Garden Furniture | Manufacturing A Plan For Our Future
Australia’s manufacturing sector is in crisis, courtesy of a high Australian dollar and flat demand in domestic markets. Once around 30 per cent of our economy, manufacturing has fallen to 12 per cent of gross domestic product, and is likely to push through the 10 per cent level soon.
Yet, if we are to believe senior Treasury officials and newspaper columnists, we need not be concerned. It is all part of an inevitable long term structural adjustment towards a largely service-based economy where I mow your lawns with my Chinese-made mower and you iron my Chinese-made shirts.
We must let the free market have its way and stick to our obligations under global tariff agreements (the GATT).
I don’t buy this, and I suspect you don’t either. There are five reasons why a vibrant manufacturing sector is critical to our future:
1.Defence
I will start with the obvious point that we must be able to produce some of the basic weaponry needed to defend our shores, and to maintain the sophisticated defence equipment that we purchase from others. There is a threshold issue here – below a certain point we will not be able to maintain the required critical mass in heavy engineering, metal fabrication, electronics, and other fields. We may already be at, or below, this threshold.
2. Paying the import bill
Much of the standard of life we enjoy in our wonderland down under is due to a vast array of imports, the value of which has steadily risen as a share of GDP. Exports of mineral products largely pay for this, but we cannot assume the mining export boom will last forever. When it fades, who will pay our import bills? We will have a balance of payments crisis, necessitating severe belt-tightening. Another recession that we have to have, or worse. Broadening our export base around manufactured products is the only answer here, unless we are prepared to accept a permanent reduction in our standard of living.
3. The multiplier effect
Manufacturing has very strong flow-on effects into other sectors – construction, retail, finance, and services, to name some of them. Each job lost in manufacturing causes a loss of up to five other jobs. So, we need these multiplier effects to be positive, not negative.
4. Education and skills
Manufacturing requires a very diverse range of abilities that straddle the full educational spectrum. Acquiring these skills gives our young people a truly interesting and worthwhile alternative to spending time on Facebook.
5. Dignity and satisfaction
I don’t know about you, but I derive little satisfaction knowing that our prosperity comes mainly from quarrying finite resources, and there is not much dignity in me ironing your shirts, and you mowing my lawns. There is, however, both dignity and satisfaction in making things.
Affirmative action is needed now to arrest the decline of manufacturing in Australia, particularly as our currency is unlikely to weaken in the short-to-medium term.
As we reflect on the policy options, we should remember that the economic success of nations has not been won on level playing fields. The opposite is the case. All of the
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