in the present political climate.
Posted by sarnian, Thursday, 18 August 2011 9:22:30 AM
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Come on sarnian, why would you want to convert the oil & gas industries into loss making catastrophes, from the profitable business they are today.
Posted by Hasbeen, Thursday, 18 August 2011 11:06:26 AM
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*One thing that I would advocate is a tax on the export of gas.*

They are already taxed. As most of the gas is offshore, money goes
straight to the Fed. Govt. This goes all the way back to the Hawke
Govt

*I really think that the oil and gas industries should be nationalized but there would be no chance in the present political climate.*

As if the Govt could run an oil and gas industry, when they can't
get installing pink batts right. So you'd risk 25- 50 million $
of taxpayers money per hole, to find gas? Hardly a clever way to
spend Govt money, given their poor record of running a business.
Posted by Yabby, Thursday, 18 August 2011 11:44:36 AM
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You need to look at what happened with the insulation. Firstly it was sub IRS who were the problem. Second the safety record was comparable. I'm not sure nationalisation is a good idea, but the I'll companies don't seem to have much of a record on safety in the last couple of years either.
Posted by Evan Hadkins, Thursday, 18 August 2011 11:52:37 AM
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So far all respondents have agreed that we have a problem.
Solutions have been more problematic. Yet there is something that a government could do that would ensure we do not lose our manufacturing industry. It could, by regulation, tweak the business models that Telcos use.
Until the advent of the modile phone you bought the service provided by the telephone company. Factored into the cost of that service was the cost of the telephone itself - you never owned it all you could do was use it.
If we go back to this model not just with phones but with all manner of consumer goods - we want to be able wash our clothes and dishes, have cool homes, be entertained, for which we happen to need a product that manufacturers provide. So if by regulation govt created the situation where we could not own these products but instead were invited to purchase the 'service' from manufacturers. This would apply to all consumer durables from mobile phones and pc's to fridges and washing machines. Two things would happen. Firstly manufacturers will have a much better handle on how many units to manufacture and so can provide employment certainty. Secondly it would have a built in quality control - people will not buy a service if the product to deliver that service is constantly breaking down. Retail outlets would operate as usual but all they would be doing is selling the service and supplying the machine to deliver that service. Domestic manufacturers would have a competitive advantage because they would not have ship superseded models back to their country of origin.
Will by no means as simple as suggested here but it is an example of the sort ideas that we need to explore if we are going to keep control of our future.
Posted by BAYGON, Thursday, 18 August 2011 12:30:53 PM
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You are treading on dangerous territory there, Baygon. The law
of unintended consequences usually bites good intentions in the arse.

Govt could start by lowering costs which they lumber on business.
Carbon tax, payroll tax, cushy labour laws which prevent flexibility or productivity gains.
Business has no certainty, so why should the provision of labour? We have in fact created a double
standard.

Besides, the odd recession is actually not such a bad thing.
It cleans out the dead wood that accumulates. Like overvalued real estate,
far too many retail stores, those who have overborrowed, etc.
Short term it means a bit of pain, but long term we all benefit.
Posted by Yabby, Thursday, 18 August 2011 2:45:27 PM
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I'm thinking that Yabby isn't one of those feeling the pain at the moment.
Posted by Evan Hadkins, Thursday, 18 August 2011 3:34:47 PM
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Also Yabby the law of unintended consequences applies to all proposals (including yours ) and to not doing anything.
Posted by Evan Hadkins, Thursday, 18 August 2011 3:36:45 PM
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http://forum.onlineopinion.com.au/thread.asp?article=12474#215608

Squeers, great article & your comment as well, for once i agree with you.

But the article still ignores "the elephant in the room", there is no way to reverse this trend other than return to protectionism.

The kind of economy described as being desirable is exactly what we had between 1945 & 1965. Before it was destroyed on the altar of "economic rationalism".

By whom one wonders? http://www.mailstar.net/xTrots.html so that is who killed the jobs.

http://www.youtube.com/watch?v=u9aHC2tSmRM UN australian activitees.

http://forum.onlineopinion.com.au/thread.asp?article=12474#215611

sarnian, subsidies are expensive, it is cheaper to have tarriff barriers.

http://forum.onlineopinion.com.au/thread.asp?article=12474#215612

stevenlmeyer, spot on, they are wedded to the international banksters.

http://forum.onlineopinion.com.au/thread.asp?article=12474#215616

Hasbeen, heading in the right direction but something like tarriff barriers or ANTI dumping laws is less painfull for consumers, workers & employers.

http://forum.onlineopinion.com.au/thread.asp?article=12474#215623

Amicus, hopefully you are right, but the LNP is also wedded to globalised, free trade, Coca Cola Communism.

