A lonely voice on manufacturing

Money talks and so there’s nothing like a billionaire or, at least, CEO of a multi-billion dollar firm lending support to your ideas. On that note I can only applaud the lonely voice of Andre Liveris at the Australian American Leadership Dialogue:

One of Australia’s most senior expatriate executives has been lobbying political and business leaders to win support for an advanced manufacturing taskforce, attempting to spur investment worth billions of dollars and help ensure an economic future beyond commodity exports.

Dow Chemical chief executive Andrew Liveris told The Australian on the sidelines of the Australian American Leadership Dialogue in Perth at the weekend he had been heartened by the support for the idea in recent days and was willing to lend a hand in establishing the taskforce.

With Dow preparing to invest $20 billion in a chemicals plant in Saudi Arabia and a further $4bn in shale gas in the US, Mr Liveris said the multinational was on the hunt for gas-processing opportunities in Australia.

“We would love to find a way to get a project in Australia, and that’s one I continually raise when I am here,” he said.

The Darwin-born, Michigan-based Mr Liveris is co-chairman of US President Barack Obama’s committee on manufacturing and is a passionate advocate of redefining manufacturing to be hi-tech and modern.

Mr Liveris attended the annual dialogue in Perth and sat alongside Prime Minister Julia Gillard, World Bank president Robert Zoellick, US ambassador to Australia Jeff Bleich and other dignitaries during the conference’s gala dinner at Perth’s Burswood complex on Saturday night.

The event’s founder, Australian businessman Phil Scanlan, told the dinner that the gathering included the most significant delegation of US leaders to visit Perth during peacetime.

Perth was an excellent venue for the three days of high-powered talks, he said, because US companies were increasingly active in the city, which had emerged as the “southern anchor of the engine room of the world economy”.

Many of the American business chiefs took the opportunity during their visit to tour some of the multibillion-dollar mining and energy operations in the north of Western Australia.

Ms Gillard used her speech on Saturday night to recommit Australia to the alliance with the US and to express faith in the ability of the US to “get its economic house in order”.

Speaking before the dinner, Mr Liveris said Dow wanted to establish downstream projects in Australia using the abundant natural gas reserves, but the country lacked policies to develop a large petrochemical sector.

“The Australian economy, especially in the southeast in NSW and Victoria, has always been an intellect-based economy and we have a great education system,” he said.

“We have great entrepreneurs and innovators. What we have lacked is the domestic sector to scale it up.

“I think it would make great sense for Australia to adopt an advanced manufacturing agenda to value-add its resources.

“The boom-bust cycle of commodities is not the only thing we should rely on.”

This is nice but Mr Liveris’ fly in, fly out advice is unlikely to change the inertia of Australian policy-making and their obsession with Quarry Australia. For instance, to resuscitate manufacturing during growth cycles without generating an inflation spike, the froth of the commodity cycle will need to be whipped off through a resource rent tax.

To get to that point, policy will need to be confronting a burning platform, a manufacturing crisis, as it were. That’s why the Australian Industry Group’s gentlewomanly approach to defending its members is signing their death warrants.

Without a palpable sense of crisis, Australian policy will simply go the path of least resistance.

I continue to offer free advice on how to generate said crisis.

 

Houses and Holes
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Comments

  1. +1

    There is no interest in manufacturing, engineering, and science, other than a few examples, and it will be to our detriment eventually. Likewise with education, and if you attend an Australian University graduation ceremony as I did on the weekend, the vast majority of students are Asian, but where are the local Australians?

    Where is the vision?

    • The vision is on the big screen LCD.

      You know, the one built with foreign manufacturing, engineering and science.

    • Even Gittins banged on about that today. The very institutions that educate the people with the necessary knowledge to expand productivity have been run into the ground. You don’t need to be educated to dig rocks! Quarry Australia for ever!

      • “…educate the people with the necessary knowledge to expand productivity…”

        Well for starters I would question the premise that what you describe above actually occurs.

