Ridout must resign

I’ve spent some time pointing out the flaws in the Australian Industry Group (AIG) approach to defending its manufacturing membership against the annihilation that Canberra’s economic boffins have planned for it. To me it is plainly obvious that to save manufacturing, the AIG must go way beyond its efforts to date. Those efforts have largely consisted of reasoned debate, spearheaded by the always rational and impressive Heather Ridout asking for small favours in nipping this tax or tucking that regulation.

This approach is entirely admirable and, in a sane world, a world where reason swayed policy, would no doubt be highly effective.

But that is not the world we inhabit. The world we inhabit is insane. It is driven by wildcat financial markets that blow historic asset market bubbles with the ease of a child in the park. Commodities are only the latest. We inhabit a world where the power that accrues to the winners of these bubbles enables them  to further their own ends. We inhabit a world where policy is the servant of these vested powers, not the umpire or even the setter of the rules of the game.

In such a world, as the AIG has illustrated all of this year, the reasoned approach to influencing policy is totally ineffectual.

I believe in a sane world and an objective policy approach. But I believe more in the preservation of a manufacturing base for Australia. Heather Ridout does not and so she must resign.

I do not make this call lightly. I have never made such a call before. And I do not blame Heather Ridout at all for this failure. She is simply the wrong person in the wrong place at the wrong time.

The AIG has just missed an extraordinary opportunity. The Tax Summit has passed and as predicted was a complete flop. Yet, it was a tailor made platform to hijack in the cause of shifting the tax system in favour of Australia’s tradable goods sectors.

Months ago, the AIG should have allied itself with a tourism and education. It should have commissioned a series of economic reports from Australia’s economic ‘guns for hire’ outlining the dire consequences of mining’s domination of Australian exports. It should have drafted senior business figures and the unions into a coordinated assault upon on mining vested interests and the government. It should have engineered a total moral panic about a nation destroying “manufacturing crisis”.

The Tax Summit could have been stolen and turned into the “last chance to save manufacturing summit”. It could have been a moment where the government was forced to confront a national emergency with the obvious corollary that inaction would cost it votes. That is how to change policy in our insane world.

None of this happened because the AIG stuck to its losing script. Witness this debate from ABC’s 7.30 (h/t Mav) in which Ridout spends all of her time attacking Paul Howes, her natural ally in the struggle for a mining tax and associated relief for manufacturing. You have to ask yourself, why is Ridout prioritising a tired class conflict over the mining tax reform she championed as a member of the failed Henry Review?

But, you don’t need to believe or agree with me. The AIG’s own research damns its boss. Here is last month’s PMI:

That’s a ceaseless twelve month recession and accelerating. Time for new blood and a new direction in the manufacturing lobby.

Houses and Holes
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Comments

  1. ‘Bashing the Union’ is the official Coalition policy, and Rideout is positioning herself for a safe LNP seat at the next election.

  2. Why do Australians have to preceded virtually every comment they make with the word “Look,…..” as so well illustrated in that video!

  3. H&H you can have the best person for the AIG. And it won’t make a lick off difference until we attack the root cause of the destruction and that is an economy totally devoted to asset speculation. How much of our nations savings have been gambled on rising real estate and stock market in the past generation I wonder. Capital that could have been put to more productive use.
    The nab head of business banking has spoken out on this apra’s regulations fuel this bubble and starve real business of capital.
    Hopefully when the banking system comes smashing down this year these things will change.

  4. “Yet, it was a tailor made platform to hijack in the cause of shifting the tax system in favour of Australia’s tradable goods sectors.”

    Indeed, I wrote Prosper Australia’s submission with precisely that aim. As far as I know, it was ignored.

    • When the Dust settles from the banking meltdown your submission will be dusted off out of necessity. As will the original Henry tax review advocating a shift in taxes off labour and production and onto land and mining rents. The pain will almost be worth it.

    • The wealthiest already pay for most taxes.

      The top 20% pay 70% of taxes.

      What more do you want ?

      Heres an idea.. get rid of taxes and let people live their lives.

      • that would be the lives we would be living defending our vege plot from marauders or foreign invaders, travelling on foot or by horseback, working 24/7 just to survive, and then dying young due to lack of cheap healthcare? Yeah, good plan…

      • how much do the top 20% earn?

        The tax system is intended to be proportional, so if the top 20% earn 70% of the income, then why shouldn’t they pay 70%?

        Comparing different bases in percentages (capita vs. dollars) is a easy statistical trick but it requires context.

