Greg,
I enjoyed this piece, however in the long term our future is looking rosy.

From March this year we will see labour costs begin to fall, thus over a 10 year period, we should have the comtetitive edge over the Chinese. If we cannot get our labour costs down to 1/2 a bowl of rice by 2016, Workchoices [no choice] will have been a failure.

Provided the rich continue to become richer, and the poor continue to welcome more and more to their situation, our economic outlook long term will stand us in good stead. We need a good ecomony to continue to provide jobs with starvation wages for the employees of this great country, not to mention the bank balances of the wealthy.

I have overwhelming confidence in our country and it's Government, to provide these things, and I would go so far as to predict that by 2016 we will see that Kraft factory returned to our shore by it's American owners. Prosperity for all [except the low wage earners, pensioners, and their depedents]and to all a good afternoon.

'Australia’s manufacturing sector...received about $6 billion in Federal Government assistance ' that sounds like welfare !

Having said that, given that the wages in places like China, Fiji, Vietnam etc are less that Aust then of course manufacturing will go offshore.

What can we do? Like me, we need to reskill and look for another job.

Shonga, did I notice a touch of sarcasm? I like your style.
I do like my vegemite every morning, I guess I will just have to make my own !

I don't blame alot of manufacturers if they go offshore. Wages are an issue only in some industries. Consumers are the first to benefit from cheaper clothing, powertools etc, which is what China is good at.

The Govt might dish out subsidies to some, but various State, local and Federal Departments overwhelm most businesses, with massive red tape, unlimited rules and regulations, and a whole lot of Hitler like bureaucrats who want to throw their weight around.

As the previous owner of an award winning Export business, I eventually got so sick of all these guys that I sold the business
and if the Aussie $ should ever crash in value, let the bureaucrats figure out what to do about it. It wasn't wages that were the problem, but the attitude of a whole host of Govt depts.

at LAST Greg Barns writes something which makes sense !

"gradual global shift of manufacturing production to low-cost countries, including China", will continue to place competitive pressures on parts of Australian manufacturing"

Err... no, it will just KILL IT.

"China is Australia's second largest export market and the revaluation of the renminbi (yuan) will make Australian exports cheaper, having a positive impact especially on resources and agriculture products".

AND THIS... is why there is little sympathy from Mark (the Cocky and Miners mate) Vaile and company for small and medium manufacturers !
Politics is about POWER.. and you just have to ask 'Who Benefits' from the current power status quo.. "Resources" and "Agriculture"

Manufacturing? nope...

I hear a mild bleat of encouragement in the possible revaluation of the chinese currency. HAH ! as IF the Chinese will commit economic suicide (as we are)

The scary part in all this, is that you can just add the following to our already overburdened social welfare bill....

Aging Population+Unemployed(and unreskillable) ex manufacturing workforce + Artificial Labor rates in China = BIG and unlikely survivable problem.

If manufacturing was just 1% of our economy it would not matter but its more like 28 % !

The French might be wierd in some ways but boy oh boy, their tenacity and activism in retaining small farm holdings is admirable (even though they rely on big subsidies)

The day we allow all our manufacturing and engineering skills to die as they pass to China is the day we cease to texist as a nation. We will just be a farming and mining backwater with an elite and prosperous few, dwelling in high security compounds to keep the rest of us hungry ferals OUT.

With some planning and foresight and a global approach coupled with automation and innovation, we can compete. But who is going to drive that agenda when its easier to just dig stuff out of the ground and shear a few sheep and pack a few moo cows off in ships.. don't even need abbotoirs. (or their workers)

Coyote -re-skilling in tourism? :)

China has just overtaken the UK to become the world's fourth largest economy at around 2.14 trillion dollars, and has an estimated population of 1,307,728,458 (http://www.cpirc.org.cn/en/eindex.htm). According to my ancient Casio, this represents a GDP per capita of $1,636.

We on the other hand share a GDP of $860bn or so between 20,460,603 people, a GDP per head some 25 times higher.

This is bound to create some interesting situations. We know from the examples of the post-war economies of Germany and Japan that the path is to first use people to create cheap articles for world consumption, move up the "food chain" to the efficient production of quality high-value/high-tech goods, before maturing into a balance of services and high-capital-investment products.

China has already exported significant financial stability to us and to European countries in the form of cheap goods - textiles, white goods, electrical appliances - which we happily absorb into our shopping baskets in the form of low price-inflation. It is a perfectly natural act, to choose goods that meet your budget without more than a cursory glance at the label. Without them, we would be paying higher prices, our wages wouldn't stretch so far, and we'd re-introduce the sort of wage and price inflation that terrorized previous decades.

The next phases will create both demand, in the form of skills as well as raw materials, and massive supply of every conceivable manufactured item.

There is an inexorability about this process that takes a little patience to understand. But the question cannot be "how do we avoid exporting the vast majority of our manufacturing capability?", but "how should we adapt ourselves to it?" Regrettably, our normal response is to pretend it isn't happening, and then blame the government when it does.

We should work out what it might be that the Chinese market is going to need, and then gear ourselves up to provide it. That is the normal reaction of a mature an intelligent economy that doesn't believe the world owes it a living.

Pericles,

For once I agree with every word you said.

As Mark Vaille said "China is Australia's second largest export market and the revaluation of the renminbi (yuan) will make Australian exports cheaper, having a positive impact especially on resources and agriculture products".

Lets face it Australia is a resources and agriculture super power, why do you think the Govt. is trying to reduce subsidies to inefficient EU farmers. (I am an ex member of the Labor Party and a vehement critic of the Howard Govt. but on this they are really pushing a very difficult issue).

Lets stick to what we are good at, digging up stuff, and growing stuff. To pretend otherwise is silly.