Wiz, whilst I think that in the past, the Australian labour market
has been way too overregulated, I do agree that Workchoices was
what can be considered badly introduced. Sometimes its how we say
something, not what we say, that is critical. Peopleskills matter
and in this case they wern't applied, so that will highly likely
cost the Govt the elections.

I disagree with your proposal to create another consumer goods
industry in Australia, unless you can give me a really good reason,
where the benefits outweigh the many disadvantages.

Today thats a global industry and comparative advantage matters.
Many Nokia phones are designed in Finland, but more and more are
made in China. Fair enough. Ikea does the same, many other brands.
Electrolux makes some products here that are designed in Europe.

If there was some superb entrepreneur of Australian origin, who
designed goods that people actually want to buy, then making them
in China would maybe be the way to go. Clearly none has appeared,
many companies closed down.

Consumers are voting every day about which products they want to
buy, so they should be able to. Bringing back tariffs would
strongly disadvantage the poor and would in fact disadvantage
all Australians, limiting choice. If the costs of consumer goods
goes up, standard of living goes down.

Australia doesent even have the labour force. We are short of
doctors, nurses, teachers, building workers, meatworkers, chefs,
restaurant staff, miners, engineers and a host of other jobs.
Perhaps more effort should be placed on making sure that those
people who want to work in these professions, are actually given
a chance to do exactly that. Abbott denies it, but 10 years ago
the Govt cut back on educating doctors, as it was felt that there
were too many. So they screwed up on that one.

Singapore, NZ, Holland, Finland etc don't have a mining industry
sucking up every available employee. Mining is where we have
a comparative advantage, not in making consumer goods.

I never made a "proposal" that there should be an effort to create a consumer goods manufacturing industry in Australia; I'm simply stating that the current global situation makes it impossible, without allowing that some sort of tariff protection would help it get off the ground. There are significant economic risks in letting Australia's manufacturing sector die off, and as a consumer, it annoys me that I don't have the choice of buying "Australian" when I would be happy to pay a more to do so. I certainly don't accept that we don't have sufficient workers willing and able to take part in such an industry - I've yet to see it ever explained why 4% unemployment is considered somehow economically "ideal", considering that in the 70's we had 2% or lower unemployment. 2% of the Australian population that is willing and able to work is at least 200,000 workers - far more than enough to support a robust manufacturing sector.
I agree that protectionism is not a good long term solution, but historically, is has proven a very effective technique at allowing local industry to "get a foot in the door", so to speak.

A lot of claims are made about protectionism that may make sense on the surface, but we need the hard evidence to back those claims up, and objective examination of the historical reasons behind their introduction and the likely long term economical consequences of phasing tariffs out - not just unthinking acceptance of free-market ideology which claims that any government "distortion" of the market economy is necessarily a bad thing, no matter what. For instance, protectionism in the agricultural industries, something that has been criticized from both the Left and the Right, is in no small part an acceptance that food availability is so critical to the functioning of a economy that it's too risky to allow one nation to become too dependent on others for supply of food. Any number of developments can quickly lead to a situation where supply chains can be cut off, and without sufficient food, economies will collapse within weeks.

Wiz, I don't think that manufacture has to collapse, it has to
restructure away from consumer products, into "intelligent
manufacture". If you look at the Swiss success story and
the wages they pay, they don't compete with the Chinese etc.

They make high value niche products, not products by the
million. Lots of those, make up for a diversified and
active industry. In Australia we are not bad at making
specialised mining and agricultural equipment for instance,
apart from ferries. There is a farming machine called
a DBS, costing hundreds of thousands. He even exports
to Kenya and Mongolia! Thats just one example.

As to the 4% unemployed, the question is how many are
actually employable. Take out those on drugs, those
who refuse to work, those who are mental, you won't have
much left. You can't go employing anyone on ice, give him
a knife and put him on a meat chain for instance. Those
industries are screaming for workers, but can't find them.

WA officially has 3% unemployed, but in reality there is
simply nobody left to employ.

As far as food goes, there is such a diversity of it,
nobody is going to starve lol. Just that this or that
might not be available, when consumers want it. They also
need to sort out their priorities in the Murray Darling,
which is a mess. Its pointless supplying water for
irrigated pastures, whilst the bloke growing veggies or
fruit is cut off his water supply, for instance. If you
do silly things like that, there is bound to be a problem.

Food supply has other risks, not even considered by most.
Go to your local dairy and they make the bottles a few hours
before they fill them. Those machines are French. If a major
part breaks, the whole thinggy stops until a part from France
is available. You won't distribute much milk without bottles!

