Sure Chris, we need to economically diversify, in order to give us a bit more of a buffer against the prospect of our mining boom ending or winding back.

But there are other huge factors that have gone unmentioned in this article:

We need to break free of growth economics. That is: the utterly absurd idea that we’ve got be constantly expanding our economic turnover and expanding our population in order to do this.

We’ve also got to get the bejeezus off of our addiction to oil. Sharply rising fuel prices, let alone shortage of supply, threaten to skittle our economy and cause social upheaval much more so than any slow-down in China or whatever.

If we uphold current economic practices or anything like them, we are BOUND to come up against huge barriers and suffer enormous consequences in the near future.

Ludwig,

Do not disagree with you. We certainly cannot keep going on forever relying on population and economic growth, although this is indeed the easiest path for policy makers (as it has always been).

I wouldn’t rely on anything from Andrew Leigh. He is an academic who has said nothing while almost everything inside his university is now imported. So much for universities helping to overcome the trade deficit.

About the only thing universities are now doing is producing workforce fodder for multinationals.

Not sure why the writer is worried about exports when he is really talking about domestic demand.

Processed food and beverage industry turns over between $70 and $75 billion per year. Growth in the value of output has averaged around 2 per cent a year over the past ten years.

Due to reciprocal trade agreements we import about $6 billion of food stuffs (wine and cheese) from New Zealand. The problem isn't food or even demand, it's why were swimming in bloody sauvignon blancs and fine cheeses.

Let's hope the new political 'paradigm' lends itself towards some rigorous debate and assertive decision-making in terms of economic planning required to deal with the matters highlighted here; Away from the easy, safe, populist approach we've endured for the past 15 years.

I think this would be most possible if we had Turnbull back as opposition leader. Unfortunately, Abbott is just going to be playing obstructionist politics to force an early election or have the independents switch their support to give him the prime-ministership.

Cheryl,

good points. I obviously can break down data further to see which industries are under greatest pressure.

However, I would note that imports have an effect of offering domestic consumers cheaper goods which places further pressure on domestic producers to cut costs even further to compete against imports.

Even for cheeses and wine, we should be concerned with their wealth generation in regards to both their export potential and domestic consumption, especially given trade agreements.

After all, exports are seen as Australia's best way to maintain national wealth. During the 2000-2008 period, the growth of global merchandise exports (value) exceeded the growing value of global merchandise production (5 to 2.5 per cent)

Another pressure on Australian primary producers is the huge power of Coles and Woolies to force down the price they pay in order to maximise profits and shareholder returns. Rember milk before the dairy industry was deregulated? Price at the farmgate was controlled, cost to consumer kept on an even keel. Now dairy farmers get a pittance (if they are still in business),and we pay more.

A carbon tax could work to our advantage, if the cost of shipping goods to Australia was part of the equation. It really is ridiculous that it is 'cheaper' to bring processed fruit across the world when we can grow everything we need right here.

Cheryl,

I would think your remarks are extremely flippant.

"domestic demand"

I would think that it is at the stage, where there is less and less demand within Australia for Australian made products. The continuous statements that tarrifs make products more expensive has lead to the belief that anything made in Australia is expensive or of worse quality.

So now people tend to buy imported only.

I know of people who wouldn't even look at something if it has been made in Australia. But in other coutries the ethos is the opposite, and the average person is extremly interested in what is being produced inside the country.

An example also would be the education system that buys mainly imported products, because it believes that Australian made products are inferior, and this would jeopardise the education of the children. The end result is generations of children being lead to believe that anything made in this country is inferior.

Hi Vanna,

No slight intended about Oz products and I wasn't really talking about tariffs although they can be a factor in bilateral trade agreements. Low tariffs make goods cheaper - well, they're supposed to. Someone was very clever to bring up the Coles - Woolies duoploy. I hadn't though of that. Oz produce is world class, no doubt.

I think the argument here is about supply or lack of it due to external market competition (trade), a growing population (demand) and the fear that internal demand for food will out strip supply. That's it isn't it?

Some careful use of statistics, I notice.

"While Australia’s agriculture exports increased ($US16.4 billion to $US26.1 billion) between 2000 and 2008, agricultural imports increased at a much faster rate ($US4.2 to $US10.4 billion). In other words, the agriculture export-import ratio in Australia’s favour declined from 390 to 250 per cent."

Or, put another way, our trade surplus of agriculture exports over imports widened (if I was reporting this, I'd say "surged") from $12.2 billion to $15.7 billion.

Yay.

Most of those other figures simply reflect market size. We are simply not geared to lift production by the tens of billions, as they can in Europe, the US, Brazil, China etc. - the "markers" that Mr Lewis chose to use.

"...global agricultural export... Between 2000 and 2008... the EU ($230 billion to $566 billion), the US ($US71.4 billion to $US140 billion), Brazil ($US15.4 to $US61.4 billion), and China ($US16.4 billion to $US42.3 billion)...China’s manufacturing exports exploded [surged?] from 2000 to 2008 ($US220 billion to $US1330 billion), along with Brazil ($US32 billion to $US86 billion), and India ($US33 billion to $US112 billion"

Big numbers. We're a comparatively small market, economically speaking.

But I agree with Cheryl - our food imports are skewed towards the "non-staple", which given our general level of prosperity, is hardly surprising.

It's what we choose to buy.

>>The problem isn't food or even demand, it's why were swimming in bloody sauvignon blancs and fine cheeses<<

And as they say, you always have a friend in cheeses.

Cheryl,
I would say the issue is developing an ethos of producing, value adding, and extracting as much as possible from what is available.

As an example: - Australia is only skimming the top of what it could be gaining from the mining industry or mining boom, as most of the equipment being used in mining (billions of dollars of equipment) is being imported. There is even shipload after shipload of low tech welded framework going to the mines in central QLD that is being produced in Viet Nam, and then being shipped into the country.

While academics (or ex academics such as Malcom King) may condemn tariffs, few talk of the necessity of producing something in Australia. It’s easier for them to import with taxpayer funding (or “government spending”).

