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One of the many outrages following the announcement of the Abbott ministry was that there was to be no science minister. This was to be rolled into the portfolio of the industry minister, Ian Macfarlane.
Sadly, Macfarlane is not even up the job of Industry minister as he's forgotten on very important thing about the portfolio... the necessity to have an actual policy.
After being rolled by the economic illiterates and being involved in daring the car industry to leave (which they subsequently did), there is no plan 'B'. A bit like the plan to save Qantas where 'Plan B is our Plan A'.
While you surely know the story of ongoing and widespread Abbott govt incompetence, what was less clear prior to Monday night's episode of 4 Corners was the dire implications of this.
To add to the discussion, The Conversation website recently posted an article on the likely impact of not having an effective industry policy. Included below are excerpts (in italics) from Goran Roos article.
Australia faces a fall in living standards unless policy action is taken. This is due to de-industrialisation and loss of economic complexity.
The higher the economic complexity, the stronger the economy’s value-creation prospects. Australia languishes at 79 in global rankings of economic complexity.
Modern industry policy could help correct this but is poorly understood. Hence it is frequently maligned in Australia.
Any intervention should aim to improve business environments or influence a shift in the economy. The goal should be a structure that generates higher economic benefits. That, in turn, provides all the desirable social good.
Australia needs a consistent long-term industry policy to tackle the following challenges.
Increase the nation’s economic complexity
Policy should help broaden and deepen the available industrial commons. This is the shared concentration of knowledge, capabilities and resources within an industrial sector. Some liken it to an ecosystem supporting production.
He adds:
Countries and regions that achieve high economic complexity develop a basis for competitive advantage as distinct from standard price-based competition. This is evident in high-cost manufacturing economies that succeed regardless of low-cost competition.
This is of vital importance, particularly for high-cost countries like Australia that are in danger of losing significant manufacturing capabilities.
Add value to manufacturing
Greater economic complexity aids the transition to high-value-added manufacturing. This process depends on the interaction of the knowledge of specialists (designers, marketers, finance experts, engineers, technology experts from various disciplines, human resource managers, legal experts, environmental scientists, social scientists etc). Where economic complexity is lower, it is not possible to make products of the same high added value.
Importantly:
As can be seen in other countries, most high-value services are closely interlinked with manufacturing. A service economy without high-value manufacturing is not a viable economy (as the UK discovered).
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The stronger the international competition, the lower the prices that national firms can charge for their products. The result is lower-value returns to owners and employees. They then have less money available for consumer spending.
Goran explains:
Presently, Australia’s industry is primarily in domains with very competitive global markets for outputs like agriculture and mining. The Australian producer has low bargaining power (i.e. is a price taker). MFP and its growth are also relatively low compared to manufacturing in high-cost countries.
Identify manufacturing sweet spots
Australia has around 35,000 manufacturing firms with more than one employee. Only a minority, about 2500, are high-performing, globally competitive firms.
Most of these produce goods with these characteristics:
- low volume (meaning limited benefits from economies of scale and clear benefits from economies of scope);
- high variability (e.g. through short product life cycles or high levels of customisation);
- high complexity (of products, services or a combination of these, a complex production process, or complex production systems);
- high value added (which could mean offering luxury products where price and costs are disassociated, through control of brand, relationships etc enabling monopoly or scarcity rents, through extremely high customer relevance, to highly effective business models allowing the appropriation of most value created for the customer etc).
- Luxury and functional food goods for Asia;
- Customised cross-laminated timber construction elements;
- High-value chemicals extracted from sustainable cellulose raw materials as petroleum substitutes;
- Inorganic nanoparticles for additive manufacturing equipment (which would increase the price from a few cents for a kilogram-equivalent of ore to about $300 per kilogram of nano particles);
- Highly efficient solar cells that broaden absorption into infrared and ultraviolet using properties inherent in specific local minerals;
- Assisted living for improving quality of life and cutting health costs;
- Medical devices to replace drug treatment, thereby increasing quality of life and reducing health costs;
- Unconventional gas product-service systems specifically adapted to the Australian geological and geographic environment;
- Produce components, sub-systems and sub-assemblies for the global automotive industry in the domain of CO2-based drive trains using catalytic technology based on mineral properties.
These and other opportunities are not being pursued. The result is continuously reduced value creation and value appropriation in Australian industry.
We can see the warning signs. Federal and state budget deficits are growing. Goods made in Australia comprise a declining share (about 7%) of the economy.
The consequence is that Australia will suffer a reduced standard of living.
You can read the full article here.
While Abbott likes the idea of being PM, it is time he started actually doing his job. It would be preferable for all Australians that if he is as incapable as he actually appears, that he step aside, move back to Manly, spend more time surfing and just collect his pension as a former PM. It would be a lot cheaper for us all in the long run to see the back of the Mad Monk.