        Secondly, a major resource project from a glint in a company’s eye through to production requires substantial technical expertise provided by a wide spectrum of professions – all (generally) tertiary educated. In addition to this high level technical expertise are the skilled tradesmen required to install and operate facilities. Finally, there are the unskilled jobs, particularly in during construction.

        Don’t fall for the myth of no skills – you’re dead wrong on that one. Resources – something for everyone.

    • Nowadays, Australians have been priced out of tertiary education. We have returned to the situation where only the privileged can afford education and health care!

      • WTF?

        priced out of tertiary education?

        A full time tertiary curriculum is around $2,600 per semester. Halve that and its around $1,300.

        It it rather easy to work 35 hours a week and do 0.5 curriculum. If you have your work related to your field of study, then virtually all of your expenses bar the first $250 become tax deductable.

        I may be wrong, but I believe if you pay the tuition in advance and it’s related to your field of work it is also tax deductible. I’m pretty sure this is the case as I don’t think you can access the HELP scheme with post-grad studies.

  2. Manufacturing has been on the decline for decades and little care at all has been directed to that end. You know the view – it services where we’re heading! A myth but not well understood yet.

    The roll out of free market globalisation has in no way helped Australian manufacturing, particularly as it has not garnered niche markets (eg electronics, chips, processors etc). And time and time again a plant closes because it is cheaper hence more profitable to produce offshore.

    This is not the time to demonise mining with petty sloganeering and cheap points. It is time for a genuine ideological appraisal of where we want this country to be in the decades to come, mining utilising manufacturing here in Australia may be a start!

    In any case, the best candidates to fight the good fight for manufacturing are indeed the miners, resources companies and the Minerals Council – at least they haven’t forgotten how to get a job done.

    • Coincidental that you posted your advice piece at the same time as Diggers and Dealers was taking place….

    • “In any case, the best candidates to fight the good fight for manufacturing are indeed the miners, resources companies and the Minerals Council – at least they haven’t forgotten how to get a job done.”
      .
      In other words, entrust the future of our country to the likes of Twiggy and Gina.
      .
      Like hell I will.

      • You miss the point Mav – partially said tongue in cheek but you’ve got to hand it to them – they know have to run a campaign.

        Ridout is too busy trying to be some sort of doyenne of Australian business, she’d probably like a royal honour bestowed. Truth is, to save manufacturing, from small workshops through to heavy industrial plants (what is left) is vital to the future diversity of the Australian economy. I have long argued this.

        No-one has cared for years about the decline. No-one. Now that is happens that our resources sector is flourishing at the very time our credit binge has ended it has become the convenient fallguy for superficial arguments to be made that is is ‘destroying’ the rest of the economy.

        It is not. Once the credit plug was pulled we were on a downer regardless. We are fortunate we have resources – many other countries would love to be in our position right now.

        Australia should mature a little and let go of the puerile ‘mining is evil’ meme. Why do we want to destroy our natural comparative advantage – the natural resources. We don’t have any other point of global advantage at all. Rejoice!

        • “partially said tongue in cheek but you’ve got to hand it to them – they know have to run a campaign.”
          .
          Who did they campaign against? A democratically elected government that was planning to implement a resources rent tax.
          .
          I am not saying mining is evil. I am saying just they are a clear and present danger to democracy.

          • All corporations exert influence over government. Nothing new there. Major corporations are often the preferred (and very lucrative) resting patch for politicians, of all persuasions.

            The RSPT was a shabby hastily drafted proposal and deserved to fail. As did its instigators.

            Any corporation operating under all the corporate and legal framework of a country would be well within their rights to lobby against undue and unfair opportunistic imposts – changing the rules after the game has started.

            In any case, the current government appear well pleased with their latest incarnation of a mining tax – doing their bit for business, imposing taxes, resources, carbon etc on companies that take calculated risks in operating their businesses and employ thousands.

            That’s what you get when you have a government primarily composed of ex-union officials and bureaucratic advisors who have never run a profitable operation in their life.