A good suggestion from another forum is to tie money going to systems such as the education system into GDP or a national productivity figure. If the national productivity figure goes up, systems such as the education system get more. That concept could also be extended to a range of government departments, and it could even be used to determine the pay rates of our illustrious politicians.

It would certainly help stimulate innovation and create improvements in productivity, and becomes self-sustainable.

Next time government employees or public servants want to buy imported cheese, TV set, car, textbook, computer game etc, they would also realise its was going to affect their paypacket.

Pericles,

not sure what you are on about.

Here are some smaller nations whose agricultural exports are increasing at a faster rate (from 2000 to 2008) than Australia so you don't think i am being too selective in my use of data.

Norway agricultural exports 4.24b to 8.78b;
Switz 2.52b to 7.63b,
Paraguay 699m to 4b.

also, article not just about agriculture. I was asking where Aust's future wealth was going to come from given ongoing decline of manufacturing, and smaller opportunities coming from services.

Perhaps you have some answers to enlighten me, or is everything just dandy with the stuff in the ground.

Also Cheryl and Pericles,

Maybe this source is full of lies and you have other evidence.

Fruit and vegetables top the list of import categories at $1.7 billion in 2008-09, followed by seafood at $1.3 billion, coffee, tea, cocoa and spices ($1.2bn), cereals ($800m), dairy ($600m) and meat ($575m).

Chris Lewis:>>also, I was asking where Aust's future wealth was going to come from given ongoing decline of manufacturing, and smaller opportunities coming from services. Perhaps you have some answers to enlighten me, or is everything just dandy with the stuff in the ground.<<

Chris the only future is service industries; there is no way back to manufacturing on the scale of the 70's. You name it we manufactured it here up till 30 years ago. That was when the free trade agreements took our protectionist tariffs away and manufacturing died because of cheap imports. Our politicians signed our futures away with a bit of stiff arm tactics from the IMF and the World Bank. We are a banana republic, we live off what we did up or grow, they don't even let us value add to the resource, just dig it grow it and ship it. Any talk from any govt about revitalizing the manufacturing segment is spin if they do not bring in import tariffs.

Sonofgloin, you should remember that those tariffs only supported the blue collar workers of NSW & Victoria. All the the rest of the population, & particularly the other states were much poorer for that transfer of wealth to manufacturing.

As a bloke who worked in industrial raw materials, [plastics] when we lead the world in developing new applications, & techniques, I hated to see our industry die. However you must remember that an FJ Holden was over a years income for many. Imports have reduced prices.

I agree we have stuffed it up mightily, when we can import finished brass products for less than the local cost of the brass to make them. This does seem strange, when it's our copper, & zinc that made the brass.

I doubt the service industry is our salvation. Just today I closed my account with a phone company, when I could not understand the subcontinent accent of their call centre worker. This is the second, & I have decided my little protest will be that I will no longer do business with any company with an overseas call centre.

As for agriculture, it is about to get worse, rather than better. Many irrigators in the Murray Darling are about to be put out of production with the announcement of the new policy. This will please the greenies, who must want to eat imported somewhat doubtful food, & the South Ozzies, as it will ensure their man made fresh water water sky, & irrigation lakes continue to fill. This at the cost of much of the inland of three states, but that's Oz today it seems.

So hang on, enjoy your big house, while you can. I'm afraid my crystal ball shows a bark hut in the future of many of us, in the not too distant future. Grandfather was right when he said, "get a nice safe government job" we may all need one of them soon.

I think the people have already voted on this one. When the last
liberal Govt tried to free up the labour market, to make it flexible
and competitive, Australians voted against it.

They clearly want all the bells and whistles. Double time overtime,
termination payments if the business has to reduce staff and all
the rest.

In that case, why would any entrepreneur risk his money to create
globally competitive exports? Better just to focus on local
niche, which is a sure thing. Or invest the money at 6-7% and head
for the beach.

China buying farming land.
In my opinion, their motive is more to do with the fact that our farmers simply won't be able to produce food in ten to twenty years as their costs will outweigh their profits.

We are already fast approaching a position of 'net food importers', so with our wage costs, in comparison to OS, we are on a hiding to nothing.

NBN
I think the author is spot on here. Fast broad band will make taking IT overseas much easier. Let's face it. When one can employ a fully staffed office for the price of one executive back here. Simply do the math.

Our beef industry
For years now we have been crowing about live export, both sheep and cattle. Well, now we have rising competitors, whos herds dawft ours and there is one OS company, that is well established in southern america that is tipped to take our export market. They are gaining a strong foot hold here right now.

Remember, we currently export 85% of what we produce. Loss this and it will be game over.

Most of these issues raised are attributed to one common problem. High wages.

You see, our wages increase in line with the cost of living. Times get tough, so our government grants a pay rise.

This is where the problem is.

Wages, like any other expense, come from profits. If we increase expenses, while decreasing profits, we are heading south.

You simply can not continue to hurt the 'risk takers' or they will eventually stop taking the risks.

It's a pity none of you think of looking up the real things that matter when making such decisions. To start, the mined resources are non-renewable, once they're gone, they are gone for good. The raw exports are also non-value added, meaning that no employment is used to produce manufactured goods from them and though – when exported, requires reciprocal imports, and depending on the country to which the export takes place, we receive the goods that the companies in our country choose to import, so companies such as Target, K-Mart, Lowes, Bunnings,Wesfarmers, Trade Tools and a hundred others, buy in the Chinese clothing etc, Chinese and Japanese tools, and a thousand other goods, most of which we used to make and maybe some we still produce here in Australia. In a report by Bloomberg, they say Pohang from Sth. Korea, paid an estimated $US308.70 / ton for coal, while BHP Billiton, sold Premium coking coal (same type of coal), for $US98 /ton. Implying that we are putting too low a price on the coal that we are trading, and the reciprocal goods we receive are similarly reduced in value, being subsidised. Our manufacturing industries are being destroyed, and our “Professionals” in cabinet either don't have a clue or don't care, they are getting a great salary with all perks and a terrific super scheme if they get kicked out, so don't expect any great advances in our economy with them. The internet tells us that the land after open cut mining is of very little use, nothing will grow there, the value of export mining is grossly over rated, it has been causing more destruction to our own industries than any benefit we would ever receive.