i will be voting for Bob Katter & preferencing the LNP.

http://forum.onlineopinion.com.au/thread.asp?article=12474#215626

Neutral, your learning but all the left wing parties are working towards take over by an international socialist NWO.

http://forum.onlineopinion.com.au/thread.asp?article=12474#215627

Evan Hadkins, don't put yourself down, i have met many taxi drivers with better ideas than academics.

are you familiar with Austrian economics? Basically you have social policies, tax/welfare systems that promote the traditional christian family, especially extended, rather than nuclear. this then provides a stable foundation for small & medium family owned businesses.

end of problems.

http://forum.onlineopinion.com.au/thread.asp?article=12474#215642

Don't worry Micheal Dw, even if the economies of China & India don't slow down some more because the rest of the first world is not buying as much of their manufactered goods, mines will soon be opened in places like Mongolia with lower wages & when the mining bust arrives our currency will soon be worthless again.

BTW, all the gold will be gone in 5 to 10 years.
Posted by Formersnag, Thursday, 18 August 2011 4:00:30 PM
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http://forum.onlineopinion.com.au/thread.asp?article=12474#215651

sarnian, the conservatives only added to the globalisation process which was started by the closet communist comrades Whitlam, Hawke & Keating.

http://forum.onlineopinion.com.au/thread.asp?article=12474#215686

imajulianutter, if we were to repatriate all capital invested overseas we would probably have little or no need for foreign investment here.

http://forum.onlineopinion.com.au/thread.asp?article=12474#215687

again, not a bad idea but sounds like another type of tarriff barrier &/or ANTI dumping laws, easier to just go back to a protectionist economy & be done with it.

http://forum.onlineopinion.com.au/thread.asp?article=12474#215689

individual, getting their, but we need to have national service for our military as well & any move towards a simpler taxation system is good.

http://www.youtube.com/watch?v=umEGHYLZryk have you seen this one? individual?

http://forum.onlineopinion.com.au/thread.asp?article=12474#215693

Antiseptic, spot on, although i prefer "jobs for the girls".

http://forum.onlineopinion.com.au/thread.asp?article=12474#215701

Neutral, both major mistakes parties are in decline but so is ALL left wing politics, bear in mind that the LNP is also Coca Cola Communism.

http://forum.onlineopinion.com.au/thread.asp?article=12474#215707

sarnian, again a good idea but we would be better off reducing all mining exports, building up all manufacturing, looking after ourselves.
Posted by Formersnag, Thursday, 18 August 2011 4:28:39 PM
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*The kind of economy described as being desirable is exactly what we had between 1945 & 1965. Before it was destroyed on the altar of "economic rationalism".*

Ah, the good old days eh, Formersnag. As Australia rode on the sheeps
back and eventually rode it into the ground, until the whole frigging
lot collapsed. Meantime efficient exporters had to buy crappy,
overpriced inputs, as the Melbourne industrial club got rich on
the fat of tariff protection. Consumers got screwed all the way
of course.

Lets see. We could tax all computers, mobile phones, Ipads with
100% tariff protection tomorrow. Why would consumers be better off
paying twice as much?
How would that make our present export industries more efficient?

You forget completely that manufacturing has changed dramatically.
The very nature of more complex technology means much larger, more
expensive, more automated manufacturing. You can't make computer
chips or LCD screens out in the back shed, it takes billions. For
that kind of investment, you need those plants to run 24/7, which
our small population can't justify.

Somehow I doubt if the womenfolk would return to the sewing machines
to sew your clothes. They want cushy jobs these days. Then of
course the poor could never afford to buy them.

You really need to think this through a bit better, Formersnag.
Posted by Yabby, Thursday, 18 August 2011 6:08:15 PM
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Yabby,
"Consumers got screwed all the way of course."

Did they really?

When a single income could raise a family, pay off a house, and allow the husband and wife to retire at 65 (or the wife retire earlier).

Objective analysis of globalisation could very well show that the rich have gotten richer, while the rest have seen an increasing gap.

Good article, but perhaps a little too late.

The Labor party has a history of spending big, to eventually leave the Liberal party the job of refilling the coffers.
Posted by vanna, Thursday, 18 August 2011 7:05:58 PM
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*When a single income could raise a family, pay off a house, and allow the husband and wife to retire at 65 (or the wife retire earlier)*.

It still does that, in many country towns and where people have
lower expectations.

Don't blame globalisation for city house prices. Don't blame
globalisation on the fact that people live in houses twice as
big as they used to. Don't blame globalistation that women spend
300 million$ a year on Botox, that people want to travel overseas,
etc.