          • “Any corporation operating under all the corporate and legal framework of a country would be well within their rights to lobby against undue and unfair opportunistic imposts – changing the rules after the game has started.”
            .
            “I think the mining industry is very important and we’ve got to broadly support the mining industry, but mining shouldn’t be allowed to destroy prime agricultural land and mining companies should always respect the rights of farmers.” – Tony Abbott yesterday.
            .
            Will the miners campaign against Abbott now? 🙂
            .
            Fun times ahead – I think, this time, the miners have swallowed more than they can chew.

          • Not the miners – heard Ferguson (I think) on the weekend on Abbott’s comments – reassuring the miners Santos et al that there would be no issues of sovereign risk here(!) and that their business was welcome.

            Curious and curiouser.

    • This is not the time to demonise mining with petty sloganeering and cheap points

      Yes it is!

      If the big miners can go around demonising the mining tax with petty sloganeering, then why can’t we give the mining sector some of ist own medicine?

      Its time for non-mining Australia to push back against these greedy bastards and take back our country. Its starting to happen in the bush with the Lock the Gate Alliance and coal seam gas. Abbott pledged support for the farmers this week until he back-flipped today. The Greens (God bless ’em) are fully supportive of the farmers keeping the greedy bastards (sorry mining companies) off their land.

      Everyone should watch this. Everyone.

      • Lorax,

        Mining is more than a little exploration on farming land – God knows State Governments want it for royalties – even Ferguson on the weekend was assuring “we welcome the miners – no sovereign risk probs with our government” (to paraphrase).

        Resource extraction undertaken at best practice is a responsible, needed adjunct to any economy.

        Critics of mining – sit back, look around you and draw the logical conclusion, there is no modern life as we know it without mining (in its many guises) – it appears fashionable at present to decry the resources sector but those that are honest will concede, we need mining.

        And as for anything by that under-grad outfit The Hungry Beast…meh.

        Better than that, please.

        • Resource extraction undertaken at best practice is a responsible, needed adjunct to any economy.

          ad·junct/ˈajəNGkt/
          Noun: A thing added to something else as a supplementary rather than an essential part.

          Not in Australia. In Australia mining is the economy.

          I don’t object to mining co-existing with the rest of the economy. Its mining’s complete dominance at the expense of all other sectors that I object to.

          • Lorax,

            You are often quoted as saying that mining is only 5% of the economy and can’t therefore support the rest. Now you say it’s mining dominating everyone.

            It is in the tradable goods space that mining is dominant and, currently, business investment too.

            We are Very fortunate to have it in a time when we otherwise would have been forced to correct our external funding dependency without rising incomes.

            The world would have stopped lending to our banks years ago if we did not have the mining boom.

          • You misquote me! Its Mav (or someone else) who always bangs on about mining only being 5% of the economy. The point I make repeatedly, is mining only employs 5% of the workforce and will never employ much more.

            Mining could support the rest but doesn’t, by using its political influence to kill off the RSPT.

            I often say we are destined to become a welfare state supported by mining, but we haven’t even managed that. We’ve allowed the greedy bastards to get away with not paying their fair share.

            Meanwhile, mining’s dominance is exerted through the currency. It kills off the ability of other sectors to compete in the international marketplace. That’s what I really object to. I don’t begrudge the miners success. What I begrudge is the hardship the mining boom imposes on others.

            As for rising incomes: Yes the mining companies incomes are rising, and so are the governments tax receipts (but not nearly enough) but its becoming increasingly apparent that the majority of Australians are not experiencing rising incomes.

            The world hasn’t stopped lending to New Zealand! I doubt the world would have stopped lending to us if all we had was wheat and wool to sell. Sure, we’d still be a “commodity currency” but not the supercharged commodity currency that’s fueling China’s manic building boom.

            I believe the effects of Dutch Disease will, in the long term, prove to be more economically damaging than the short-term benefits of the mining boom. We’ll just have to agree to disagree on that point.

