No manufacturing for VIC as Manchurian Dan sends it to China

Peter Hartcher gave us a decent wrap of all things manufacturing on the weekend:

Just as China’s stimulus after the global financial crisis helped Australia power its way out of that downturn, so too today. In the decade to 2013, mining added 13 per cent to the average disposable household income per person in Australia, according to the Reserve Bank…But consider this. Australia was the most China-dependent economy in the developed world last year.

We’d better do something to diversify. Because China certainly is. The world has two enormous sources of iron ore – Australia and Brazil. Chinese state-owned companies are about to bring a third online. Rio’s boss Jean-Sebastien Jacques said in July. Simandou is so big that it’s sometimes called the Pilbara-killer.

…What’s the Morrison government’s plan? The good news is that, under the force majeure of COVID, the Coalition has moved from a laissez-faire mindset to a strategic development one….Australia needs urgently to move beyond the mentality and the reality of a rock-dependent nation. And that’s not going to happen organically. It needs to be guided by policy.

It was I that named it the “Pilbara-killer”, not Jean-Sebastien Jacques. It’s not that bad in and of itself. The real problem is that it comes as China passes peak steel and demand starts to wane simultaneously.

The issue becomes all the more pressing when we consider the geopolitical need to get as far from the evil CCP as is humanly possible. But there are some issues on front. Although the Morrison Government has pivoted on industry policy it has a very long way yet to go. It’s total failure to address economic competitiveness – for energy prices, land prices, trained labour, opex, capex, inflated AUD, you name it – means any industry policy is still swimming against the macroeconomic tide. Hence, $1.5bn is drop in the bucket:

The federal government’s $1.5 billion manufacturing spending package is unlikely to “move the needle” and needs at least one zero added to it if Australia wants to be competitive with our Asian neighbours, according to industry experts.

Elenium Automation, led by chief executive Aaron Hornlimann, manufactures its hardware products (which include portable kiosks equipped with health symptom monitoring and self-service ticketing and touch-less triage kiosks) in the Melbourne suburb of Tullamarine.

Mr Hornlimann told AFR Weekend he supported the government’s new investment, but said there needed to be a recognition of just how expensive it was to set up advanced manufacturing operations in Australia.

The less Morrison does to make Australian competitive more widely – and mostly it does the exact opposite –  the more the taxpayer will have to kick into manufacturing and that means we’ll only end up with a half-pregnant Game of Mates that prefers lobbying to innovation. 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:

That said, there are certain things you can do to make it easier. One is preferential government procurement for local firms. This is a very common practice worldwide and makes perfect sense given the dough is to be spent anyway. But no! Not in Great Southern Manchuria, at Domain:

Premier Daniel Andrews directly courted some of China’s biggest Belt and Road Initiative companies, including one subsequently blacklisted by the US government, to help build Victoria’s huge pipeline of infrastructure projects including his signature Suburban Rail Loop.

Internal documents obtained under the freedom of information act show Mr Andrews pitching for money and expertise from Chinese state-owned companies in his trip to China in October last year, with a promise to “facilitate” their access to Victoria and “collaborate” on the state’s biggest projects.

Victoria, he said, would become “China’s gateway to Australia”.

Meaning students to corrupt our universities, lift property prices and sink wages in exchange for further hollowing out, also at Domain:

The Chinese company which won the $2.3 billion contract to build Melbourne’s new train fleet is central to President Xi Jinping’s controversial Belt and Road Initiative and was recently blacklisted by the US government due to the security risks posed by its ties to the Chinese government.

CRRC Changchun Railway Vehicles, which beat local bids in 2016 to win the contract to build 65 new high-capacity metro trains, is a subsidiary of major Chinese state-owned rolling stock manufacturer CRRC and has been identified as a beneficiary of Uighur labour.

There is a very long way to go before Australia restores any manufacturing capacity.

 

David Llewellyn-Smith

Comments

  1. Like most of Morrison’s policies, his “Advanced Manufacturing” announcement looks set to fail with only 80k jobs being generated in 10 years.

  2. SnappedUpSavvyMEMBER

    Andrews is a disgrace, Gladys did similar in Sydney with a contract to build buses given to the Chinese instead of locally, how many times: dumbest dumb fckn dumb western country on the planet

  3. Shades of MessinaMEMBER

    The local procurement policies for security firms to manage Covid in Melbourne didn’t end all that well.

