@AuManufacturing’s occasional editorial series on the real issues of the 2022 Federal Election continues today. Here, Danny Samson asks why Australia doesn’t add more value through manufacturing, and can we ever?
Our economy is generally doing well, regardless of the fact that we are a commodity-exporting nation, as evidenced by more than 20 quarters of pre-pandemic economic growth, and the current return to growth and essentially full employment.
Governments have ignored the structural risk of being tied to exports of iron ore and other metals, and worse still in the current and future era of phasing out fossil fuels, coal. We even have a prime minister who brought a piece of coal to the federal parliament and waved it around.
The loss of our auto industry marked another downward step in the richness and diversity of our economy, as measured by Harvard’s Economic Complexity Index, where we fell from 55th to 86th ranked country since 1995. and are now stuck between 85th-ranked Paraguay and 87th-ranked Uzbekistan.
Our raw material resources make us something of an anomaly of a nation in that we barely add value to what we dig and grow (hence the 86th place), but we live well, with a GDP per capita of $55,000, making us the 8th richest country in the world. .
Some key questions are who cares and what future does it predict?
To the question ‘who cares’, part of the answer seems to be ‘not our politicians’, as they have been disinvesting (in real terms) for decades in our universities, R&D and innovation infrastructure , and seem unable or unwilling to get seriously interested in opening up the economic black box that shows our nation’s risks in the future.
This myopic approach is understandable but inexcusable, and certainly not good enough, leading Harvard Index analysts to comment pessimistically on our future prospects.
We also have a risk-averse corporate culture and comfortably profitable and comfortable oligopolies in some important industries in Australia, from mining to banking to retail.
How can we do better to add value to our wonderful natural resources?
What can and should be done is for government and business to work closely together, as in other countries, to develop world-class industries, even if that means tipping the scales in our favor at least a bit, like other nations do.
We need strong national policies and incentives for energy renewal, sustainable and export-oriented food supply chains, and the adoption of the export of digital services that are truly bold and that have an order of magnitude more impactful than current moans.
We need strong local procurement policies at all levels of government.
Take Singapore, Israel, Taiwan, China, South Korea, where the focus in each location is on specific industrial developments.
We have a lot of thriving start-ups here, with too many of our entrepreneurs going overseas to achieve growth and success, and very few see Australia as the best place to create business value.
Good news: it’s not too late.
Can any of the federal political parties create a bold and impactful national business plan?
If the government catalyzes it in a meaningful way, businesses will come to the party in droves.
Dr. Danny Samson is Professor of Management at the University of Melbourne, with degrees in Chemical Engineering and Business. He is Program Director, Masters of Enterprise and Supply Chain Management, Director of the Australian Institute of Management and Co-Editor of Operations Management Research.
Photo: Dr. Danny Samson
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