    • Jono, whilst that is true, you need to examine which part of the 20% is paying the most….its not the top 1-2%, its the high income earners, the small business people who get slogged.

      Those who make money on capital gain, speculation, etc are more favourably taxed and can more easily afford a battalion of tax accountants and/or brigades of lobbyists to push policy around.

  5. That Paul Howes is one stubborn unionist. Instead of dealing with the argument for lower tax, he says “Look – Ireland !! Ireland !”

    What the hell does Ireland’s housing boom and bust have to do with the cutting corporate tax rate over here ?

    • Instead of dealing with the argument for lower tax, he says “Look – Ireland !! Ireland !”
      .
      Are we looking at different YouTube feeds? Paul Howes categorically stated that he supports lower corporate tax rates for non-mining/non-finance industries.

        • That’s your opinion because you don’t run a business. The Boost Juice chick is obviously not a professional journalist or media presenter and her message wasn’t put in the best language. Yet she was spot on in many ways.
          Business is way overburdened with regulations all of which are supervised by a plethora of public servants who have now become the holy of holys.
          I had a brush recently with NSW Payroll. It was a problem that could have been fixed up in about 20 minutes and involved the payment of about $400 unexpected payroll tax. I explained this to the person doing the standover bit. Nope! He didn’t care what the costs were to either our business or the government.So my costs were some somewhere in the vicinity of $3000.00 plus no doubt in their efforts the NSW State Revenue will spend perhaps $10 to $20,000 when all their real costs are taken into account.
          This is stupidity in the extreme but typical of current attitudes by the public service towards business in this country. To give credit where credit is due here funnily enough I find the ATO the most sensible dept I deal with!!!
          We pay tax after we make a profit. You just can’t keep stacking up input costs ad infinitum. Howes and Ridout both missed this point entirely.

          • Flawse, you seem to ignore the fact that the discussion was about TAXES ..not labour or any other costs …TAXES.
            .
            Boost juice lady went on a fishing expedition – she may have made valid points about labor regulations — but that was entirely off-topic.
            .
            Maybe it was an auto reflexive reaction from her, on seeing a union leader on the panel, even when said union leader agreed with her that her business deserves a tax cut.

          • Not just business Flawse
            I had to get a QLD driving license a while back. I went in to the centre in Brisbane with a UK passport, an Aus passort, A UK driving license and (wait for it) a South Aus driving license as ID.
            One of the drones spotted that one of my 3 middle names (not including first name or family name) had been omitted from my Aus passport. She stated “you have an alias!”. I spent 3.5 hours in there while they phoned Canberra, put on & took off the QLD number plate etc etc. when it was all over I asked her what her name was – “We don’t have to tell you”

            Dolts

  6. PMI’s around the globe are in decline. We are not immune from the consequences of the model we operate in (free-trade, floating currency, neo liberal globalisation).

    We have progressively shifted production offshore in a range of sectors for years, chasing the cheapest cost of production – simultaneous with most other developed economies.

    Just what ‘industry’ those in other countries ‘blame’ for this phenomenon I have no clue. Not many are as fortunate as we are to have any sectors experiencing rapid growth at present.

    Your view is extreme and you ‘fix’ misguided, however the retention of manufacturing capability is something (as you know) I agree with – the difference being I see the root of manufacturing decline in no way connected with the resources boom, after all the decline started decades ago (under the watch of educationalists, governments, businesses and the unions – a collaborative effort) but as a natural outcome of the globalised model we operate under.

    Dalia Marin (Prof International Economics Munich) has presented good papers clearly demonstrating this transfer of production (and associated processes) across a range of countries – we are not unique.

    You say

    ‘It should have commissioned a series of economic reports from Australia’s economic ‘guns for hire’ outlining the dire consequences of mining’s domination of Australian exports. It should have drafted senior business figures and the unions into a coordinated assault upon on mining vested interests and the government. It should have engineered a total moral panic about a nation destroying “manufacturing crisis”.’