You are right on the money, merv09.

>>To start, the mined resources are non-renewable, once they're gone, they are gone for good.<<

But where do we go? We don't have a competitive edge in anything else. Our labour rates are too high for simply transformed manufactures, and our experience and skill-base in elaborately transformed is non-existent.

Hasbeen has a point.

>>So hang on, enjoy your big house, while you can. I'm afraid my crystal ball shows a bark hut in the future of many of us<<

Well, maybe not a bark hut, Hasbeen, but a substantially modified lifestyle, supported predominantly by tourism.

And we will need to get a lot smarter to make a go of that, too...

I don't want to sound like the answers too Australia's eco future are straightforward. Article was merely about highlighting some trends and hopefully encouraging debate.

As some of the comments indicate, there are a whole lot of issues that explain our plight and complicate our future ability to resolve them, including our high wages.

As i am still a supporter in freer trade (within reason), it is indeed unlikely that we will return to being ultra-protectionist in manufacturing terms.

However, we can always tinker at the edges in our support of freer trade to ensure that our eco policy mix is more balanced. There are ways that Aust govts can encourage the development and use of goods at the local level.

Sure, it will require our best and brightest to come up with even better analysis and ideas rather than stuff that merely supports the status quo.

We must aim for better analysis that combines the strengths and weaknesses from left and right perspectives in regards to eco matters.
I suspect the best answers and approaches lie somewhere in the middle.

Pericles
"Our labour rates are too high"

I don’t think so. I know of at least one factory in Australia and a comparable factory in Singapore. The Singapore factory that produces the same product has higher rates of pay.

There are also many countries now vastly ahead of Australia in terms of technology, and their education system are the equal to those in Australia, if not better.

As far as tourism goes, I know of quite a few tourist resorts (mainly around the Whitsindays) that don’t even pay their council rates.

We will have to invent a paddle, or better still, import one.

Our labour average labour cost is indeed too high, but this is not due to the average worker.
There are thousands of workers on over $150K who do not justify it, and a few over $1M that definitely don't deserve it.
One man in particular: Murdoch is a *major* impediment to Australia!
As with the USA it is the top 5% that are causing 80% of the problems.
Australia seems paralysed due to the current rent-seekers having blocked all strategic moves by corrupting governance processes.

Pericles, I sure hope you're wrong, I'm not sure I like a future, for our kids of very low wages, often much below award, as they make beds, clean toilets, & pull beers.

I know where you're coming from Vanna. I always found if funny when the greenies, & the unions talked about get rich quick tourist developers. I never saw one who did not go broke. Most developments were usually not even viable for the second owner, who had bought in at half price at the bankrupt sale.

The only one I ever saw make a quid was Keith Williams. The resort went broke, as usual, but he made money using the resort to sell the apartments he build on the island.

I rescued a couple of tourist operations from receivership some years ago. In one I ran the company from the wheelhouse of one of the boats. We could not afford another skipper for the first 12 months.

I communicated by private frequency radio with my secretary/assistant manager/office manager/clerk/order taker/sales girl/cleaner, who must have looked a bit like one of those one armed paper hangers.

I worked from 7.0AM to 9.00PM, & managed at least part of a day off about once every 3 weeks. She worked from 7.30AM to 6.00PM, with one day off a week. That's the one when I took her place, so I had some idea of how hard she worked.

Neither of us took home as much as the award rate for a deck hand.

All the rest of the staff worked for agreed wages, working 8.00AM to 6.00PM or longer, 6 days a week, for about check out chick money. Only the skippers, & some engineers lasted any length of time. The rest were working holiday people, who burnt out quite quickly.

I certainly hope we can find some other way, rather than tourism to sustain the place. Even there, we have much competition with great attractions, & very low labor costs, who will probably nail us to the wall, if they haven't all ready, going by tourist numbers

Hasbeen,
I would think the trade in foreign students is very similar to tourism. Australia might be the flavour of the month for a little while, then the students drift to another country.

The local campus built a new conference center for its staff, complete with video conferencing equipment, reclining chairs and a bar fridge. The only problem was, there were hardly any students, as the foreign students had left and most rooms were empty.

I knew a cleaner at the university who was laid off, and asked them if they ever found something made in Australia at the university. Their answer was that after 3 years cleaning in all the rooms, they never once saw a “Made in Australia” sticker in the so called Australian university.

Hasbeen:>> Sonofgloin, you should remember that those tariffs only supported the blue collar workers of NSW & Victoria. All the the rest of the population, & particularly the other states were much poorer for that transfer of wealth to manufacturing.<<

Hasbeen, I can't see that. When you have an active manufacturing base the raw material suppliers, the logistic guys, and a load of other people who support that manufacturing base prosper, manufacturing begets other jobs, the flow on effect.

Because of free trade agreements we now import fruit and meat from countries with diseases that our island has been free of and we make nothing here because of these treasonous agreements. It may be a global economy, but nations go broke individually not globally. Sending manufacturing to cheaper climes only benefits the corporates. They ship it across the world and are still cheaper than locally produced products. Protectionism is good for a national but bad for a global corporate entity, and that suits me fine.

>>As a bloke who worked in industrial raw materials, [plastics] when we lead the world in developing new applications, & techniques, I hated to see our industry die. However you must remember that an FJ Holden was over a year’s income for many. Imports have reduced prices.<<

Our CSIRO was considered a world leader among research centre’s, and we took all the funding from it as manufacturing closed down, nothing left to research, here anyway. Have you heard of them lately?

Re the car, modern production techniques have more to do with the cost, all mass produced products are cheaper than their counter part of 50 years ago. Hasbeen there is no positive aspect for a society if manufacturing ends and we buy everything from overseas. Right now if we did not dig and grow we would be stuffed when it comes to balance of trade. We would not be able to afford even the cheap imports.