What has changed is peoples expectations. What has changed is that
many women prefer to have their own income, so are less dependant
on hubby. That might not suit some men, for it takes away some of
their power, but it sure suits plenty of women.

Back in the "good old days", it was a 13 square 3 by 1 fibro,
with a Holden out the front. A new dress was a big deal or mum
made it on the sewing machine. Going out to dinner was a big deal,
watching no 96 on the telly was the highlight of their day. And yes,
Australian consumer products were crappy and overpriced, as they
lacked competition.

You people have short memories
Posted by Yabby, Thursday, 18 August 2011 7:58:07 PM
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We don't have short memories. We just don't automatically buy that consumerism is all there is to life.
Posted by Evan Hadkins, Thursday, 18 August 2011 9:22:48 PM
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Yabby,
Houses were normally on 32 perch or more, and often the family had 3 or more children, so houses were not that small.

Many people also had a holiday home, but I would agree that life was less hectic, and day care centres and family law solicitors were not very common at all.

Globalisation has done nothing for the majority in the US, but has improve the bank accounts of a few in Wall Street.

The same for Australia I would think.
Posted by vanna, Friday, 19 August 2011 7:44:08 AM
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Vanna, GDP is higher thanks to daycares and family lawyers. That's all that matters, didn't you realise?
Posted by Antiseptic, Friday, 19 August 2011 7:52:41 AM
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“But the article still ignores "the elephant in the room", there is no way to reverse this trend other than return to protectionism.”

And that is a bad thing?
Posted by sarnian, Friday, 19 August 2011 9:53:56 AM
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Antiseptic,
No, it has reduced GDP.

It can now take 2 households to run a family, and every time a family is split, it reduces savings and reduces spending ability.

If it is true that minimal revenue is raised from personal income tax, then it could be better to have no personal income tax, and as an added bonus, the rich would not bother with tax avoidance schemes.

Let the workers spend their pay packets without personal income tax, but the trick would be to make sure that money spent in Australia circulates as much as possible within Australia to stimulate Australian industry, and is not immediately spent on imports from another country.

Bob Hawk was probably the most short-sighted politician Australia has ever had, or did have up to the present government.

He introduced globalisation without stimulating Australian industry, which then decimated Australia industry. He also introduced the notoriously corrupt Family Law system which decimated Australian families, and he introduced HECS fees which wrecked the skills base amongst Australian workers.

Few anarchists could do a better job at long-term damage to a country.
Posted by vanna, Friday, 19 August 2011 12:16:43 PM
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Vanna,

I don't believe "It can now take 2 households to run a family".
It's consumerism, which seduces people into "needing" more and more and newer and up to date stuff and creature comforts. We could all live very well but modestly on a single wage. I have no sympathy for all those "battlers" who can't get by without "necessities" like huge houses, extra cars and boats and all the other lifestyle accessories and indulgences that supposedly make life worth living (they accomplish the opposite).
It's the same theme at the micro individual level as it is at the macro corporate, resource, fire-sale level. Shameless excess for the sake of it, on the social level--though ultimately for the sake of the profiteering few who feed off the whole saturnalia.
Apologies for the puritanical tone, but it's true.

We deserve to get screwed for being such bunnies! Individually and as a nation.
Posted by Squeers, Friday, 19 August 2011 12:48:37 PM
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I guess that if you repeat something long enough, however wrong, you must eventually come to believe it to be true.

>>No, it has reduced GDP<<

Thank you, vanna. GDP growth appears frequently as one of the stars of this syndrome.

Here's the reality:

http://www.indexmundi.com/g/g.aspx?c=as&v=67

From $22,200, at purchasing power parity (PPP), in 1999, per capita GDP has increased with metronomic regularity, right through to $41,000 in 2010.

Another is the "buy everything here in Australia" mantra. Again courtesy of vanna...

>>...the trick would be to make sure that money spent in Australia circulates as much as possible within Australia to stimulate Australian industry, and is not immediately spent on imports from another country.<<

That is the surest way to condemn the country to an uncontrollable inflationary spiral. Think it through for a moment, by following the money.

Take the case where we spend all our money within the country. Being a highly inefficient manufacturer (can you imagine how much an iPhone would cost, if we made it here? The mind boggles) we would find a whole range of stuff out of reach - which would be annoying. But because so much would be out of reach, there would be too much money chasing too few goods. The classic recipe for inflation.

Plus, who would buy our minerals? The earnings lost in those industries alone would condemn all but the richest amongst us to poverty. And they would simply hop on their yachts and hightail it to their tax haven anyway.