    This is totally wrong. What exactly is the problem with the current domination of exports by resources, there will always be one sector or other in that position. An argument such as you suggest from AIG provides excellent fodder for counterattack, an attack which would be based on historical fact clearly demonstrating the gradual offshoring of Australian manufacturing over years, naming companies, politicians, and unions that facilitated such moves. It provides opportunity for gritty ad campaigns focussing on economic and social unrest in Europe and the US, contrasting this to the relative ‘sweet spot’ we are in in Australia – asking the question “Where would you rather be”, infomercials explaining clearly the effect on borrowing costs for Australians if the cap inflows from mining ceased, explaining how our love of property and preparedness to incur massive debts to foreign creditors is the real elephant in the room. Reminding Australians that much growing discomfort they feel can be explained by rising global uncertainties, constantly increasing utility costs, ‘unknowns’ re the carbon tax, even a subtle poke at leadership (or not) of the country. Heads will be nodding in agreement and recognition…

    It is not a question of setting one sector against another – that cheapens the debate, gives rise to extreme positions and creates unnecessary conflict. Which in a way is where Howes and Ridout find themselves – because no situation is as black and white as you pretend.

    Dire consequences? Only if the boom ends.

    • Jeez, mining bot, that’s a gobfull even for you:

      a) Australian PMI is the worst in the world that I’ve seen by some margin
      b) Former declines add nothing to the debate about current declines
      c) Cut the rhetorical shit about blaming mining, this is a serious national problem of losing our manufacturing base
      d) My view is realistic about the political economy we are in but you bet I’m angry about the fate of manufacturing
      e) there is no doubt whatsoever that a big mining tax that funded offsets for other tradable goods industries would help. The only debate is about how best to deploy the funds
      e) all booms end

      Please don’t respond.I’ve had enough of your mining centric view already.

      • c) Cut the rhetorical shit about blaming mining, this is a serious national problem of losing our manufacturing base.

        The rhetoric is all yours! Your focus remains anti-mining centric, I am only pointing out that it is a mistake to concentrate on one point only. Serious national debate on the future of manufacturing in this country must not be allowed to derail into a them (resources) v. us (manufacturers) debate – it is not that at all and it is so much more important.

        • The issue here is the strength of the currency has eroded our competitiveness in all sectors except mining.

          Fanboy’s assertion that manufacturing (and other trade exposed sectors) were uncompetitive prior to the rise in the currency is plainly false. Manufacturing, tourism, education and other non-mining exporters were doing just fine in the late 90s and early 2000s when the dollar was trading in the 60s.

          This is an issue of grave importance for all Australians. What do we do about it? Do we allow the mining sector to continue as is, relatively lightly taxed, and stupendously profitable? Or do we tax the mining sector more heavily and redistribute the wealth?

          The fact is the mining boom is producing a massive surge in national income, but it is very narrowly focused, and it comes at the expense of everything else. Everything.

        • +1. Uncalled for. I am in no way related to mining/resources and I agree with Mining Bot. In fact, I believe his gobfull above was a direct copy of a post he made over a month ago in a similar segment.
          .
          (Perhaps when he went offline to get his software upgrade he got a new program to help him search out old posts and re-use them – more efficient that way).

        • +1

          The rise of mining isnt the cause of our decline in manufacturing. That has been going on for decades, and will continue until we (and other Western nations) take action to redress the imbalances between developed economies and countries like China that have used subsidies, currency manipulation and other means to effectively capture our manufacturing base.

          The issues you speak of, H&H, are smaller bickies. Plus you keep harping on about a mining tax that wont do anything for us long term and just hurts the one sector of our economy that is actually doing OK (but wont be in a few years time). Why should we cut off the economy’s nose to spite its face? Its ridiculous policy.

          The fanboy is correct here, and you shouldnt expect cheerleadering.

          • How come Germany competes successfully with China? How about Japan? Neither of these are low-cost locations.

            The reasoning behind HnH’s view on the manufacturing sector is that once you lose a certain critical mass of supply chain and expertise, you will struggle to ever get it back. Manufacturers here are slowly slipping to assembly shops – getting parts manufactured overseas, fitting tab A to slot B and selling the product as “made in Australia”. We lose collectively because we don’t add value to the raw material – a position which will be distinctly uncomfortable when/if demand for the raw materials slows.

          • Pete,

            The strength of the currency is not just killing manufacturing. Its killing every trade exposed sector — education, tourism, services exporters — they’re all in the doldrums.

            The question is: What do we do about it?

            Do we allow the mining sector to continue as is, relatively lightly taxed, and stupendously profitable? Or do we tax the mining sector more heavily and redistribute the wealth?

            A super-profits tax only hits the miners when they are doing exceptionally well. If commodity prices fall and they become less profitable they will get considerable tax relief. What’s not to like?

          • Both Germany and Japan have targetted specialised production in niche markets. My understanding is that Germany has benefited from an artificially low currency via the Euro and has effectively traded employment and suppressed wages growth for continued growth in exports.