You know we have a serious problem when it costs more to have an Aussie look at your broken powertool, than it does to buy a new imported one.

There is a simple answer.

Stop cheap imports!

Now, there are those who say, "if we don't buy from them, they won't buy from us"

Well, we have one thing they don't, resourses.

rehctub:>> Stop cheap imports!
Now, there are those who say, "if we don't buy from them, they won't buy from us"
Well, we have one thing they don't, resourses.<<

The problem is we cannot legally stop the importation of cheap goods; we have signed away our rights with the free trade agreements. If we said no more imports tomorrow we would be taken to World Court as the defendant and we would lose. We have signed away our national sovereignty, rehctub it is against the law to do what you suggest but that is what must be done.

*Stop cheap imports!*

Ah Rehctub, that is easy to say, for you who are rich!

What about the pensioner mum who needs clothes for her
kids? She could not afford Australian made clothes.

What about the old age pensioner who wants a few power
tools to do a bit of work around the place? He
could not afford Australian made.

What if you had to pay 8000$ for your Aussie made
computer?

The biggest beneficiaries of globalisation are in
fact consumers.

Yabby,

Without agreeing or disagreeing with you, we need extensive studies to show whether trends over the past three decades have delivered benefits, including for families starting off today.

Sure, those supporting freer trade, including myself, can point to many benefits, but i am sure that much counter evidence also exists.

*manufacturing begets other jobs, the flow on effect.*

Manufacturing also costs other jobs. It adds costs to
efficient producers, making them less efficient and less
able to compete globally. So you have a downward spiral.

If I have to buy your crappy and expensive products,
just because you want protection, then I as an exporter
will be less able to compete globally. We have seen
it all before.

It is rubbish to suggest that its all down to low wages.
Germany up until recently was the largest exporter on
the planet. The US, Japan, Korea, Switzerland, all major
exporters of manufactured products.

Even Singapore and HK have high wages and are still major
exporters.

Where we have a problem, is all our bells and whistles.
If I am a manufacturer and the market changes, I need
to dismiss staff as I missed out on the contract, I
cannot just dismiss them. They want their entitlements,
like termination payments, which can bankrupt the company.

Robert Gottliebson highlighted a number of these cases,
during the GFC, where it was easier to shut the whole
company down and stop manufacturing, then to scale down
in size and adjust to the market. Bells and whistles were
the problem.

Protectionism solves nothing, it just increases costs
to both consumers and to efficient producers and
exporters.

You're dead on Yabby, but don't forget bureaucracy, bureaucracy is becoming the number one killer of industry in Australia, we need to get the bureaucrats out of our faces!

I don't care anymore anyway. I sold a successful manufacturing business that exported to 6 countries about 12 years ago when cheap Chinese goods were coming in by the shipload. Copies of our very own products (they're so good at it they even copied our faults) But you know - it wasn't even that that made me sell, it was bureaucracy, I was and still am over it. They, the bureaucrats can rot in their crappy imports for all I care.

My business is still running but is now an import from Indonesia, which is now a cost to us instead of an income, waydago bureaucrats!

If you don't get the bureaucrats (Poly-Ticks) out of small business's faces, you've got no hope!

This sums it up beautifully. It's American, but the same applies here!

This is why there are no jobs in America (And soon to be Australia)
http://www.wnd.com/index.php?pageId=195493

Ah Rehctub, that is easy to say, for you who are rich!

Now that's a cheap shot yabby.

BTW, I am not rich. I may have a few assetts, but you want to try running a small business these days and see just how rich one 'can't be' any more.

Now as for your comment on Germany. Guess what, they also made most of the machines that were once used to manufacture quality goods.

Many have now been replaced by cheap, almost slave labour.

When I was a kid leaving school, mid 70's, I just wanted to be a butcher.

Now if I couldn't find my 'dream job', I could have been an electrician, or, I could have chosen from any of ten or so factories for low skilled work.

Those options are now gone in less than 40 years.

Now iof we can't stop the cheap imports, than the best solution I can come up with is to put a huge excise on our resourses, much like we pay for fuels.

This would be far better than the proposed mining tax, as the end user pays, not the job creators or the risk takers.

After all, what other options do our resourses customers really have.

The reality we face today is that our population is increasing and our potential for creating tax revenue is decreasing.

We are buring the candle from both ends.

rehctub.
"The reality we face today is that our population is increasing and our potential for creating tax revenue is decreasing."

That is true.

I was doing cleaning many years ago, and we cleaned a number of government offices, including an office of taxation auditors.

Some of these offices are quite luxurious, but not a single thing in them was purchased from Australia.

The same is now for schools and universities, and many of these government employees and academics have not the slightest interest in purchasing anything from Australian companies.

However government departments and the education system can be used to help kick start Australian industry, as long as it is tied to their budgets and hip pocket.

If they want to purchase something with taxpayer funding, they have to demonstrably show that they have been proactive in searching out Australian companies who make that product, and in providing feedback to those companies.

If the government departments, schools and universities don’t do that, then they don’t get the money to buy the product.

They don’t have to buy Australian products, but they have to be proactive in searching for Australian companies, and providing feedback to those companies.

With feedback, Australian companies can develop their products, and start and export them, but at present I don’t know of any government employees or teachers who have any interest in providing feedback to Australian companies. Their only interest is in getting as much from the taxpayer as possible.

I'm pretty sure they still do this, vanna.

>>If they want to purchase something with taxpayer funding, they have to demonstrably show that they have been proactive in searching out Australian companies who make that product, and in providing feedback to those companies<<

But the process is loaded, as I discovered when I first ran a business here, back in the eighties.

On the one hand, they would welcome an Australian bid, and point to all the hurdles that an overseas company would have to clear in order to show their support for the local economy.

Then they would explain that they were duty-bound to take the lowest bid anyway, to make the best use of the taxpayers' money.

This effectively meant that we were actively discouraged from even starting the bid process, given that it was immensely time-consuming (i.e. expensive) and inevitably favoured the large multinational. Who, quite often, had more staff working on the "we support the Aussie economy" section than in our entire company.