    • The market niche in manufacturilng is to emphasise quality not quantity. We can’t compete with large volume production because our labour costs are high but so is our standard of living (though it has been fallin). So the answer is to do what Germany did and create a highly trainied workforce, particularly in manufacturing and design, and also encouarge high quality production by sophisitaced means. For example, the USA Food and Drug Administraion provides a major stumbling block to importing goods to the USA. We could do the same – by insisting only on quality imports. The downside is that other countries could retaliate by seeking resources elsewhere.

  3. “We would love to find a way to get a project in Australia, and that’s one I continually raise when I am here,” he said.
    .
    Well, what is stopping him? is it environmental regulations and unlimited liability?

    • I really don’t mind the first 2 – tax break and free land.
      .
      But given the background of these multinationals, I think they are looking for limited liability in case of an environmental catastrophe (Bhopal gas leak/Deepwater Horizon anyone?)

  4. I live in Wollongong , home of Bluescope, and they are suffering big time. We had the head of South Coast Labour Council come and speak to us. He is a very intelligent man. He believes heavy manufacturing is a vital strategic asset which I agree with with. What i didnt agree with was the fact that he was championing the ETS, ie the imposition of an (eventual) market for carbon, but then also championing governement protection to make them competitive. Cant really have it both ways. The other point was that currently Wollongong Uni has about 150 R& D projects underway many of them environmental. These are all funded by by overseas interests, predominatly Chinese. We will then be importing and competiting and paying for this intellectual knowledge

    • The environmental industry is simply an industry like any other, currently flavour of the month and to believe it is not interested in a turning a profit would be naive.

      After all profit is effectively what any ETS is all about and yes, the technologies will be purchased by the highest bidder and sold on at profit to the rest of us. This is a sector that must not be treated with kid gloves simply because of the latte-sipping feelgood factor – is is a business.

      I have found Brendan O’Neill quite refreshing in discussing the environmental machine.

      • I have found Brendan O’Neill quite refreshing in discussing the environmental machine

        Funny, I have found Brendan O’Neill quite vomit-inducing.

        • It appears from you may suffer from some malaise – visit a pharmacy, they can provide assistance.

    • Australia has a competitive advantage inside its tertiary institutions – the intellect, creativity and imagination of its people. We really have to see them as the Pilbara of the future and create new industries based on our talent.

      The world needs good ideas, better technologies, new products – advanced thinking as well as practical innovations. We should aim higher than we do now.

  5. I have been advocating something similar for a while. It seems so totally obvious that this is what Australia should be doing. We have to integrate our scientific, engineering and technical knowledge with businesses to create and commercialize new technologies and new businesses.

    There are issues of scale, sector, focus and tax, finance and management to consider, but this should be done.

    When I listen to the leaders of US business, i am always reminded of an old axiom – never bet against American business, no matter how dire things look. They have vision, will and ambition. There should be a lot more of it in Australia.

    • I agree that we need to integrate as you mention – but honestly despair our lack of vision. Was this not the government that recently reduced funding to various scientific programmes and the ensures CSIRO has to go cap in hand for funds?

      • The political structure in Australia is so bereft of ideas, vision, ambition-for-the-country, willpower, capacity…call it what you will.

        This applies to both sides, amongst whom I can hardly find more than two individuals I would willingly trust with anything important.

        We have failed ourselves dismally.

  6. > The Darwin-born, Michigan-based Mr Liveris is co-chairman of US President Barack Obama’s committee on manufacturing and is a passionate advocate of redefining manufacturing to be hi-tech and modern.

    Hi-tech and modern industry in Australia? Tell him he’s dreaming. But wait, we can still do something high-tech. We can build smart houses.

    • Are you sure we can build it.

      I was under the impression they’d be Japanese designed and built modular houses.

  7. “Ms Gillard used her speech on Saturday night to recommit Australia to the alliance with the US and to express faith in the ability of the US to ‘get its economic house in order’.”