We cannot close our borders, for any value of "close", without incurring some very nasty, unwelcome and unpalatable shocks. Any government that did so would be perpetrating the greatest harm, with the least benefit, to the most people, of any era in our history.
Posted by Pericles, Friday, 19 August 2011 1:52:30 PM
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http://www.abs.gov.au/ausstats/abs@.nsf/Previousproducts/1301.0Feature%20Article262005?opendocument&tabname=Summary&prodno=1301.0&issue=2005&num=&view=

There you go, Vanna. In just 18 years, the average NSW home grew
by 50%. That was my point, expectations have grown.

*Bob Hawk was probably the most short-sighted politician Australia has ever had*

Nonsense. Hawke was simply in Govt when the whole Ponzi scheme built
by McEwen, Gunn and others, finally came crashing down when reality
hit. Millions of bales of wool, stockpiled everywhere, billions in
debts to pay for it all, 170 million sheep which nobody wanted,
farmers had to get the gun out and shoot thousands and thousands.
Australia was broke, Keating admitted it with his banana republic
statement.

Australian industry had been mollycoddled for so long, they did not
know how to compete on a global market, like the Germans, Swiss,
French, Japanese etc.

Farmers could no longer buy crappy, overpriced inputs either to pay
for all the tariff subsidies. They were going broke by the thousands.

Hawke and Keating did the sensible thing, bring Australia into the
real world, as the the Ponzi scheme had finally collapsed.

Now some of you want to create another Ponzi scheme, some learn nothing from
history.

Vanna, the fact that women don't want to sit home and darn your socks
anymore, is up to them really. I am all for choice. But that has
nothing to do with globalisation.
Posted by Yabby, Friday, 19 August 2011 2:04:17 PM
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Perciles,
My understanding of economics, is that $1 received from an export circulates through the economy about 4 times until it reaches par value of a dollar produced at the mint.

If true, then the trick of course, is to make the value of money stretch as far as possible by circulating it through the economy as much as possible, and not just fall into the hands of a few, or be earnt in Australia via exports, and then immediately sent out of the country to some multinational company via imports.

Yabby,
It does seem odd, that even though there has been globalisation, many countries are now on the brink of economic collapse. Globalisation was supposed to benefit all.

As for houses, about 1 in 4 houses in Australia now only has one person in it, a major economic, social and environmental catastrophe.

Now how did that happen?

As for women, apparently their levels of measured happiness have not increased in 50 years. But you must know how to make women happy, although very few others seem to know.
Posted by vanna, Friday, 19 August 2011 2:36:14 PM
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http://forum.onlineopinion.com.au/thread.asp?article=12474#215793

Yabby, why don't you try the old closet communist trick of selectively misquoting.

the quality of some goods has improved, some have gotten worse. perhaps the concept of choosing between the lesser of 2 evils is just too difficult or complicated for you.

between 1945 & 1965 we had "full employment", in other words as fast as families could produce the next generation & migrants could get off the boats our economy was producing jobs faster.

do you seriously suggest this is worse for workers than the great deppression we are about to fall into? bear in mind we have no "real" industry or jobs left other than quarrying? What happens when we are in "mining bust"?

As for the Melbourne industrial club being rich, what a joke, they "used" to have hundreds of times the income & assetts of the average worker? Now they have thousands of times the wealth they used to have thanks to you & yours?

next you will be telling me the unions did not fat in their feather beds behind the tarriff barriers either?

this may come as a complete surprise to you but many young women are rejecting radical feMANazism, are tired of being tax/wage slaves & want to get back in the kitchen/bedroom making babies.

http://www.youtube.com/watch?v=6U4c7Ldua2o&feature=related Yabby you are a counter revolutionary, reactionary, enemy of the workers.

You really need to think this through a bit better, Yabby.

http://forum.onlineopinion.com.au/thread.asp?article=12474#215800

Yabby, you do have a short memory, feMANazism promoted retail therapy, unrealistic expectations for the specific purpose of creating self oppression.

Fathers try to create wealth & opportunities for their own children. Mothers try to create wealth & opportunities for Hardly Normal's children.

Au contraire, many Australian consumer products were good quality because there was plenty of competition among small & medium sized businesses behind the tariff barriers anyway.

You reaaly do have a short & convenient memory, Yabby.

Take the big box, emporium style stores like Myers, they had to compete with David Jones, Waltons, McWhirters, Finneys, Barry & Roberts, Enrights, Tritons, McDonald & Easts, etc.
Posted by Formersnag, Friday, 19 August 2011 2:36:30 PM
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Ummmm... what, vanna?

>>Perciles, My understanding of economics, is that $1 received from an export circulates through the economy about 4 times until it reaches par value of a dollar produced at the mint.<<

What does that mean, exactly?