          • Karan,

            Japan really doesn’t compete anymore. Japanese corporations have been moving their manufacturing offshore for decades.

            Germany has a 60 year head start on Australia developing a high-end manufacturing sector, and benefits from the Euro being much weaker than the Deutsche Mark would be.

            Again, don’t be fooled by Fanboy’s propaganda. The decline in Australian manufacturing halted during the late 1990s and early 2000s when the Aussie dollar was in the 60s. The decline has accelerated dramatically in recent years with the strengthening currency.

          • Lorax, as sweet and simple as that sounds, it does not fix the core problem.

            I doubt the problem can be fixed.

            If the mining boom is to last forever, we need to tax the miners more heavily to support the massive welfare state we will require, because mining will never employ more than a few hundred thousand people.

            If the mining boom is transient, we need to tax the miners more heavily to support non-mining sectors through this difficult people, so they can recover quickly when the boom ends.

            Either way, the mining sector must be more heavily taxed. The only way you could come to another conclusion is if you were a beneficiary of the boom and really didn’t give a damn about the rest of the country.

            Lets see your algorithm chew on that logic.

          • Lorax,

            My father is in the manufacturing industry, and the decline has been going since the late 90s. There wasn’t a halt as such as a slowing of the decline, but manufacturing that relied on imported parts at the time of the AUD in the 60c zone suffered badly; the subsequent rise of the dollar was too late to offset the sections of the sector off-shored during that time – e.g., in 2001, during the period where the AUD hit 45c, my father was involved in moving a significant chunk of manufacturing in the company he worked for to Thailand.

            I believe during the Hawke-Keating government there was a significant tax break for R&D conducted in Australia, and the reduction of this break in Howard’s term led to a reduction in R&D activity here – I can’t cite the exact act/section of tax law, but apparently that killed forward-looking manufacturing for many companies and contributed to the decline we’re in today.

          • Lorax, you say

            “Either way, the mining sector must be more heavily taxed”

            I assume you mean more heavily taxed than that proposed in MRRT legislation? MRRT, a tax applicable to no other sector, regardless of whether or not the sector falls in to spuriously defined ‘super’ or ‘windfall’ profits categories. An inequitable tax from the outset.

            I just remind you that each of the Big 4 banks will make several billions dollars more profit than all miners, apart from BHP and Rio. Each of the Big 4 banks have done so for years. There have been no calls on the financial sector to ‘carry’ the rest of the economy, to cushion it from perceived hardships or appropriate additional profits solely for the purposes of redistribution of wealth.

            This country successfully manages to redistribute wealth at an increasing rate and that said redistribution is often poorly targetted and often not well justified. I am not in favour of accelerating growth in the welfare state at the expense of crucifying tax levels on businesses.

          • Karan: Either way, manufacturing is declining much faster today than it was in the early 2000s. Other trade exposed sectors (e.g. services exports) that were booming in the early 2000s are now also shrinking.

            Again, the mining boom comes at the expense of everything else. Everything.

            3d1k: if ($logic_trap == true) then change_subject_to($banking);

          • Lorax

            ‘Karan: Either way, manufacturing is declining much faster today than it was in the early 2000s’ – that’s quite funny, Ridout uses the same technique, the ‘whatever’ technique with Howse. Conceding the point but not directly open enough to say so.

            Banking profits are not a diversion, profits are profits, in whatever sector they are accrued. The demand for additional taxation to further increase the welfare state may be your preference, not mine.

          • Lorax, I’m not disagreeing with you, I’m emphasizing the point that manufacturing has been in long term structural decline for longer that the mining boom so many are focused on.

            Aside from that, I have to admit I’d favor a banking levy too, if only to put a price on the implicit guarantee and to put a price on moral hazard.

          • The demand for additional taxation to further increase the welfare state may be your preference, not mine.

            Its no longer a choice.

            The industries that previously generated most of our national income also generated a lot of jobs. Mining doesn’t create many jobs, indeed, it destroys jobs in other sectors via the exchange rate.

            So what do you do with a hollowed out economy where the one strong sector only supports a few hundred thousand jobs? Do we let everyone else starve, or do we support them on welfare?

            Did yourself out of that one.

          • Lorax

            To date there has been only a very moderate increase in unemployment, which remains nowhere nearly historical averages. This may or may not significantly change into the future.

            ‘Done myself out of nothing’ – there has not been a dramatic increase in welfare demand due to the mining boom!

