The Federal Budget was clearly an election budget. When opinion polling shows that the Coalition is on top, the Prime Minister is likely to go to the polls.
This is reflected in key items:
- $1.5 billion for manufacturing (much more is needed).
- $2 billion for research and development, backed by halving company tax on income earned and developed and registered patents to 17 per cent from July.
- Continuing for another 12 months the full capital write-off for approved equipment over the next year.
- $110 billion on infrastructure over the next decade, or $11 billion per year.
- $270 billion on defence over ten years, or $27 billion per year.
Certainly, such a budget will stimulate the economy, boost employment and drive a property boom.
At the same time, the Budget shows the world has changed.
The Coalition has dumped the idea of balanced budgets in favour of big spending and government intervention in the economy in response to the covid19 crisis and growing threats from Beijing.
However, the preparedness to take on huge spending has not been matched by a focus on building the strategic industries that are needed to ensure Australia’s sovereignty in the event of a major global or regional conflict.
As I recently pointed out in News Weekly (May 15, 2021), a major war could see our supply chains cut and the economy almost grinding to a halt in three months, according to a major exercise conducted by the Defence Department in 2019.
Australia’s manufacturing base has been reduced and thinned out so extensively, now down to 5.8 per cent of the economy, that the country would soon run seriously short of liquid fuels, essential medicines, vehicle spare parts, replacement electronic parts for telecommunications, water purification and sewage treatment chemicals. We are so reliant on imported essential products transported on foreign-owned merchant ships, that in a war this island-continent would be cut off from its major trading nations. Our major trading partner is China.
The Federal Budget reflects a slow push in the direction of building manufacturing industries. But, as The Australian’s Greg Sheridan told the 2021 NCC National Conference, the Government’s policies to expand Australia’s military forces were a move in the right direction, but at the pace of a tortoise on Valium.
So, what needs to be done?
The NCC’s recent White Paper, Manufacturing: Double Production by 2035, calls for Australia to declare the strategic industries that are needed both to defend the nation and to ensure economic survival and sovereignty in the face of an international crisis.
Given our defence and supply chain vulnerabilities, strategic industries need to include: important defence products (the Government has announced a $1 billion missile industry), essential pharmaceuticals (building manufacturing capability for mRNA vaccines was announced in the Budget; a reasonable start), transportation and agricultural equipment (losing the car industry was a tragedy), machine tools, metals processing, advanced chemicals, telecommunications, agriculture and food processing, liquid fuels and electricity.
Most importantly, the Government needs a “super department” for strategic industries to identify the industries Australia needs to maintain a resilient economy in a crisis and to focus policy on building these industries. It needs to be financed by a development bank, which would reduce the need for huge government spending and deficits, and by policies to keep newly established industries in the country.
Urgently, the Government needs to declare that it aims to double manufacturing industry by 2035. Then, businesses can plan for major investment and expansion.
Such a plan would underpin the hard industries the nation needs while generating well-paid jobs and the tax revenue to pay for the investment.
Download your FREE copy of the NCC’s White Paper, Manufacturing 2035. Backed by the National Party and leading industry experts, our White Paper lays out the simple steps needed to double manufacturing in Australia by 2035 and create 1 million jobs.
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As U.S. Brigadier General Robert Spalding (retired), author of Stealth War, told the 2021 NCC National Conference, the essential policies that Australia needs are: “Decouple [from China], have industrial policy, invest in your people, science and technology, STEM [science, technology, engineering, and mathematics] education, infrastructure, manufacturing and, for heaven’s sake, build a secure, encrypted internet for your people so you can protect them from outside influence from authoritarian regimes.”
As a nation’s ability to defend itself depends on the size of its economy, which depends on the size of its population, General Spalding could have added, build your population from 23 to 50 million.
Unfortunately, the massive Budget subsidies to childcare will undermine fertility, as I explained recently in News Weekly (May 1, 2021). In justice to families, and to encourage families to have more children, the Government should fund families and let them decide between home care and institutional childcare.
Herein is the essential formula for defending Australia’s sovereignty. The Government needs to take heed.
Patrick J. Byrne is national president of the National Civic Council.