No, forget exactly, what does it even vaguely mean?

How do an "export dollar" and a "minted dollar" have a different value to each other? And how does one of these change in value by "circulating" through the economy, while the other does not?

And this is also somewhat... opaque.

>>If true, then the trick of course, is to make the value of money stretch as far as possible by circulating it through the economy as much as possible, and not just fall into the hands of a few<<

How does the value of money "stretch"? And how can you tell that it is, in fact, "stretching? Or when it has "stretched" far enough, and can safely stop?

>>...or be earnt in Australia via exports, and then immediately sent out of the country to some multinational company via imports<<

Given that the "export dollar" is of a different value to the "minted dollar", why not simply use "minted dollars" to buy imports, and keep those "export dollars" whizzing around, stretching themselves like crazy?

Bizarre. Quite bizarre. Did you learn your economics from Arjay, by any chance?
Posted by Pericles, Friday, 19 August 2011 5:07:38 PM
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*the quality of some goods has improved, some have gotten worse*

Well Formersnag, what is wrong with letting consumers decide how they
spend their money? I recently in fact bought an Australian made
stove. The quality is dramatically better, because they have the
Germans and Italians breathing up their arse. That is competition
Formersnag, not 4 or 5 stores selling the same crap.

*between 1945 & 1965 we had "full employment",*

We still have jobs, for those that want to work. Where I live, we
have South African linesmen, British policemen, Chinese slaughtermen,
SE Asian doctors, Filipino welders, because Aussies didn't want the
jobs. Today they drug test for most work places, unlike in the 60s.
But of course that whole Ponzi scheme collapsed, as I explained a bit
earlier.

*bear in mind we have no "real" industry or jobs left other than quarrying?*

Nonsense. 80'000 people in WA work in manufacturing. Then we have
agriculture, which was nearly sent broke by tariffs. Now you want
us to pay more for inputs and send it completely broke? How the
hell should it survive, if you go and increase the cost of machinery,
herbicides, fertilisers and all other inputs, with your tariffs?
I remind you that WA exports nearly all that it produces, into that
real market where you seemingly can't compete, as you are too lazy
perhaps.
Posted by Yabby, Friday, 19 August 2011 6:15:14 PM
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Pericles
Money can be printed or earnt.

If something is made and then sold, money is received, and the more value adding, generally the more money is received.

Money can also be printed by government or sent out electronically, and handed over to the public in the form of payments. A dollar earnt from exports is worth about 4 times the dollar passed out by government.

It may be useful to import, but a lot more should be done with money from exports before it is spent on imports.

The sovereign fund is a good idea, and better than getting money from coal, and handing it to the public in the form of payments or tax cuts, so they can spend it on imported movies from Disney or the latest gadgets from Apple.

Yabby,
Initially, a lot of the items from Asian countries was crap. They fell apart almost on purchase, and often poorly recycled materials were being used. (Remember the imported cars that began rusting before they left the sales yard, and you were lucky to get 30,000K out of them before something broke).

I personally know an Australian saddle maker who reported to customs the fact that imported saddles from India were being stuffed with discarded hospital dressings, and these dressing had not been washed.

There were good quality products being made in Australia, but people opted for the cheap products, with less concern for quality.

We now pay the price of having very little manufacturing industry left.
Posted by vanna, Friday, 19 August 2011 7:18:56 PM
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Regarding GDP, GNP, etc - I thought this little snippet from Alvin Toffler's "The Third Wave" (1980) was pertinent:

"With respect to the pursuit of GNP, an amusing fantasy suggests that women undertake to do each other's housework and pay each other for it. If every Susie Smith paid every Barbara Brown one hundred dollars a week for caring for her home and children, while receiving the equivalent amount for providing the same services in return, the impact on the Gross National Product would be astounding. If fifty million American housewives engaged in this nonsense transaction it would add about 10 percent to the U.S. GNP overnight."

Joseph Pearce writes in "Small is Still Beautiful":
"...the more people are self-sufficient and not reliant on others, the less they are considered "economic". The more they are dependent on others the higher will be their contribution to GNP."
Posted by Poirot, Friday, 19 August 2011 7:30:51 PM
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*so they can spend it on imported movies from Disney or the latest gadgets from Apple.*

There you go Vanna, trying to impose your view on the world. What say
people decide for themselves what they like or don't like and how they
spend their money. Frankly its none of your business. I happen to have
bought an Apple Ipad. Its the greatest little thing since sliced bread
IMHO and I use it constantly. Equally if somebody wants to watch
Disney, well so be it, its none of my business. What is it with you
control freaks?