          • Ahhh … so now you’re going the full Adam Carr and denying reality.

            if ($logic_trap == true) then try($Adam_Carr_playbook);

            I believe it was only a few days ago you were telling me Australia was already a quarry for Asia. I agree. If the China boom continues for another decade, and commodity prices remain elevated, its inevitable.

            But given that scenario, you still haven’t explained how the millions currently employed in manufacturing, tourism, retail and education will find work in Quarry Australia.

            I believe its impossible. If labour-intensive industries are supplanted by capital-intensive industries you have a serious social problem. A problem you clearly have no answer to apart from “its not happening”.

          • MRRT, a tax applicable to no other sector,

            An inequitable tax from the outset.

            There have been no calls on the financial sector to ‘carry’ the rest of the economy, to cushion it from perceived hardships or appropriate additional profits solely for the purposes of redistribution of wealth.

            First, mining is different to other sectors because it is finite, that is, the extraction of resources is a one off gig. After its gone, its gone. Finished.

            The aim of this “inequitable” tax is to ensure that during cyclical commodity booms, the country is well remunerated for the one-off extraction of precious, limited resources, and COMBINED with proper currency management, doesn’t hollow out the other sustainable industries so when the cycle is finished, their isn’t a widespread recession or depression, or a huge reliance on government deficit spending to prop up ALL industries.

            For a robust economy, resource extraction industries must be minimised or they cause excessive capital allocation of scarce resources at the expense of sustainable industries, education/skills development and inflation.

            This is not about a mathematical “he gets, she gets, its not fair” problem, its an anti-fragility problem.

            Its about exposing the entire economy to the vagaries of speculative commodity markets and the historically volatile boom/bust cycle.

            There have been plenty of calls to hit the financial sector “inequitably” – first and foremost from here at MB, and me in particular.

            The banks make super profits – by using the politico-housing complex to get cheap access to foreign funds to inflate a secondary asset market whilst during so through an oligopoly, and without ANY RISK to their own corporate structure.

            Banks are UTILITIES and should be treated as such – which means either higher corporate rates or higher cost of funds restrictions or strict separation of commercial, retail and other sides.

            Again, this goes to anti-fragility. It is better to have a dozen or more smaller, less profitable banks, where if one fails the economy can shrug it off, and they cannot collude to incite a bubble in assets, then to have the current arrangement, where ALL FOUR BANKS are TBTF.

            Historically, this has not been tied to just the mining boom – Australia has had a predilection for concentrating fragile industries – e.g agriculture, or indeed strategic interests with “allies” like the UK and USA.

            Tied with a near religious adherence to flawed economies “ideas” and the use of skilled propaganda and media influence, manufacturing is but a visual casualty of this trend.

            Step back and look at the bigger picture and consider whether you want to end up the “Lucky” country or the “Robust” country.

          • Lorax

            Your extension is extreme.

            “…given that scenario, you still haven’t explained how the millions currently employed in manufacturing, tourism, retail and education will find work in Quarry Australia.”

            What are you saying – that these ‘millions’ will be unemployed because of the resources boom. Get a grip on reality. If unemployment were to occur at that level you can be sure that something far more ominous than a resources boom had occurred.

            You have an apocalyptic vision that is far removed from a resources boom, one that indeed would entail the end of the resources boom together with the end of much else in the global economy.

            We had best hope your vision does not come to fruition. If it does, the resources boom would have had nothing to do with it, of this you can be assured.

          • Prince

            As a fellow admirer of Taleb in the general spirit I agree. Specialisation of any kind is fragility! Anti-fragility or robustness is the desired position.

            Imposing taxes on a particular sector does not in any way promote anti-fragility. It simply increases the revenue pool for subsequent government expenditure. It could be argued that the reliance on this revenue stream itself indeed further promotes fragility!

            On a more particular level I argue that if you want the change you speak of it is a matter of Constitutional amendment. The finiteness of the resource is currently accommodated, for better or worse, via the royalty process which is the province of the States.

            In terms of profit could it not be equally argued that during the period of a credit boom, profits to Banks at magnitude are or a ‘one off’ nature, entirely during to the laissez faire approach to credit, one which will, like any boom come to an end?

            You say:

            “For a robust economy, resource extraction industries must be minimised or they cause excessive capital allocation of scarce resources…”

            And the scarce resources are…?
            And must they be ‘minimised’ or rather subdued, and for what longer term benefit when talking of non-renewable resources – siphoned off over what period for the benefit of whom?