    Favouring local manufacturers for government procurement is just another extension of the “Game of Mates” played globally but perhaps ok if some local employment is at least stimulated. Incremental changes locally make zero difference when compared to the boondoggles that are submarines and JSF’s sourced from overseas in any case….

    • Arthur Schopenhauer

      Quite the opposite, it’s what countries like France, Germany, Austria, Switzerland, Italy, Czech, Slovakia, Canada, the US, Japan, Vietnam, Korea, China, Sweden, Denmark, Finland, Norway, Spain, Russia, Israel and Turkey do.

      (Edit: Forgot the Dutch, Belgiums and Polish. Conspicuously absent are the UK, NZ and Australia.)

      All counties that value their sovereignty do it. Building a railway is known problem, easily delivered locally. It’s been done here for 150 years.

      • China PlateMEMBER

        hyperbole or can you substantiate each and everyone of those nation’s practices.
        Only joshing i’ll take your word for it

    • We’re not going to be able to wave a magic want & bring it back in an instant considering the systematic & willful destruction of what we had. Incremental changes are the only way we’re going to be able to get any semblance of manufacturing back.

      And it’s about time we scratched local backs instead of some mercenary who wouldn’t understand quality if it ran over them. Although I’m not sure there’s many left in the right positions here that understand quality either – more incremental steps from a potentially higher base perhaps.

  4. happy valleyMEMBER

    The only manufacturing the pinocchio ScoMo gubmint wants is housing, warm body visas, money laundering and uni degrees.

  5. To change anything requires an admission that the service-economy clap trap was only ever going to be a temporary gig. Araldited to their one-trick China pony all our major parties have never dared to consider that this generated ideological inertia dependent upon a 30 year dreamtime that China would be a benevolent giant who played nice. They’ve sold us down the river in the process.

    Today, the required change to the mindset demands vision about R&D, ideas and making things locally as part of a productive economy more like Germany. But it won’t happen as this would mean a wealth reset. It needs people with ideas and the capacity for innovation to be rewarded and money diverted from the army of locusts and parasites of our financialised population Ponzi scheme. It needs investors to be forced to take risks on new ideas and innovation. But why would they? Today they have a government propping up a debt-based and rent seeking real estate plan and still wanting to shift vast populations around the Australian toll road and university ticket clipping system. Our PM is king of the real estate marketing spruikers, rent seekers and god botherers. The ALP is MIA and entrench in their own Sino-Fantasia still. The Greens have yet to place a lid on Jenny Leong’s race baiting career and re-discover sustainability. And Dan defended his Belt and Road MOU to the bitter end – no inquiry here.

    The old guard and temple priests who caused the problem ain’t going to fix it. Albo is just the putty and sandpaper man unable to paint a new vision due to his arthritic politics. But who in the ALP can think clearly today? There are two women I can think of who might do it – as well as two women who are the very worst that the ALP has to offer as the sneering woke face of the ALP.

    • PaperRooDogMEMBER

      Exactly, most service jobs have a very small job multiplier effect ie low single digits whereas manufacturing is more like 100 not to mention the wealth of diverse skills required which would raise us up the economic complexity rankings where we are currently surrounded by poor African nations etc. Not to mention manufacturing trade makes up about 2/3rds of the global economy, why wouldn’t you want a piece of the biggest pie!!! (especially when people are slowly beginning to realise that the neoclassical economists were wrong about countries specialising & comparative advantage as it only works in the short term and will ultimately lead to most industries ending up in a handful of countries which had an initial advantage of technology or size, just as has been happening with global corporations)

      Until our goverments understand the above and “It’s total failure to address economic competitiveness – for energy prices, land prices, trained labour, opex, capex, inflated AUD, you name it – means any industry policy is still swimming against the macroeconomic tide.” we will only slowly slide down the list of wealthy countries (if India suddenly booms like China did we may be able to mask this for a few more decades, but that seems unlikely, especially with how easy credit is not coming back anytime soon as we work through global debt)

  6. It’s not existing macroeconomic policy settings that are the issue — the answer lies back in time, with policies that financialised land and made energy and labor expensive. So what you have instead is policies designed to work around the above core issues to ‘fix’ the problem. Like this gem:

    “One is preferential government procurement for local firms.”