As for feedback. Would you have time to listen to a government bureaucrat telling you how to run a business? Thought not.

At the time, I felt that we were being badly served by the government purchasing process. But the cold reality was - and still is - that we do not have the raw material (education, infrastructure etc.) to build sustainable, world-class businesses here in Australia. Anything more complex than digging up stuff and flogging it, that is.

We have some of the worst business managers in the world, but pay them as if they were world class (there are a few significant exceptions to this, but only enough to prove the rule), and some of the most wasteful business practices.

Trouble is, we've never really had to work that hard. This became abundantly clear during the nineties, when I spent a fair amount of time doing business in Europe and the Far East.

Compared to the Chinese and the Germans, we were coasting while they were putting their backs into it.

Now we are reaping the rewards.

Pericles
The ultimate aim should be to develop more exports.

Depending on the product, the Australian population may be too small to support more than a few Australian manufacturers of that product.

So the manufactures have to develop the product in Australia, and then head for the export market. To sell on the export market, the product has to be unique or better in some way than what is available. IE. it has to be innovative.

It is found the best means of developing innovation is with feedback from the consumer regards the product.

So, government departments in particular have to be pro-active in providing constructive feedback. I do know of government employess and some teachers who purposely provided false feedback to an Australian company, and their feedback may not be reliable, but we cannot continue to have so many government employees and teachers who simply feed from the system, and provide less and less back to the public in time.

I absolutely agree, 100% vanna.

>>The ultimate aim should be to develop more exports.<<

The point I was trying to make was that as a country, we are fundamentally ill-suited to doing just that.

China's exports began the same way as post-war Japan and Germany's. Labour-intensive, low margin everyday products. They progressed over the next thirtyfive years to serious electronics and heavy engineering, requiring an educated workforce and a supportive government structure.

During the same period, we were living "off the sheep's back". We developed some industry, but none that was close to the "elaborate transformation" that creates the highest amount of added value. As a result, we became content to ship out raw materials, and ship in finished goods.

Significantly, this was also a time where we gradually freed ourselves from the tariff protections that had been implemented across the twentieth century. By the time our industry was exposed to the economic reality of the rest of the world, it became obvious that the lifelong featherbedding had rendered it incapable of competing.

Sadly, nothing much has changed. Every unfavourable economic wind exposes us to the awareness that we simply don't have the native talent to invent and create.

Or even manage.

A friend who works in one of our major export industries (education), presently undergoing a massive downturn in enrolments, explained it to me in these terms...

"It was as if we had built a business that could only survive in the good times. The minute enrolments started to drop, we found that we had no management mechanism to evaluate and implement an appropriate business response. Everyone just sat around like stunned mullets. It was when someone said 'so what is the government going to do about it' that I realized we were doomed."

They specifically asked not to be identified. Which is another really bad sign.

Unfortunately, with a government whose ministerial competence extends to lawyers and unionists, but not to business, this is unlikely to change. Hence my rampant pessimism.

Pericles, it was worse than that. It was the unintended consequences of poorly thought out government policy that started the rot.

To compete with imports we developed a policy that allowed manufacturers to use up to 50% imported content in their products. Smart engineers discovered that they could import the whole working product, less housing, for less than 50% of the cost. The only problem was the imported works were really inferior.

No problem, our smart Asian suppliers offered to produce the works to our design.

One company who were early in this system manufactured movie, & slide projectors among other things.

They soon had excellent asian projectors, produced to their design, landed for about 20% of their cost of manufacture. They wrapped an excellent locally moulded plastic housing around the thing, & doubled their previous mark up.

However, their export markets dried up, when the Asians exported the new projectors under their own brand.

Next their brand was undercutting our manufacturer, even after paying import duty.

We still had import quotas, that restricted how much imported stuff was allowed. As quota's were reduced, or eliminated our manufacturing stopped. Our markets were too small for economies of scale, as the Asians had the whole US market, & we were too insular to even try that.

In 64 I was supplying 7 companies who produced TV sets, & portable radios. By 69 they were gone.

Percilies,
I’m quite sure there is a total malaise right throughout the country. EG The office of taxation auditors didn’t have a single thing in it that was produced in the country, but this didn’t seem to faze them.

There seems to be two opposing forces that are not working in sync. Private enterprise and government, and I forgot to mention in last post, that the wages and budgets of government employees should be tied to some type of national figure, such as a national productivity figure.

If that national productivity figure goes down, then the wages and budgets of government employees are not increased until the productivity figure comes up again.

This would get government employees and academics more interested in productivity, Australian made products and in exports, which seems to be the last thing of any interest to many current government employees and academics.

Also the training of foreign students may be costing Australia money. We have to compete with other countries in terms of supplying more technologically advanced products. What little technology we have, universities are now teaching that to foreign students who take it back to their own country.

IE We have been training the opposition.

*manufacturing begets other jobs, the flow on effect.*

Yabby>> Manufacturing also costs other jobs. It adds costs to
efficient producers, making them less efficient and less
able to compete globally. So you have a downward spiral.<<

Yabby you can bet that if the job aint there, no employer is paying for a body to fill the space. More jobs, downward spiral, more jobs, downward spiral, sorry I had to say it twice to make sure you had said it once. Lets all stop working and look forward to better times ahead, I'm all for that.

*You're dead on Yabby, but don't forget bureaucracy,*

I fully agree, RawMustard. Some of them can be real little
nazis, when power goes to their ahead. But I have to say,
I took them on a number of times, went over their heads to
their bosses in Canberra. In virtually every case, reason
prevailed and they were put in their place. It was just
all alot of hard work and hassle, however.

*By the time our industry was exposed to the economic reality of the rest of the world, it became obvious that the lifelong featherbedding had rendered it incapable of competing.*

You hit the nail on the head, Pericles. When I first came to
Australia, I was shocked how many companies were managed.
Consumers? Ha! We will just hide behind our tariff barriers,
innovate and invest as little as possible, increase our prices
annually, pay ourselves handsomely and consumers will have to
wear it. Efficient exporters paid the ultimate price, bogged down
by these people.