*Initially, a lot of the items from Asian countries was crap*

Indeed Vanna, some still is. But I know of plenty of pensioners who
want the odd power tool and are happy to buy a cheapy at Bunnings,
to potter around in the workshop. Good on them. Its their choice,
their decision, it is no business of yours or Govt. Years ago it
was Jap crap, look at them now. I spend money on music technology
at the cutting edge. The Japanese are making what nobody before them
has made. Amazing stuff. Our industries need to learn to make what
consumers actually want, not what they feel like making and then
demand a market based on tariffs.

What tariffs created was a heap of lazy, inefficient industries
which when thrown in into the real world, battled to cope.
Posted by Yabby, Friday, 19 August 2011 8:41:13 PM
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Hankering for a return to an imagined golden age will not get us very far, nor will a total rejection of the idea that somethings can be done better by returning to past practices. We need to selectively mine our knowledge of the past and reclaim those nuggets of wisdom that are to be found there.
Sometimes that wisdom lies in knowing the mistakes that have been made:
1. The failure to acknowledge that not all government services can be delivered better by private enterprise.
2 Small family businesses not committed to growth but a long term, secure future providing local employment. (These are the backbone of the German economy - worth chasing up the BBC world service business reports to find out more.)
3 Our continued failure to exploit Australian inventions - when working as a business consultant I lost track their way overseas just so that we could import them.
4 A consistent cultural cringe evident in all levels in Australian society that assumes overseas is better.
5 A misunderstanding of the role of protectionism - you protect a plant from the full fury of nature in its seedling stage but there comes a time when that plant has to survive on its own. The economic history of Britain and the USA shows that their demands for the global abandonment of protectionism came AFTER their industries were mature enough to withstand competition.
6 A commitment to quality - yes there is a demand for cheap, shoddy products and we can import those by the truckload but there is also a demand for quality goods.

We are running the danger that the death of manufacturing becomes a self fulfilling prophecy.
cont.
Posted by BAYGON, Saturday, 20 August 2011 6:39:38 AM
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cont...
At present government no matter which party is in power is not the solution but part of the problem for they are committed to stay the present course. We wont get a different result by continuing to do things the same way.
We need a government that rediscovers Adam Smith and this time actually reads him only to discover that he was not advocating perpetual growth but acknowledged that a mature capitalist economy would cease to grow and reach a stable equilibrium.
Maybe then, just maybe will they get off the obsession with growth.
This may well include a new form of protectionism - provide protection to start up industries for a predetermined period of time.
Recognize that our small size means that we need a government innovations fund that ensures that our inventions stay at home by providing the start up capital needed to keep those business here.
Apply tariffs to those products that have been produced by flouting environmental and labour standards that should not be tolerated in the 21st century. (Do we really want to support child labour, do we really want to encourage products that have been produced by US prisoners ie slave labour? Fish that has been caught using the oceanic equivalent of strip mining?)
Instead of the growth GDP as a measure of successful government the criterion should be the level of employment, our capacity to support those members of our society in need, our ability to care for people who are disabled, and finally our ability where people do not feel the need to spend all the hours god gives them to have secure empoloyment and a comfortable standard of living.

Then just maybe we will discover that the true role of government is to ensure that the burdens and benefits of social co-operation are fairly distributed.
Posted by BAYGON, Saturday, 20 August 2011 6:53:08 AM
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I would agree with that Baygon.

Particularly the part about “A consistent cultural cringe evident in all levels in Australian society that assumes overseas is better.”

That is now becoming the No 1 problem IMO.

Australia produced some of the best quality agricultural products in the world, (and still does), so it is difficult to believe that manufacturing products from Australia were poor quality.

Ironically, one of the reasons why Australian coal is so much in demand worldwide is because it has uniform quality and low sulphur content, which makes it better to burn in power stations.

It is incredible that people are preferring imported food, when Australia grown food is probably healthier, and grown using much more environmentally friendly farming practises.

The mindset that Australian made is inferior is quite pervasive, and this mindset now extends through government departments and almost completely through the education systems (and there are now teachers and university lecturers who wouldn’t even glance at an Australian made product because they believe it is inferior).

But all the “government spending” has to come from somewhere.
Posted by vanna, Saturday, 20 August 2011 8:02:46 AM
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The so-called “level playing field” of globalization is a farce when most of the companies that have relocated to Asian countries are paying miniscule amounts to workers.
Australian companies are not able and will never be able to compete and become fat and lazy.
Why would an Australian or US company move offshore unless there was more profit by so doing? The “more profit” comes from employing virtual slave labour.
The sad thing is that the skills we need are being “exported” as well as the factories. There is no incentive to train the young, if there are no factories left to employ them in.
Posted by sarnian, Saturday, 20 August 2011 9:23:23 AM
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*but there is also a demand for quality goods.*

You are quite correct there, Baygon. Back in the days of high tariffs,
the prevailing attitude was "she'll be right". Since dropping tariffs,
our industry attitudes are finally changing for the better.