            At heart, our real issue remains that resources are it, always have been – in all forms, mineral, agricultural and livestock. Resources, after decades, remain our only comparative advantage. On a personal level, I retain a hope for our role in food production in the future.

            And Prince, we have always been a economy subject to economic boom/bust cycles.

            Cheers.

            http://www.youtube.com/watch?v=ML9h3I5Uktw

          • Fanboy,

            The adjustment currently being forced on the economy is very rapid, due to the very rapid appreciation in the currency.

            Businesses that were viable at 60-80c, simply aren’t viable at 90-110c. No amount of investment in new technology, or labour market flexibility changes that.

            What we have in this country is the rapid decline of several large employers — manufacturing, retail, tourism — replaced by one very small employer: mining.

            As Prince points out above, not only does this leave us with a huge employment hole, it fundamentally undermines the strength of our economy by reducing diversification.

            Again, you refuse to address these issues because you have no answers. You change the subject, you shift the blame, but you have no answers.

            Yes we have the mining boom, but it is at the expense of everything else. In the long term, the costs of mining boom will outweigh he benefits, and I believe we have already passed the tipping point.

      • HnH,

        On the midday news today, two attendees at the job summit were being interviewed (think one of them was Howes, don’t hold me to it).

        They were going on about the fact that much of the fabrication work for current mining projects was being sourced overseas, and that some form of “quota” should be considered for Australian content. Probably a valid issue, not sure about the solution.

        At the end of the interview, one of the assembled wolf pack asked “Are either of you two blokes wearing clothes made in Australia?”. There was a sheepish silence.

        It was one of those little moments in history when a seemingly massive problem is torn down to its most basic constituent parts.

        We are all to blame.

    • H&H, curious to know – in an effort to support our manufacturing base would you recommend a deferral of the carbon tax for a period of, say, five years. This tax is an additional impost on a sector that is, as you would agree, struggling to retain footing at present, the tax is not imminently necessary and timing could not be worse.

      • At least it would put the focus back on more important (and more impacting) policy, like say managing the currency, reforming welfare/tax and defusing the housing melt.

      • What not just cap the level of exports?

        Issue tradeable export permits for different types of money dirt.

        Set a cap on the total tonnage to be exported per annum and let the dirt diggers bid for them.

        That would raise some cash and limit the size of the mining industry.

        Norway take a simpler approach to oil.

        Dont tap all the wells at the same time.

        Once we have a limit on the size of the industry and system to allocate production rights to the most efficient producer the Dutch disease will be under control

    • +100
      “I see the root of manufacturing decline in no way connected with the resources boom, after all the decline started decades ago (under the watch of educationalists, governments, businesses and the unions – a collaborative effort) but as a natural outcome of the globalised model we operate under.”
      Well put. Capital follows cheap labour. Big business looks to invest where there is the biggest imbalance in the stake workers have in their own enterprises. Of course, it’s cyclic, the trouble is, we’re at the wrong end of the bicycle.

    • Mining Bot, Don’t you think Heather Ridout would make a fine candidate for the post of CEO of a new Small Miners Council of Australia
      .
      She seem to be intent on defending the miners & bankers, at the expense of AiG members, even when corporate tax cuts is being offered to AiG members on a platter.
      .
      I am sure “small” miners like your beloved Twiggy and Gina already have their grievance with the MCA being dominated by the big miners.
      .
      🙂

    • Jumping Jack Flash

      +1

      This is correct.

      The problem is not resources, it is the gross inefficiencies and bloat in our manufacturing and other non-competitive sectors that was suddenly exposed when we found ourselves competing in a global market for everything.

      Labour, goods and services all globalised. All dog eat dog.

      In my opinion there were 3 major factors that exposed our inefficiencies and sounded the death-knell:

      1) Quality – Productive, developing nations finally got it right and started producing stuff that was of equal quality to most things produced with fancy brand names by developed nations, but,

      2) For much cheaper. Because of,

      3) Overheads – it has been pointed out that wages and compliance are the two greatest expenses of any business. Developing nations beat us on both fronts. Minimal compliance (violations usually solved with bribery), and low wages make sure we can’t possibly compete in the global market with our bloated overheads pushing the price of everything we do up, without some kind of protectionism for non-niche products and services.

      Mining just happens to be niche. Only we have the special dirt.

      Manufacturing of (say) steel is non-niche. Everyone makes steel.