*Now that's a cheap shot yabby*

Not really Rehctub. I am simply judging by your
past posts, that you don't live on Struggle St, as
many do.

So you are judging all this from your perception, rather
then their's.

But see it this way: If people did have to pay alot more
for clothes, consumer goods and the rest, because of tariffs,
they would have less disposable income to spend at your
butcher shop.

You would be the ultimate loser.

Yabby,
I know of an Australian company that was selling a product to people all around the world through the internet.

But they had more sales to Cameroon than they did to Australia.

So for a while they offered the product to Australians for free, who still wouldn't even look at it.

Why did no Australians want to use it. Because they thought it would be inferior or inefficient, and an imported product would always be better, even if they had to pay money for it.

That is now the pervading mentality.

What surprises me most about this discussion is that 2 particular words have not been mentioned, although Candide way back when raised some good associated points. The words I am of course alluding to are:
Peak Oil.
When we are on the downward slide of oil production (probably no more than 2 decades away) fuel and transport costs will be as effective as tariffs.
A couple of decades ago, I investigated the possibility of growing garlic, as an 'import replacement project'. After a few hours at the local library, poring through microfiche files. The stats I turned up indicated that we exported just about as much garlic as we imported, from New Zealand and Singapore.
We may as well have had the ships meet in the middle of the Tasman sea, do a doe ce doe, and come back again.
In Port Macquarie, NSW, (once a great vegetable growing district) the local Growers Market bought most of it's -locally grown!- veggies from the markets in Sydney, 500 kilometres away.
This kind of absurdity simply won't be affordable in coming decades.

We are exporting almost exclusively our mining goods - Non-value added, non renewable, and the value added goods that we had been producing 40 years ago, are now imported by those companies Target, K-Mart, Lowes, Big W, Wesfarmwers, Bunnings and a hundred other stores, because they can buy them cheaper foreign made than Australian made. This is more because we are trading our coal and other resources at something like 11%, 25% and 30% of their real value. Coal that BHP Billiton was exoporting for $US98/ton, was being re traded in Pohang from Sth. Korea, for an estimated $US308.70 / ton, and I doubt that many or most of our other resources are similarly under valued, and are subsidising the price of our imports. and just remember, that when these resources are gone, they are gone for good, no iron ore for manufacture, no coal to produce the large quantities of power we need for manufacture and Railway, I don't like the look at what is in store for our future, unless our politicans grow a brain, and get wise, I know it's a bit to ask, isn't it.

Looking at some of the earlier remarks, I have to ask how many years ago are you talking about, The changing of the top tax level has had a lot to do with prices of goods and charges of services, the last 20 years has been the worst, as the top tax has been lowered to 47%, the best of our economy was in the 1950's to 1970, from then, it has consistently gone downhill, the same in the US and the UK. Check on "Tax history of Australia", "Tax history of US", "Tax history of UK" and "Taxs around the world". You will find that when the top tax goes below about 48%, there will most likely be a recession which we have had and when it goes below 365 or 40%, there is most likely a depression which the US has now. The best conditions we have ever had with economy, was in those years 1950 to 1970.

merv09,

Yes, i do not see many good signs from the major parties.

I know the solutions are complex, but everything appears to be based on 'we will be right' as long as Chinamerica relationship holds up.

Perhaps Grim is right when talking about issues such as high fuel prices changing our mindset about food production.

I would hope that there are some influential people in politics that can force a major rethink about how many policy issues are linked, and that some hard decisions (which will cause some conflict between different interest groups) need to be made.

While Labor, and some of its jokers and supporters, pretend they are
the only way to truth and justice in the Australian way, I have a gut felling that minor parties (including the Greens and rogue Nationals), and even Coalition members, are going to play an important role.

In other words, someone needs to challenge the economic orthodoxy of the day. Things are indeed not alright if we continue on our current way, although I can understand why recent policy trends occurred.

As I once argued in Quadrant, support for current trends will continue only as long as people will accept higher and higher levels of debt. I doubt very much that the Western world will keep on accepting trends as they are, although I may be wishful.

*Because they thought it would be inferior or inefficient, and an imported product would always be better, even if they had to pay money for it*

Vanna, I can't really comment on the product that you are discussing
as I don't know what it is.

But it is true, that once people suffer from affluenza, things like
status symbols and snob value become an issue. There are two sides
to that coin, as for clever manufacturers and marketers, it is
a dream.

Take China, everything is made dirt cheap. Yet today the largest
market for French and other European luxury goods, is in fact
with the Chinese nouveau riche. Fropm 5000$ Hermes handbags to
Rolex watches, they are snapping them up like never before.

Just look at Apple! Today its market cap is larger then that
of Microsoft. All based on clever design, great marketing and
appealing to people owning a status symbol.

I think in Australia too, companies will emerge, which stand
out from the crowd, which can compete globally. Price is only
one reason why a certain segment of the market buys something.

BTW Pericles, I lashed out and tried that "Deluxe Fruit Muesli"
of Carman's. Whew 1 whole $ more then her Bircher Muesli. Yup
its yummy! She exports to 20 countries now it seems. It just
goes to show that a smart university student can make it happen,
from here right in Australia.

There are in fact a number of new and emerging Australian
success stories. Sadly that is despite the fact, that we
make it as difficult as possible for them, with our ridiculous
labour laws.

The ultimate aim should be to develop more exports.

Depending on the product, the Australian population may be too small to support more than a few Australian manufacturers of that product.

So the manufactures have to develop the product in Australia, and then head for the export market. To sell on the export market, the product has to be unique or better in some way than what is available. IE. it has to be innovative.

Vanna, I have been attempting to do this for some time. Innovations galore not already patented. The problemo is the red tape regarding patency laws and the process here in addition to banks backing up projects. Similar to the hurdles the film making industry had always faced.

Banks do not like to take any risks or support here without significant assets or a sufficiently high income.