Just to prove Sarnian wrong, let me give you a number of examples
from a country paying some of the highest wages on earth, which you
can see in your local supermarket still today.

Australia made IXL jam, all sugar, little fruit. High class hotels
preferred to serve their guests Hero jam, for its made to a standard,
not down to a price. Today Beerenberg jam has emerged, finally somebody got the quality message.

Australia made Cadbury's chocolate, not too much cocoa butter in there.
That leaves a market for companies like Lindt and others.
We now have an emerging quality chocolate market, unlike before.

Australia dominates the wool industry and made Lister and Sunbeam
shearing gear. Along came a company like Heiniger, with attention
to detail and quality took away most of their market share. Again
made in a high wage country.

The list is endless. Fact is that people will be complacent unless
they have to change and competition is what does that.

Companies like the wine industry and others, which have always
been exposed to the global market, are highly innovative and
produce world class products.

Where we now have a problem is again of our own making. Why would
I build a company in say Sydney, if my employees were forced to
pay some of the highest housing prices in the world? In the end,
that is reflected in the cost of my products.
Posted by Yabby, Saturday, 20 August 2011 10:32:44 AM
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Don't kid yourself that Asian imports are all rubbish, & you don't have to relocate. I could use various contract manufacturers to make anything I wanted, to my specification, in excellent quality, at a fraction of our prices.

I was producing & marketing high quality, mostly brass, water & energy saving gear in the mid/late 80s, long before the craze set in. It sold because it saved water heating costs mainly.

As competitors moved in I had to go to Taiwan for my products. They could supply for $2.00 into my store, excellent quality products that cost me $14.00 to make here.

The thing I could never understand was that, here the brass to make the $2.00 product, cost $3.10 here, over 50% more than a finished chrome plated & assembled product from Asia. Our manufacturers have no chance, with costs like that, not counting wages.

I believe a large part of our problem is transport. Incoming transport is so cheep today, that it adds very little to the cost of imports. Local transport is however ridiculously expensive.

It cost me $8.00 to deliver that $2.00 product to a customer around the corner, & $15.00 to a customer in Perth. In much of WA it was cheaper to buy most things from Singapore, than the Oz east coast.

Communications are another problem. No one wanted a call centre in India, when it cost $8.00 a minute for overseas calls. Now those costs, to large users, are less than me calling the next local area.

Here's an idea for our cash strapped lady in Canberra. Put a 500% tax on out going overseas calls, bring all those jobs back home, & get out of your financial mess, all at a stroke of the pen.
Posted by Hasbeen, Saturday, 20 August 2011 11:32:05 AM
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*They could supply for $2.00 into my store, excellent quality products that cost me $14.00 to make here.*

Hasbeen, its a great point to show that its silly to try and make
everything, as is often suggested by the protectionists.

Take a look at an Apple Ipad. The CPU is an ARM design, made by
Samsung. (Korean). There are parts from Japan, Germany, Taiwan,
and elsewhere in there. The whole thing is assembled in China.

Apple do the design work, write the software and do the marketing.
Consumers love them and Apple have 70 billion cash in the bank,
clearly they are doing well. In the late 90s they were close to
going bankrupt.

Building factories to try and make everything, would send you broke
in capital investments, trying to buy all the machine tools.

As manufacturing becomes more complex and automated, the capital
investment to make things has increased, the actual labour involved
has decreased. I love watching a tv series called "How Its Made".
Making something as simple as a pencil, just about totally automated,
requires a huge amount of expensive machinery. Now think of the many
products that we use, it is totally unrealistic to try to make them
all.

We need to find our niches, which will depend on the entrepreneurs
we have. The best we can do is provide them with the infrastructure
which is competitive and a labour force that is educated and keen.
At the moment we are doing neither, just trying to slug them with
a carbon tax, which will be another reason to forget Australia as
a place to make anything
Posted by Yabby, Saturday, 20 August 2011 3:53:00 PM
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Yabby,
Do tell what should be these “niche” markets?

In regards to entrepreneurs, it is an advantage to develop a product in Australia before exporting it.

Unfortunately the mentality in Australia has become “Australian made bad”, “imported good”, so entrepreneurs in Australia won’t get much help from the Australian public.

People such as yourself are creating the “Australian made bad”, “imported good” mentality.
Posted by vanna, Sunday, 21 August 2011 6:21:58 PM
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There is actually a reason for this, vanna.