    (In a nutshell, the taxpayer pays more for goods and services BECAUSE we’re less competitive than companies elsewhere). Such a policy isn’t going to make us competitive and it isn’t necessarily going to encourage much investment because it’s a policy that is subject to a high degree of political risk i.e. it can be wound back by the next government. We’re just chasing our tail with half-baked band-aid solutions. Address the core problems and the rest will take care of itself.

    • Arthur Schopenhauer

      Is what your saying, ‘wages must be lowered’? Or lower land/housing prices and let the country recalibrate?

      • I don’t support any attempts to alter prices ‘by decree’ – that’s what the Soviets and various other socialist states have tried in the past with disastrous consequences. What I’m saying is that if you rescind the policies that caused the problems in the first instance – specifically sending land prices to the moon and same with energy prices then you’re well on your way to creating the environment for a manufacturing renaissance (to what exact extent, who knows, but the situation would be vastly improved.).

        As for wages: the minimum wage and award rates in this country (pricing by decree) have the effect of some people being paid too much for what their true economic input is and others being too little (the flip-side of the same coin). At the end of the day the minimum wage is a policy designed to correct the inequalities caused by the state’s inflationary policies — the self same policies that have made housing crazily unaffordable but lavished undeserved riches on those with easy access to credit.

        • Arthur Schopenhauer

          Thanks for the clarification Dom. I agree, especially with the land/house pricing. It’s frustrating when your house makes more after-tax profit than your business! (Even if the house gains are unrealizable.)

        • The minimum wage is there to set a societally acceptable floor on living standards.

          It’s there because the acceptable floor for “the market” is a LOT lower (eg: those “immigrant slums” people like to complain about will give you an idea).

          • There is no ‘floor’ to any market – the price is the price.

            If I have to offer something for free for someone to come and collect it then its price is zero. And if still no one wants it then then I may have to pay someone to to take it.

          • Arthur Schopenhauer

            “There is no ‘floor’ to any market…” , especially in the age of global labor.
            That suggests a need for a minimum wage, for those without pricing power, and a policy of local employment for those that extract profits from Australia.

          • If I have to offer something for free for someone to come and collect it then its price is zero. And if still no one wants it then then I may have to pay someone to to take it.

            Yes, we know.

            You seem to labour under the misapprehension people who disagree with you don’t understand how markets work.

            Some of us have an aversion to people dying of starvation because the “price” of their labour is zero.

    • “In a nutshell, the taxpayer pays more for goods and services BECAUSE we’re less competitive than companies elsewhere”

      This may be a little misnomer. for example if you look at the input of slave or child labour into a product, clothing for example, or calculate the cost of safe work practices the cost difference in imported products is not such a bargain.

      But the big one that is overlooked is the value of taxes paid, not jut GST but also income tax. As far as I am aware state governments do not make an allowance for income tax received by the ATO from workers employed in local projects when they calculate the benefit of buying an overseas product. not only that but you can also add back the cost of jobseeker for example the people that used to be employed at the Holden plant and affiliated companies.

      The Feds haven’t got a clue what they are doing and neither do the states

      • “But the big one that is overlooked is the value of taxes paid, not jut GST but also income tax.”

        By that same logic, all goods should be produced domestically. The value of the taxes paid, along with GST is more than reflected in the increased prices paid by consumers. In other words it’s little more than a form of welfare.

        We’ve been down this road before:
        “Australian Made”
        “Made with Natural Fibres”
        “Responsibly Sourced”
        “Sustainably Sourced”

        A few people GAF, most vote with their pockets, as they rationally should.

        • I understand what you say having lived through a few changes in my lifetime but you miss my point.

          About buying domestically, we should seek full employment. Just like in a household budget we buy things (imports) with our income (exports). It makes no sense getting someone to cook and clean for us if we have to borrow to do so and can easily do it ourselves. At the same time if we can export a few bananas and get an iPhone for it that may be a good deal.

          However the cost to government is not the same as cost to the retail consumer in that government can recoup tax costs that are not able to be realised by others. For instance if the cost of labour is 1/2 of the cost of a product and the labour component includes income tax at 30% the saving on the up front cost is 15%.

          If we do not have full employment we need to work out how to achieve it.

          State governments have made purchases of foreign products when purchasing Australian would have entailed an increased price with a smaller margin than taxes that would have been recouped. Australian jobs would also have been kept. Government has a duty to take a tax saving and/or increased social expenditure into consideration when making a purchase.

          If an imported product is equal to an Australian alternative the “real” cost needs to be in the mix.