A couple of engineering companies agreed over the phone one day to meet and discuss one of my innovative concepts; after the patency process was in full swing. Several Banking institutions were not interested. Raising children, working a couple of jobs and other obstacles took over the remaining years.

Last year I observed that one of the innovative concepts [that I had ultimately planned to export] is now up and running and highly successful in the city.

Congrats to the person who found the time to engineer and market the product.

One day I may decide to take a risk and follow through the patency process!

Yabby,

I'm fully aware that advertising has become a major reason for people buying imported goods.

The continuous insistance that tarrifs would make everything more expensive and of lesser quality, has resulted in people not buying anything Australian, because they think it will be more expensive and of lesser quality.

The whole system is reinforced and likely to continue indefinitely if government departments and education systems keep buying so much imported goods.

Once government departments and the education systems stop buying Australian products, the rest of the country is unlikely to buy Australian products also, and that is basically where we are at.

*The continuous insistance that tarrifs would make everything more expensive and of lesser quality, has resulted in people not buying anything Australian, because they think it will be more expensive and of lesser quality.*

I'd have to disagree there, Vanna. Australian manufacturing is
restructuring. If you look at specialised mining and farming
equipment for instance, lots of it is made here. Their problem
is that they can't find the welders, metalworkers etc to keep
up with orders.

Manufacturing is also becoming more specialised, we cannot make
everything. So cheap and labour intensive consumer goods are
made in China. But my Samsung LED was made in Malaysia, not
China. My Isuzu 4wd was made in Thailand. My Korg music machine
was made in Japan. My Prattley auto stock handler was made in NZ,
my Mig welder was made in Australia, my JD tractor was made in
Germany. My point is that these are all high value articles,
where quality, reliability, innovation etc are far more important
then just price.

Australia too, will develop its specialised niche products. Our
ferries are extremely popular, for instance. The other day I saw
a report on a company which makes large turntables and exports
them around the world. We export both specialised mining equipment
and specialised agricutural equipment.

The biggest problem for Australian exporters, is going to be the
value of the A$. Mining income is pushing it up, as other countries
race to push the value of their currencies down. That is bad news
for both agriculture and for manufacturing, for we are stuck with
the high costs, imposed on us by Govt.

Yabby,
I think you will find that nearly all equipment in new mines is now imported, and even steel framework is being imported and not being welded up in Australia. We sell other countries coal and iron ore, and import steel girders and welded framework.

I also think you will find that there are people who are reluctant to take up trades such as boiler maker work, because they can be laid off very quickly if there is a downturn. There is not enough constant work to take up some trades.

The loss of so much of Australian manufacturing has also resulted in a reliance on other countries such as China, as well as a loss of national pride and a general loss of innovation.

As an ex boilermaker, I certainly wouldn't recommend the trade to anyone.
Why would any kid with an ounce of brains want to endure the lousy pay an apprentice gets for 3 or 4 years, when they can make as much or more sitting on their can in an air conditioned cab of a truck, for the price of 3 or 4 lessons?
True, boilies on mine sites can make $150k plus a year, but so do truckies, with a lot less pain.
The good old capitalist laws of supply and demand should be pushing up wages for tradespeople in this country, since they are in short supply, but there's a way around that, isn't there?

http://www.commerce.wa.gov.au/LabourRelations/PDF/Publications/IndustryOverviewManufacturing.pdf

Vanna, I think we live in a different country, over here in WA.

WA manufacturing has been steadily increasing over the last 10
years. Much of that is for the mining industry.

To all those worrying about globalisation and foreign trade.
Forget it, globalisation is already fading and everything will become
local.
Read Jeff Rubin's book "Your World is About to Get a Whole Lot Smaller".
It is quite cheap, I think I paid about US$14 from Amazon.
It will change your ideas on all the discussion here on this thread.

Bazz,
So, can you give a summation? Also, is the book imported?

Vanna,
Rubin's central point in his book is that as oil prices rise the
effect on freight costs will gradually increase the cost of international
freight. This can already be seen in the US in the re-establishment of
furniture and steel manufacturing. First products to be affected are
lower value bulky and heavy products.

I don't know if we have seen any affect here yet.
I did read just a few days ago that container ships are running at
reduced speeds to save fuel. If a voyage from China to Europe takes
an extra week that must add to cost.
I have only seen a couple of books on sale in Australia on this subject.
This is the link to the page on Amazon.
http://tinyurl.com/2flxkkj

Do a search on Utube, there are several talks he has given at various
conferences.
Everything, especially food, will become increasingly local.
As they say, the days of the 2000Km salad are coming to an end.

Yes, but some US data I have for 2009 suggests that the cost of shipping a tv across continents was down to $10 each. The cost would have to increase a fair bit before tv production in the West became more attractive in a world of open trade.

Bazza,
I don’t think rising oil prices will stop the mentality of import, import, import in this country. That mentality is now so deeply entrenched.

Jeff Rubin’s book, Amazon and Utube are all US based, and through importation, our culture is now becoming American culture.

Is that a good thing?

Well, one of the funniest things I see, is when I see a longhaired, bearded, tattooed bicky riding around on a Harley Davidson. They seem to think it tough to ride on a bike imported from the US.

Why don’t they build an Australian bike and ride around on it?

Because they’re too sooky.

*Why don’t they build an Australian bike and ride around on it?*

Why would they want to do that Vanna? Why reinvent the wheel?

If you think they should, you are free to invest your hard earned
savings and do exactly that. But I can't see a good reason for
doing so. Best to stick to things where we have a comparative
advantage

Yabby,
The longhaired, bearded, tattooed bickies riding around in Australia on Harley Davidsons, are now more American than they are Australian.

Maybe they should live in America.

Ah Vanna, I think its just all that US tv that is rubbing off.
We also have plenty of Aussie housewives who love their Oprah,
Days of our lives and all the rest.

As a marketing exercise, I think that HD tells an interesting story.
The Japanese and Europeans produce better, faster, more reliable
bikes, yet there is something about the sound of a Harley that
attracts people. The movie Easy Rider has alot to answer for.

You'll find that bikers in Europe look just like Aussie and American
bikers.

