Who is Online

We have 155 guests and no members online

Into the 21st century

With the exception of one or two dissident voices, on both sides of politics, there is now bipartisan support for free trade and free enterprise.  Australia is now one of the World’s principal advocates of free trade and argues that industries that are not internationally competitive are a burden on national (and collective) wealth.  Most previously government owned trading organisations have been privatised. It is argued that international competition leads to improved efficiency, productivity and is an incentive to innovate.

As predicted by Jackson, Australia has moved to become a service economy and the largest industry sectors in NSW are now Retail trade, Property and business services, and Health and community services.  Manufacturing is now on fourth position.

There is little doubt that Australia’s very strong economic growth performance and relative insulation from international economic downturns is an outcome of its ability to exploit the moment and extract the best available advantage.

It can also be argued that the last remnants of protection have now been stripped away and primary industry, manufacturing and the service sectors have reached a more or less stable base and share of the economy consisting of: “industry that is land (eg food) or minerals based; industries based on skill, innovation or design; and industries with a high degree of natural protection by virtue of their bulk, non-durable nature or ability to satisfy specialised local demands”. 

But the non-mining good producing sectors like manufacturing are still at the mercy of declining protection. It can be seen from the earlier discussion that the value of the Australian dollar is now the single greatest determinant of manufacturing viability and growth (or decline) in Australia.  In addition to the implicit protection afforded by a low dollar, and corresponding lack of protection afforded by a high dollar, rapid fluctuations in the value of the dollar and cost of capital militate against businesses that are highly capitalised and need a continuous, relatively stable return on that capital. These fluctuations both affect viability and make it difficult to predict return on investment.

External influences on the dollar’s value include money market speculation, the country’s trade performance and international investment flows.  The principal visible trade drivers of a strong Australian dollar are our mineral and energy exports but agriculture, trade in services and manufacturing itself are important contributors.

The various Governments’ fiscal behaviour has an influence on internal distributions of wealth and on savings, in turn influencing investment, and the longer term dollar valuation.

The remaining (benign) facility to smooth fluctuations and influence the dollar’s value (through money market operations and interest rate manipulation) now rests with the independent Reserve Bank (established in 1960 under Menzies).

While government has substantially withdrawn from direct market manipulation and participation in support of manufacturing it continues to play a number of important roles that directly or indirectly support or influence manufacturing viability.  These include:

  • regulations affecting export reputation (eg export meat and dairy);
  • regulation of occupational health and safety;
  • regulation of business practice, including accounting and competition;
  • regulation of emissions (airborne, water, noise);
  • local planning and zoning;
  • maintenance and expansion of transport infrastructure (roads, rail, ports, airports);
  • ensuring the appropriate availability of electricity, gas, water, and waste disposal;
  • ensuring an adequate information technology and communications infrastructure;
  • participating in international standards;
  • providing support for research and technology development;
  • providing export development services;
  • negotiating international trade agreements and partnerships;
  • providing and/or supporting basic, trade and advanced education;
  • ensuring a healthy population; and
  • maintaining law and order and the protection of property.

As identified by Jackson, manufacturing can be divided into processing industry that is land (eg food) or minerals based; industries with a high degree of natural protection by virtue of their bulk, non-durable nature or ability to satisfy specialised local demands; and industries based on skill, innovation or design, in other words those possessing unique intellectual property.

Strong areas of manufacturing export, based on indigenous resources, include semi-processed mineral and energy resources such as alumina, basic metals and aviation fuel; and a wide range of processed rural products including wine, processed milk, meat, sugar and processed fruit.  Indeed, processed food exports significantly exceed the value of unprocessed food exports.

Manufacturers that are not trade exposed due to the bulk of their product, its non-durable nature, or their ability to satisfy specialised local demands, include: cabinet making (eg kitchens); bread making; and steel fabrication. These compete with other local firms; with substitute products; and from the risk that there will be new local entrants if their productivity is too low or profit taking is too high.

A small and decreasing subset of this group is protected by non-tariff barriers such as uniquely Australian standards and/or regulations.  These are more common in primary industry but a traditional manufacturing example was electrical appliance cords. A number of other electrical, railway and telecommunications components and were similarly ‘protected by regulation’.  Australian standards are now harmonised with several overseas (European and US) standards and it is notable that many of these, once protected, items are now imported. 

The technology used by these firms is often simply imported and there is less pressure to be highly innovative or better managed. Increased competitive pressure and the potential for imports to supplant their products will generally result in a net economic gain.

The remaining, trade exposed, manufacturers rely heavily on skill, innovation and/or design (intellectual property – IP). In many cases this competitive advantage stems from a novel appreciation of a market opportunity together with knowledge of a recent technological advance that presents a solution. This often depends on a good understanding of the ‘state of the art’ and an ability to mobilise resources and materials processes and/or techniques from a wide variety of sources. 

These businesses often use imported materials or components and benefit from improved trade access, lower trade barriers and declining international transportation costs. It has been estimated that around 92% of innovative technologies and a similar proportion of the apparatus and equipment used in Australia are sourced from overseas.

IP dependent business is a volatile sector where most new manufacturing jobs are generated but where company formation and failure (churn) is also high.

It is paramount that innovative businesses ‘stay ahead of the game’; have ready access to world knowledge and skills; and are able to freely or competitively acquire knowledge, techniques and equipment.

This is the group upon which most (past and present) government industry assistance and information programs are focused.

  

No comments

Travel

Russia

 

 

In June 2013 we visited Russia.  Before that we had a couple of weeks in the UK while our frequent travel companions Craig and Sonia, together with Sonia's two Russian speaking cousins and their partners and two other couples, travelled from Beijing by the trans-Siberian railway.  We all met up in Moscow and a day later joined our cruise ship.  The tour provided another three guided days in Moscow before setting off for a cruise along the Volga-Baltic Waterway to St Petersburg; through some 19 locks and across some very impressive lakes.

Read more: Russia

Fiction, Recollections & News

The Coronation

Last Time

 

 

When George VI died unexpectedly in February 1952, I was just 6 years old, so the impact of his death on me, despite my parents' laments for a good wartime leader and their sitting up to listen to his funeral on the radio, was not great.

At Thornleigh Primary School school assemblies I was aware that there was a change because the National Anthem changed and we now sang God Save The Queen.

Usually, we would just sing the first verse, accompanied by older children playing recorders, but on special occasions we would sing the third verse too. Yet for some mysterious reason, never the second.

The Coronation was a big deal in Australia, as well as in Britain and the other Dominions (Canada, South Africa and New Zealand) and there was a lot of 'bling': china; tea towels; spoons; and so on. The media went mad.

Read more: The Coronation

Opinions and Philosophy

Frederick Sanger - a life well spent

 

I have reached a point in my life when the death of a valued colleague seems to be a monthly occurrence.  I remember my parents saying the same thing. 

We go thought phases.  First it is the arrival of adulthood when all one's friends are reaching 21 or 18, as the case may be.  Then they are all getting married.  Then the babies arrive.  Then it is our children's turn and we see them entering the same cycle.  And now the Grim Reaper appears regularly. 

As I have repeatedly affirmed elsewhere on this website, each of us has a profound impact on the future.  Often without our awareness or deliberate choice, we are by commission or omission, continuously taking actions that change our life's path and therefore the lives of others.  Thus our every decision has an impact on the very existence of those yet to be born. 

Read more: Frederick Sanger - a life well spent

Terms of Use

Terms of Use                                                                    Copyright