          • In my experience, if a product is available to buy locally (by Govt) then it almost certainly will be — even if it costs more. Why? Politics. Some front-bencher stands to gain from making a public announcement about ‘creating jobs’ or ‘saving jobs’. Pollies are spending ‘other people’s money’ — always. So they don’t GAF. They’d rather buy votes instead.

            Which means the situation you’re describing doesn’t even exist. We ordered submarines from abroad because we’re incapable of building a product to the standard required (and then made it more expensive by having them assembled here – because politics). We order trains from India/China because they aren’t made here. Simple.

    • UpperWestsideMEMBER

      I have posted this before but …
      The Government can pay a premium for local goods and services and it still cheaper.
      The magic of taxation, the govt gives you a dollar and takes back 33cents.
      Ignoring the multiplier effect, just the first layer of taxation can do a lot of the heavy lifting.

      Now all we need are some politicians that passed 3rd grade maths.

      • surfbeach mentioned the same above but as I explained to him/her, any benefits derived from receiving some income tax from a few workers and even some corporation tax (if profitable) is more than swallowed up by the additional cost to the taxpayer.

        I’m fairly certain a Govt would choose to acquire locally if at all possible or justifiable.

    • Arthur Schopenhauer

      I can’t find my comment, but a few of us did.

      The suburban loop railway works are at least $80 billion ($50b gov guesstimate). The plan is only feasible if Melbourne’s population is pushed to 8 million and the middle suburbs are annihilated with medium and high density housing.

      That’s a bit more than the Salesforce contract.

      (Edited for clarity. Sorry ‘bout that.)

    • kierans777MEMBER

      That’s because the way IT projects in this country are handled absolute disgrace (cf: The Frustrated State by Renai LeMay). As someone with the skill set who watches the game of mates that occurs with corporations and government giving fat gigs to the big consultancies who then outsource the real work to people without the right education/expertise but who are cheap – while skimming the cream off the top it’s no wonder we get failed projects like the census.

      The type of mob who would get a government contract like one for COVID tracing would stuff it up at a major cost to tax payers.

  7. ‘In the decade to 2013, mining added 13 per cent to the average disposable household income per person in Australia…’
    Which was rehypothecated into greater shelter price inflation.

  8. 6 Apr 2020

    Hanson says scrap the Free Trade Agreement between China and Australia

    I spoke with Peter Gleeson on SKY News / WIN about the fallout between China and the Western World.

    I have no time for China and it’s time to wean ourselves off the country.

  9. my toranaMEMBER

    I’m reading Hidden Hand. The chair of the 48 Group, the UK’s lead China business and friendship group tried to stop the book’s publication in the UK. Mind blowing stuff. The book concludes that the UK is too far gone to be saved. Of course it’s not but would require quite a rout of the game of mate-sters over there. Good ol Tony Blair denied any connection to the group of 48 just as the wind started to change direction.

    • Good luck.

      I’ve only been able to get about 40 pages into Silent Invasion and then I’m too angry to continue & have to put it down. Have tried multiple times but to no avail..

      • I borrowed it several times from the library and just couldn’t even really open it. Dad ended up reading it and told me and Mum it was mind blowing. I told Dad I lived in BJ for 17 years and I just can’t read it. I just can’t. They can get away with what they are doing because we effing let them. Oh it makes me so so so angry

  10. The CCP united front has been working on the ALP for decades and decades. What we are seeing has been a looooong time in the making.

      • No they are not but this government, particularly under Turnbull, passed foreign interference laws, banned Huawei, pushed back on Chinese millitary installations in the south pacific, progressed the Quad amongst other initatives that have p*ssed Beijing off.

        The ALP would have done NONE of this. The ALP would have got us in deeper and deeper while the Libs have started to dig us out of a very very deep hole r.e. China. It is almost the ONLY area I think this government has done well in.

        • I know I put the ALP/LNP last when I voted, but I may have put the LNP above Labour for the first time in the last election and it was for this reason only. Yeah I am now a China swing voter. Oh the irony

  11. So lots of complaints and examples of bad policy but does anyone have any good policy suggestions on how to get manufacturing going again in Australia?

  12. tsport100MEMBER

    NSW does the exact same thing… Trains, Ferry, Infrastructure as does QLD. A huge chunk of the Wiggins Island Coal Export Terminal was built by John Holland…. now owned by a Chinese company blacklisted by the US… Why single out VIC?