Well as far as competing with China goes, again, no reason Australia shouldn't be able to do at least as well as other smaller nations with healthy consumer-goods manufacturing industries - even if it means some stages of the manufacturing process are outsourced to China. Eventually however I see the rise of the middle-class in China as providing a huge boost to manufacturing opportunities here, as you have a massive new market to sell to. However I agree that focussing on high-tech and perhaps lower quantity manufacturing that doesn't require significant amounts of low-skilled labour makes the most sense for Australia, and I think government policy will (and should) have a significant role in allow such an industry to prosper.
BTW, given your interest in Switzerland, I assume you know that Switzerland has been rated as the world's 9th freeest economy, with notably higher government expenditures than Australia, supposedly the world's 3rd freeest economy (according to the Heritage Foundation). As I see it, the Swiss government is doing a much better job of supporting their nation's private enterprises than our own, and I believe this partly because they not so beholden to the idea that less government is always better.

On food supply; no amount of diversity is going to help much if there isn't enough of it. Obviously Australia has little to worry about here; even with the drought we're a long way from not being self-sufficient in food production. I don't believe Australia *or* the U.S. needs tariff protection for their agricultural industries, but I accept that in some parts of the world (e.g. Europe - including Switzerland!) it might be justified.

Getting a bit off topic now, I wanted to get back to discussing the economic benefits of a progressive tax system, as opposed to flat or even zero tax systems that some free-market economists have proposed.

While only a small minority of free-market economists have seriously proposed flat taxation, or even no income taxation at all as the best way to promote economic growth, it's still a general tenet of more conservative governments that "less tax is better", especially "less tax on the rich".
Interesting, even the highly conservative WSJ opinion page came out recently with an article accepting that more progressive taxation was needed, mainly to prevent a severe political backlash by the significant percentage of the voting populace that had been disadvantaged by globalization, and certainly the political impossibility of trying to sell completely flat taxation (as was seen with Thatcher's Poll Tax) makes it slightly academic.
There are various "fairness" arguments in favour of progressive taxation (including the mostly reasonable claim that the rich generally benefit the most from infrastructure provided by the government), but as I see it, from a purely economical point of view, it makes no sense to level taxes in such a way that the bulk of the population are left with minimal discretionary income, while a much smaller number of very wealthy individuals are left with their discretionary incomes more or less intact.
Unfortunately, there’s no space to show the figures here, but a flat income tax in Australia would almost completely remove the discretionary income for as much as 30% of the population, and at least 50% would be left with minimal discretionary income, meaning that the size of the market for any non-essential product or service in Australia would shrink dramatically. Hence, the business opportunities for those who run corporations providing such goods and services are dramatically limited, and all the extra cash they now have in their pockets from those tax cuts isn’t going to very useful. Realistically the only way out would be for company executives to collectively agree take voluntary income cuts, and pay their workers more…but we’ve been through why that isn’t likely to work in practice.
Now no-one’s going to be proposing flat taxation anytime soon, but similar logic applies to any proposal to reduce taxes and/or flatten the tax structure.

Wiz, some points about your last two posts.

A while ago I read an article in the Economist, about the
booming sales in China, of European luxiry goods. Despite
the many fakes produced there, Chinese wanting status
are buying 5000$ Hermes handbags and 10'000$ Rolex
watches, like there was no tomorrow! All produced by
expensive European labour of course...

Europe, including Switzerland, got it exactly arse about,
compared to Australia, thats why we still have a reverse
situation when it comes to industry and farming. Heavy
subsidies apply to agriculture. The net result is that
farming the taxpayer is a major industry for agriculture,
which an efficient manufacturing sector can no longer
afford to subsidise. Australia in reverse, so to speak.

If Australia is serious about assisting exports, they should
stop picking industries, like MV etc and start by cutting out
things like payroll tax on all exported products at least.
Taking money from efficient industries and giving it to
unefficient ones, is not how to improve exports.

I don't have a problem with progressive taxation, depending
on the limits of course. People have a sense of what is fair
and when Govts go over the limits, they respond. The rich
have it easy, they can take their money offshore and pay
no tax here. The higher the tax levels, the more people
will cheat. If marginal rates are too high, people won't
bother earning that extra Dollar. I know people now, who
when they have to pay over 40c in the $, say its not worth
the bother of the extra work, best to put the feet up and
have another beer.

Keating tried making housing investment less attractive.
The result was less houses being built, so less available
in the rental market. The idea failed. Best to release more
affordable land, if there is a shortage of houses.