Australian manufacturing has been put out of business by two irresistible forces. The first is the power of the mining lobby and the second the power of the banking lobby. These two between them have scuttled, shaped, bullied and destroyed the Australian polity to their own ends so successfully that Australia now has the most spectacular case of double Dutch disease in the known universe. Manufacturing output has shrunk to the lowest in the OECD and is still falling. At 6% of GDP it is half that of other supposedly hollowed out Western Economies such as the US and UK.
Yes, there are structural headwinds for manufacturing in hyper-competitive emerging markets. But the local collapse is much more. Policy in Australia has been ceaselessly pro-cyclical for banks and miners for twenty years for no good reason (indeed, for very bad reasons). So the manufacturing failure has to be put down simply to losing the policy argument. That is a failure of the manufacturing lobby.
Even in recent years there have been spectacular faux pas. Former AIG chief Heather Ridout had the ear of the Rudd/Gillard Labor Governments. But that didn’t do much for manufacturing. Her input into the Henry Tax Review was disastrous, throwing up an arcane Brown Tax to contain the mining boom when all it need was some basic corporate tax rate adjustments. The result was a resource rent tax that nobody could understand which opened the way for the destruction of an entire manufacturing-sympathetic government at the hands of bloody-minded miners.