      • “Developing nations” like China have a NEGATIVE cost of capital, and some of the goods are sold below cost. Go to K-Mart and take a look at some of the garments on sale : they’re being sold at $2. That is not enough to cover the cost of the cotton being used.

        If Australia have 12% inflation and 5% interest rate, I’m sure our manufacturing sector will boom as well, while it last.

  7. The wealthiest already pay for most taxes.

    And so they should! The problem is – the wealthiest pay the most since they make the most, but compared to the poor – they also take the most out of society. As they say – nobody got rich by its own.

  8. “We inhabit a world where policy is the servant of these vested powers, not the umpire or even the setter of the rules of the game.”

    And Ridout’s problem, apparently, is that she is not part of this group that sets up the rules of the game. Instead, you want to replace her with someone who is.

  9. “that blow historic asset market bubbles with the ease of a child in the park” – That’s not cool

  10. UE and HnH you should both buy a fin review today. Plenty of talk about Negative Gearing in the tax forum liftout. Some good (Alison Khaler page R8), some infuriating like a property developer (who has sold $3bn of Melb apartments in 20 years) esposusing the affordability and NG myth!!!

  11. Jumping Jack Flash

    Yes the best way to make a quick buck in a banana republic is to tax the bananas.

    That’s not a bad thing.
    But it doesn’t solve the problem.

    The problem is I want $50 an hour for pressing this button here on this machine.

    And I need this button to be located in an air conditioned office. And a padded chair, and coffee breaks every 3 hours.. and…

    And if I don’t get all these things, I need a panel of people more highly paid than me on standby to complain to. Working in such hash conditions is bad for my health you know!

    Everyone is just too precious.

    • I’d do that job for $5 an hour only $5 an hour won’t buy a house. It’s all boiling down to the price of real estate. Until that corrects Australia just isn’t in the running

      • Jumping Jack Flash

        And that’s the problem right there.

        Serious deflation is required to become competitive.

  12. I reckon you’re being a bit tough on Heather. She can hardly be blamed for the terms of trade, Chinese economic policy, the liberal exchange rate regime, the RBA’s interest rate settings, Commonwealth fiscal policy or post-ponzi household savings preferences, all of which have a lot to do with the trials of manufacturing.

    She is intelligent, coherent, consistent, informed, hard-working, persevering and articulate. She is also highly recognizable and credible.

    The tax forum may not have got far – very true. But I reckon that is hardly due to the participants. Sadly, it says far more about the limited scope for political initiative and the general shortcomings of summitry.

    • I agree with all of the things you say but you seem to have missed my point. Manufacturing will die in Australia unless its fights to live. There are ways it can do so in our vested interest political economy but Ridout has now proven herself incapable of the ruthlessness required to pursue them. Hence, she is by default working for the Minerals Council.

      I’m not making this up. Nor am I blaming Ridout. I’m describing simple fact. There is a nexus between:

      – mining’s refusal to pay enough tax to offset the damage it causes other sectors
      – bureaucracratic complicity
      – executive government fear

      The high dollar is not inevitable. It is the result of our macroeconomic settings.

      Same goes for the “two speed economy”.

      In a time of relative pricing shifts, “competition” shifts as much into the realm of policy-making, as it does the private sector. Mining understands this perfectly. Manufacturing via the AIG does not.

      If I were a manufacturer, I’d be very angry at Ridout. She is fighting yesterday’s war. Either export manufacturing finds a way to pressure the mining/government nexus or it dies.

      • If I were a manufacturer, I’d be very angry at Ridout
        .
        This is where short-termism prevails:
        1. The CEOs/board of Aussie manufacturers are hardly angry. Why would they be angry when they can bean count their way into short-term profits and collect their bonuses – Bluescope situation is a stark example of this.
        .
        2. The shareholders/owners of Aussie manufacturers are hardly angry – why would they be angry when they hold the shares for all of 8 seconds.
        .
        The only angry people in the room are those who are losing their manufacturing jobs now (more fear than anger) and those who can forsee the long-term future of this country.

      • C’mon H&N, this is a joke:

        – mining’s refusal to pay enough tax to offset the damage it causes other sectors

        Exactly what damage does mining cause other sectors? Mining has been undertaken in this country for almost its entire history without a claim like this being levelled against it (I am assuming you think it some economic ‘damage’ directly attributable to mining).

