Scotty from Marketing manufactures complete bull


It turns out that there is something worse than a Coalition Government dedicated to the hollowing out of the industrial base. A Coalition Government that pretends to fix it. Via News:

Prime Minister Scott Morrison has flagged infrastructure and manufacturing as the industries that will help Australia continue to rebuild from the COVID-19 pandemic.

And The Australian:

Scott Morrison’s multibillion-dollar manufacturing strategy will be a centrepiece of the federal government’s five-year blueprint to create millions of “future” jobs and reshape Australia’s post-pandemic economy.

Ahead of next Tuesday’s budget, the Prime Minister will this week focus on the government’s long-term plan to support industry and advanced manufacturing, as the nation emerges from the COVID-19 economic crisis.

The manufacturing strategy, combined with reskilling workers and providing tools for businesses to modernise operations, will form a key plank of Josh Frydenberg’s budget pitch to get Australians back into jobs as coronavirus welfare payments are phased out. Mr Morrison, who will deliver a major pre-budget address at the National Press Club on Thursday, will outline government support for small business and the digital economy ahead of unveiling the strategy, which is aimed at boosting Australia’s ability to manufacture industrial goods locally.


So, what is the plan?

  • Cheaper energy has been ruled out by the gas unplan.
  • A lower AUD is being eliminated as we speak by any and every means to restore house price growth, including a resumption of criminal lending, protecting the RBA from criticism and seeking to boost immigration.
  • There is little or no industry policy.
  • No word on favoured status government procurement.
  • No new tax cuts or R&D incentives.
  • No effort to boost funding availability.
  • No tariffs.

There is a bit of movement on commercialising ideas which is like a drop of water in the desert without the rest of it.

The simple fact is this: you don’t crush manufacturing to 5% of GDP without something going very wrong with your macroeconomic settings. Nobody else got anywhere near that hollowed out:


The major inhibitors to manufacturing recovery are macroeconomic:

  • overly high currency;
  • capital strike outside of resources endowment sector;
  • energy policy;
  • immigration debauching university standards, and
  • tax policy incentivising capital importation to inflate domestic prices.

All of these things destroy your competitiveness as:

  • capex costs spike;
  • opex costs spike
  • labour costs spike;
  • IP costs spike;
  • and real exchange rate costs spike.

The revival of scalable industrial sectors goes FAR beyond Morrison’s pathetic efforts. Indeed, he’s mostly being counter-productive. What will be needed is policy settings that trigger:

  • cheaper capital, plus
  • cheaper land, rent, energy, research, tax, labour and IP, and
  • smarter use of all of them.

All Morrison is manufacturing is bull.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.