Yabba,
It is a sad situation when someone has to use an import as a status symbol. After the debauchery of importation, Australians don’t even have any status symbols they can call their own.

Ugg boots Vanna, Ugg boots :)
.

Chris, I very much enjoyed reading your article and also the subsequent posts. The depth of knowledge regarding the numbers that have resulted because of the policies of governments is impressive. My comments are formed by my daily dealings with a range of Australian manufacturers helping them to promote their products and services.
Put very simply many manufacturers are finding it very difficult to compete with imports which is resulting in businesses closing the doors, skills being lost and infrastructure being dismantled.
But there is much more which is often ignored, whole thing is not simple, such as the amount of pork imported into Australia from countries where farming is subsidised, the power the large retailers have when it comes to setting price they are prepared to pay for items, the different standards imposed on the production of goods such as use of lead based paint, countries keeping currency artifically low making their exports even more competitive, manufacturing businesses being subsidised by the government amking them even more competitive, inadequate labelling laws ensuring that Aussie consumers are not able to make a clear choice between Aussie made or grown products and the imported ones and the list goes on.
The level of frustration that I hear from the smaller to medium sized manufacturers in many ways is very disheartening. As for the larger manufacturers run by here today gone tomorrow CEO's and boards many don't seem to care about the long term impact they are just focussed on achieving their short term KPI's achieving their massive bonuses and of course the ubiquitous "increasing shareholder value". Meanwhile they are systematically dismanteling the very things that have help make Australia one of the best places to live on the planet.
I am worried that at the end of the mining boom people will look around to what remains after everything has been dug up or is not needed more and see very little. We may well be like the island in South Pacific which for many years survived on phosphate until it was exhausted.

Chris, not sure about that $10 per TV. It might have been correct for
a while when container charges were zero dollars for a while.
However at a $10,000 a container charge across the Pacific, and that
is a lot shorter than to Europe, it means 1000 TV in a container.
I don't think a container would hold 1000 TVs.
I suppose we could work it out.
Someone here might know. Even if it was $20 per TV it would still not
be a big barrier.
One of the problems for the ships is that less bunker fuel is being
produced, so they are buying a mixture of bunker fuel and diesel
because the refineries are producing more diesel these days because
of the increase in diesel cars.
It gets very complex does it not ?

Have really enjoyed the feedback from this article.

I know the answers to trade are difficult for a number of reasons, so do want to pretend there are easy answers.

It is a subject I have long struggled with. I would love to undertake a comprehensive study of trends over the last three decades to take account of a number of impacts.

Bazz, you may be right. My source comes from a 2009 US publication on security issues

Chris,
Have a look at the number of laid up ships.
A year or so back there were photographs and TV news stories about
the ships laid up at anchor in Singapore Roads. There were something
like a thousand ships there and a similar number in Rotterdam.
A plot of freight rates might tell a story.

The Trans Siberian rail line is electrified for a large part, if not
all of its distance so I have been surprised that China has not sent
freight to Europe that way. It would be a lot shorter and the break
of gauge on the Chinese border and the Polish border would not be too
big of a problem these days. Perhaps the Russians want more than a
pound of flesh ?

Chris a comprehensive study is a great idea. If my business ( which promotes Australian made products and services) continues to grow at the current rate I would like to talk to you in early 2011 about how we could help you conduct that study.

BuyAustralianMade.com.au

That possibility sounds great. Please ask for my email address from Susan or Graham.

I would be very interested in your thoughts.

My main interest is indeed political economy, especially from an Australian perspective, although one that does give consideration to international realities and trends

Bazz, a standard 40 ft container holds 67 cubic metres, IIRC. Tonnage
wise they can hold around the 30 tonne mark.

But the question arises, why on earth would we want to make TVs in
Australia? Most tvs are now flat screens and I gather that the
specialised factories to make these, cost mega billions to build.

So the way to operate them, is to build very few globally, but
operate them around the clock, for economies of scale.

Freight hardly comes into it, the cost of building these factories
and the equipment involved do, for it has to be amortised against
production units.

Sea freight is extremely efficient in terms of fuel/ shipping tonne/mile.

What will happen when fuel prices rise, is that efficient logistics
will become a huge business. Loading a road train with 50 tonnes
of freight, both ways, is the way to go. Once again, fuel per
tonne/km is minimal. The biggest waste of fuel is when the
housewife drives 10 km to the local shopping centre, to buy a couple
of kg of food.

Our whole logistics system is still loaded with huge amounts of
waste. Rising fuel prices will change that.

You may well be right Yabby,
However as fuel depletes rationing will divert fuel to food production,
fertiliser, defence, government functions like police, electricity
maintenance, water, health etc and very little for unimportant things
like refuelling ships that have brought a load of TVs.
That is a bit of an exaggeration of course but you get the idea.

There is a possibility that complex systems can collapse virtually
without notice from a position of only minor problems.
There is an article on this here;

http://anz.theoildrum.com/node/6974#more

I just noticed when I got that URL that there is an article about
very fast trains. I have not read it yet, but I believe that it is a
pipe dream in this country as we will be better off refurbishing our
existing rail network and reopening closed branch lines while we have
the necessary resources.
http://anz.theoildrum.com/

*However as fuel depletes rationing will divert fuel to food production,
fertiliser, defence, government functions like police, electricity
maintenance, water, health etc and very little for unimportant things
like refuelling ships that have brought a load of TVs.*

Well you could be right Bazz, but I doubt it. In the end the
market will sort it out. If Govts try to regulate supplies
as you imply, the first thing that will happen is a black market
will develop.

We ship out boatloads of meat and grain, it makes sense to backload
with industrial goods.

IMHO our economy is suffering from Dutch disease. ie our miners
are doing so well, they are distoring the economy to the point where
many Australians simply have unrealistic expectations, compared to
the reality of the rest of the world.

On that basis, why would anyone want to risk their capital, to
develop a new manufacturing industry for consumer goods here?

Best for manufacturing to stick to what it does now, ie service the
mining and agricultural industries and export the most innovative of
those products