        I look forward to your answer, particularly in light of

        ‘The high dollar is not inevitable. It is the result of our macroeconomic settings.’

        which, again I assume, you mean is an issue which should be more correctly managed – therefore managed simultaneous with resource boom dynamics – therefore essentially manageable and separate from the boom.

        The reasons for additional taxes on mining are becoming more tenuous by the day.

          • HnH, I understand you don’t agree with my pro-resources view, fair enough.

            I am open to new ideas and arguments well made – to clarify your position on the above point would be appreciated.

            Thanks.

          • In addition, I view MB as superior to most the MSM and as a consequence have some expectation that generalised statements can indeed be clarified when necessary. Removes ambiguities and promotes fresh dialogue.

            Not to do so risks falls into MSM territory where statements are made with no adequate explanation or support. Readership then becomes MSM lazy – it is not necessary to carefully read the piece as one instinctively knows it will be of lightweight nature.

            Knowing there is an attentive readership encourages more thoughtful presentation of positions – something to be encouraged!

          • 3d1k,

            Maybe the site should be renamed: Manufacturing-Boosters, or more aptly, Macro-Bedwetters.

            Here are some facts from the Productivity Commission on net govt assistance:

            Mining: $242m
            Manufacturing: $8,283m

            Thus Aust taxpayers are channelling over $8 billion a year into an industry that is in decline. Apparently, H&H believes this is not enough. He thinks Ridout’s rent-seeking skills are not up to scratch.

          • Obviously by mining, you mean mining and fishing and forrestry and farming. All the export industries, they’re all bad, they all need to be taxed. Especially fishing, can someone say finite resource, what’s all that about?

            TAX, TAX, TAX. That’s how we support our FIRE economy.

            This blog really should be named macrocommunism, especially with H&H little hitler routine telling everyone else what they should be doing.

          • Dissenting views are increasingly not encouraged, are often the subject of ridicule, questions by dissenters rarely acknowledged nor addressed whereas the most inane comments of cheerleaders are routinely pandered to.

            This censorial approach does not promote open debate, rather conformist ‘groupthink’ which if not remedied may lead to a demise in quality of debate at MB – which can be rather lively and informative.

            From my own perspective I have asked two questions and if time permits would genuinely appreciate a response in order to clarify my understanding of your position.

            1) HnH Do you support a deferral of the carbon tax in order to provide additional support to the manufacturing sector (in particular) and more broadly, the Australian economy as a whole?

            2) HnH Clarification of your reference to ‘damage’ in this comment: ‘mining’s refusal to pay enough tax to offset the damage it causes other sectors’

            Cheers and thanks 🙂

          • No Craig, by mining I mean mining.

            The PC have separate data on agriculture, forestry and fishing. Which, by the way, receives a gift of $1.5bn a year from the ever-obliging taxpayer.

            God bless them and their deep pockets.

          • Sidelined, thank for those figures. I had no idea that was the level of support! An employment subsidy of sorts I guess…

      • “The high dollar is not inevitable. It is the result of our macroeconomic settings.”

        Exchange rate instability IS inevitable in a liberal capital market. But this is better than gyrating interest rates and output.

        I think we are at the mercy of economic forces over which we have little control. This applies to all economic actors – from miners and manufacturers and suburban shopkeepers.

        I do think it is worth remembering that manufacturing is not monolithic. It is multidimensional and constantly evolving, and Australian manufacturers are by no means unique in having to adapt to competitive forces. Manufacturing is in trouble in many economies – think of Italy, Spain and the US, for a start.

        Beyond this, I do not think Heather Ridout can be expected to change Australian political-economy single-handed. Even Paul Keating found that was too much!

    • Sadly we..Should really show some Respect for
      Heather and Jobs …all 3’s jokes are out
      for a while MB..enjoy your coffee,I am
      JR

  13. Yep ,gonna make me a Delicious Dutch
    Crack-up-Boom Banana Republic Milkshake
    after that one..Just to be different.Cheers H&H…JR

  14. More about politics, AIG was sympathetic to Rudd, Howes was not.

    We need to decide what we can manufacture and what we can afford to outsource and not resort to old hat protectionism.

    We’re not the only country in the world looking at a variant of protectionism and I’m sure we all know it is bad for everyone when everyone does it.

  15. I think the point is that Ridout should be SEEN to be doing more, or caring more, or trying something…..anything……. rather than waiting for manufacturing’s (not-so-slow) death.
    On the other hand, a new paradigm could be small, low-overhead, specialist manufacturers with an online presence, so maybe she should just stand back and watch the carcass rot.