    Pot calling kettle black… How parochial! This is why leadership in this country will NEVER get it – ie., because they’re simply oblivious to the irony.

    • But Swanny’s on Bloomberg telling the world we are OK – something about the tyranny of distance having been overcome in this globalised world – and then “being in the right part of the world at the right time”.

      Thank goodness! No leadership required – all luck!

  8. To be a large manufacturing business you first have to be a small one. Looking at the comments from an Austalian Small Business Summit, I wouldn’t want to start one here. For example: Fair Work Austrlalia found that employers followed their Unfair Dismissal process correctly in only 2 out of 1876 cases. Lesson? Too bad if you want to fire someone. Add that sort of stuff to union power (penalty rates for all) and a government that literally swamps business with papeerwork and impossible H & S regulations and you can see straight away why manufacturing cannot compete with any other major country. We’re only able to compete with Iron Ore & Coal because our super-abundance allows us to compete despite the on-costs. In any other arena we can only fail. In the end it’s about either accepting the necessity of Work Choices or continuing to live in cloud cuckoo land.

    • Are you telling us that there was a burst of creativity and energy among the Aussie small businesses during the Howard/Work Choices years? And 11 years wasn’t enough for these small businesses to grow into big businesses?
      .
      If so, where is the data/evidence?

      • The answer to your question is that there were plenty of other factors influencing whether a business grew or not, however, being unable to terminate unsuitable people in your business could never be said to help. Also, the bureaucracy surrounding small business is constantly growing – just wait for the Carbon Cop (or is that Carbon Cowboy)to kick the door open..

  9. Mounting campaigns is all very well but look at the macro picture. We are a manufacturer of what we can call “white stuff” and we get an inquiry from China and the duty into China is 23%. If they manufacture “white stuff” in China the duty into Australia is 5% or 0%. We have been dumped against by a US manufacturer (of German origin) at half the price in their home country. By the way the Germans obtained the idea and composition of the product by procuring a sample from a European distributor to whom we gave product in the hope of developing a market in Europe. We are small and they are big. Compounding the situation we have an Australian dollar 40% overvalued on a PPP basis and the renmimbi yuan undervalued by a reputed 40% in world terms. We need Ross Garnaut the archetypal free trader and his ANU cohort to explain how this works. Liveris is whistling Dixie!!

  10. Further do we have to be subjected to the likes of Alan Mithcell in the Financial Review and Chis Berg in the Age barracking for dumping (an illegal trade act) on their view “to keep the manufacturers’ honest with a blowtorch to the belly”

  11. Under the new world order, you know, the one where there is one central government, a central dollar and central bank?

    That same order that sees Africa and Australia as one big mining pit?

    You don’t see that?

  12. Dumping is a huge problem not officially recognised or acknowledged by government. A prime recent example is Kimberly-Clark downsizing in South Australia because of dumped tissues and toilet paper making big inroads in their market share. Dumped products have been appearing in Woolies supermarkets across Australia at a huge discount to local products. Woolies love making big money on imported products but don’t like explaining why they are so much cheaper than local products; its been killing what’s left of manufacturing in SE South Australia but nobody outside that area gives a damn… Real shame because once KCA are gone then there will be no local manufacturing of simple products like toilet paper and tissues.

    • China has offered to dump some cheap labour too.
      .
      http://www.theaustralian.com.au/business/chinese-steel-mills-to-get-the-go-ahead-to-build-in-australia/story-e6frg8zx-1225930269439
      .
      “China has advocated that it be allowed to bring in short-term workers to build mills and other infrastructure in Australia, such as rail lines, pipeline and ports.”
      .
      “China has offered to help Australia fix its infrastructure bottlenecks but wants to bring in cheap labour on a project-by-project basis.”
      .
      I would welcome some steel plants built here, but with Chinese labour??

      • > “China has advocated that it be allowed to bring in short-term workers to build mills and other infrastructure in Australia, such as rail lines, pipeline and ports.”

        Then the workers who build the railways can stay permanently to replace the locals killed in railway accidents.