November 16th 2019


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Articles from this issue:

COVER STORY Extinction Rebellion: So, it's goodnight to us and a big welcome to mega-bucks

EDITORIAL A second chance to secure Australia's future

FOREIGN AFFAIRS Early UK election will be another Brexit vote

CANBERRA OBSERVED Struggle is on not to let censorship have the last word

GENDER POLITICS Children are being given drugs that are dangerous even for elite athletes

NATIONAL AFFAIRS Thoroughbreds are literally racing for their lives

POLITICAL COMMENTARY Tony Abbott continues faithful to the broad Liberal church

MILITARY HISTORY Timor-Leste a free nation 20 years after INTERFET

CLIMATE SCIENCE V XR Is a tipping point close or is the emergency contrived?

RENEWABLE ENERGY Whatever happened to the World Solar Challenge?

ASIAN AFFAIRS How long has China's Red Dynasty really got?

HUMOUR Vote 1 for the Troposphere

MUSIC Genre fatigue: Jazz rock arrived with a bang, left with a whisper

CINEMA Terminator: Dark Fate: The heart that makes us human

CINEMA Ride Like a Girl: Celebrating family, faith and fortitude

BOOK REVIEW Quirky look at grand-scale egoism

BOOK REVIEW Clear critique of flaws of globalism

POETRY

LETTERS

NATIONAL AFFAIRS Cardinal Pell's appeal to go to High Court

South Park Calls Out Transgender Takeover of Women's Sports

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EDITORIAL
A second chance to secure Australia's future


by Patrick J. Byrne

News Weekly, November 16, 2019

Australia missed the opportunity to invest its huge export earnings from the resources boom in new industries and products. However, record low interest rates have given us a second chance.

The problems

There is a well-known problem in economics. When a country has a boom in export commodities (like iron ore, gas and coal), the nation’s currency appreciates in value, making domestic manufacturing and rural industries less competitive. In worst-case scenarios, sustained commodity export booms lead to de-industrialisation as manufacturing companies either close down or move offshore.

After the 1960s boom in North Sea gas bought windfall returns to the Netherlands, increasing the value of the Dutch currency and destroying many local industries, this problem was named “the Dutch disease”.

Such market failures leave ex-manufacturing employees either unemployed or, on average, in lower-paid jobs than before. This leads to widening inequalities.

Australia’s manufacturing industries have declined sharply as collateral damage of the resources boom. The problem was made far worse by hard-line deregulation and privatisation policies, which have been strongly criticised by the head of the Australian Competition and Consumer Commission Rod Simms, and by radical free-trade policies.

Australia’s problems can be considered three ways.

First, according to World Bank data, Australian manufacturing, at 5.8 per cent of the economy, is 179th in the world, well below Turkey (40th, at 17.6 per cent) and Greece (147th, at 9.5 per cent). Australia is just above Niger and Yemen (both at 5.7 per cent).

Second, the decline of Australian manufacturing, from 13.8 per cent (1990) to 5.8 per cent (2017), has left the nation heavily dependent on the export of minerals and energy (coal and gas) to pay for imported industrial and consumer goods.

In 2017, the export of minerals and fuels (gas and coal) valued at $191 billion (47.4 per cent of all exports) were needed to pay for $216 billion worth of machinery, computer and advanced technology equipment, consumer whitegoods (refrigerators, washing machines, televisions), other household wares, motor vehicles, clothing and footwear, etc. These are called elaborately transformed manufactures (ETMs).

Australia imports seven times more ETMs than it exports.

While our mining industry pays for the manufactured products that we do not produce domestically, mining employs only 200,000 people, less than one-quarter of the 872,000 employed in manufacturing.

Third, a recent study from Harvard University’s Kennedy Centre for International Development had further highlighted Australia’s problems.

The study compared what it calls the “economic complexity” of 133 countries. Economic complexity examines the knowledge and skills base of a country, as seen in the variety of products a nation exports. The more technologically advanced these products are, the more opportunities there are for diversification and for developing new products for the domestic and export markets.

Greater complexity improves opportunities for economic growth and for overcoming wages stagnation.

While Australia was found to be the eighth richest nation in the study, on the index of “economic complexity” Australia was 93rd in 2017. It had dropped down the scale from 57th in 1995.

Australia is rated at a similar level to Bangladesh, Cuba, Iran, Mali and Turkmenistan. The composition of Australian exports is similar to Angola’s exports.

The study showed that in the 15 years to 2017, Australia broke into just seven new products (precious metal ores, ammonia, rare earths, activated carbon, hydrochloric acid, scrap rubber and wax residues) valued at just $US33 for each Australian.

Over that period, Singapore expanded into 19 new global industries (including gas turbines, X-ray machines, synthetic rubber and imitation jewellery) worth $US2,560 per Singaporean. More sophi­sticated, capital-intensive industries can pay higher wages.

While some Australian economists disputed certain aspects of the Kennedy Centre report, none disputed that overwhelmingly Australian exports are made up of primary products and simply transformed products – minerals, energy, food, alcohol, wool, tourism and metal products.

“The data … shows that Australia is effectively a quarry and has an underperforming [education] tertiary sector and little else,” said Stephen Anthony, the chief economist of Industry Super Australia. “Other countries have left us in the dirt,” he said.

Or as Aaron Patrick, senior correspondent at The Australian Financial Review, concluded: “Australia is rich and dumb, and getting dumber.” Therefore, we can expect to grow more slowly than other nations in the future.

A solution

Terry McCrann, economics commentator at The Australian and Herald-Sun has repeatedly pointed out that, at this time of record low interest rates of about 2 per cent, it would be a “no brainer” for Federal Treasurer Josh Frydenberg to borrow $1 trillion ($1,000 billion) for 10, 20 or 30 years.

McCrann said this should be used for water infrastructure, to refinance federal debt and to invest in the Future Fund, which has been recording a 10 per cent annual return.

News Weekly suggests that another “no brainer”, to overcome “the Dutch Disease” and wages stagnation, would be to borrow at these historic low interest rates and establish a national development bank to invest in major infrastructure, which is the foundation of private enterprise, and in new technologies and industries.

Patrick J. Byrne is national president of the National Civic Council.




























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