>>Unfortunately the mentality in Australia has become “Australian made bad”, “imported good”<<

It is, for many categories of goods, the reality.

Take a look at the products that we import. Then name one local manufacturer that comes close to the quality and value they represent. You might have the vestige of a case for imported fruit and vegetables, where the consumer is simply buying on price and/or out-of-season convenience.

But manufacturing? If you had had the opportunity to witness the German and Japanese manufacturing industries of the eighties and nineties, you would readily understand how rapidly we fell behind on automation, work practices, supply-chain management, market positioning etc. and, to be brutally frank, management in general. We were complacent - and protected - kidding ourselves that the tyranny of distance worked both ways, and that we would be left in peace.

It didn't. We weren't. And there's no easy way back. We simply do not understand the basics of business as well as our overseas competitors do. Until and unless we can discover something that we are good at that doesn't involve digging stuff out of the ground, we will continue to lag behind.

And no amount of government "assistance" is going to change that. For the simple reason that for decades there hasn't been a single politician that understands the problem. Let alone be able to work out a solution. They are either professional politicians or failed lawyers. Neither category could run a business if their arses were on fire.
Posted by Pericles, Sunday, 21 August 2011 7:02:08 PM
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Whilst I do not disagree Pericles the accuracy of your observation is based on us staying within the same economic paradigm.
What we tend to overlook is that is that our welfare/economy has become dependent on imports. Let us assume for the moment that due to some major catastrophe we could no longer import anything. How long would we be able to continue? All the IT equipment on which we rely is imported - it would not take long for us to come up with a list of goods that could be described as of strategic importance to our economy which we import.
As you rightly point out we will continue to import these if we cannot match the quality. But I think you would agree that there is no prima facie reason why could not only match the quality but exceed that quality.
Government does have a role here. Just go back to the aftermath of the Montreal Olympics. We did not win any gold medals. National calamity - so we invested in sport and now we pride ourselves on being among the top 10 nations in the world as far as Olympic medals are concerned. So perhaps the government needs to take the same approach to manufacturing - pronounce it a disaster that we are not winning enough gold medals and be determined to get us up higher on the medals table.
Note I am not advocating protectionism, tarrifs or anything like that - all I am saying is that if government and the Australian people saw this as a genuine problem and concern then we would find the solutions.
Posted by BAYGON, Sunday, 21 August 2011 7:33:38 PM
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*so entrepreneurs in Australia won’t get much help from the Australian public.*

Not so Vanna, if they make a good product or provide a good service.

Cochlear implants have done pretty well. So have CSL with vaccines.
We build 100m$ ferries in WA, plus produce various equipment for
the mining industry and even agricultural industry, which we export.
But they are not things that you will see at your downtown store.
I used to see them at Perth airport cargo however, when I went
there three times a week. Even Carman exports her muesli to a whole
lot of countries now. Ask Pericles, its delicious :)

Baygon, you are correct, in Australia its only sports people or rock
stars who are seemingly lauded by the public. Plus Paris Hilton.
Exporters and export industries are not appreciated, I guess because
Australians have simply had it too good for too long. People only
seem to learn through a bit of pain, is my observation.

As to surviving without imports, well the whole world is interconnected now, so no country would survive too well.
Apart from North Korea.

Pericles is correct, Australian management was pretty shocking
when benchmarked. But I feel that competition is now changing that.
"She'll be right" doesent work anymore. They either sink or swim
Posted by Yabby, Sunday, 21 August 2011 8:12:06 PM
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Pericles
In terms of overall management and quality, have a look at the Human Development Index, and see where Australia stands in each category.

Australia is near the top in every category, and this is a result of overall good management and concern for quality.

Also glance at a list of countries with a AAA rating, although by the time globalisation is finished, there may be no countries with a AAA rating, (while some executives on Wall Street will still be earning bonuses).

Quality is one thing, but perception is another, and often Australian companies can’t compete in advertising budgets. Their products may be good quality, but not considered “sexy” enough, because they can’t compete with large multinational companies in advertising budgets.

An example is the movie industry in Australia, which once produced some good quality and very enjoyable movies. However, local movie companies couldn’t compete with overseas companies that often spent as much on advertising a movie as they spent on making the movie.

I am familiar with the sugar industry, and the Australian sugar industry was producing the best quality sugar in the world. That came about from good management over many decades, but now most of the sugar industry has been bought by foreign companies. I believe that this has ultimately occurred due to a lack of public will to keep that industry, and also to keep other industries that have been sold off in recent times.

So it is not just a mentality of import, import, import, it is also a mentality of foreign owned is best.
Posted by vanna, Sunday, 21 August 2011 9:12:20 PM
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