by Patrick J. Byrne
The Federal Government is yet to produce a coherent plan to deal with huge challenges: threats from Beijing’s aggressive nationalism, major global supply chain disruptions and more company failures.
Prime Minister Scott Morrison has brought trade unions to the workplace reform table. In some ways, it demonstrates the powerlessness of unions. They are looking to regain influence and standing after Labor’s 2019 crushing federal election loss. At the same time, the Prime Minister needs the public-sector unions onside as well as the CFMEU, despite its odious industrial tactics, to oil the construction industry.
The new National Cabinet, which is to replace the Council of Australian Governments (COAG), may have successfully coordinated measures to control covid19, but coordinating a major economic recovery requires a consensus plan for reindustrialising a nation that’s gone through half a century of deindustrialisation.
While it boasts a few well-qualified members who know about manufacturing, the National Covid19 Coordination Commission, set up by the Prime Minister in March, is yet to provide a skeleton plan.
At the same time, government leaders are still preaching the need for free trade and courting industry groups wanting company tax rates cut.
Noises about further labour market reforms, and more trade and company tax cuts suggest that the Government still believes that, with just a few “tweaks”, the “invisible hand” will miraculously guide the free market to build new industries for Australia post-covid19.
Yet, as history shows in Australia and in most countries, major industries are only built with determined, long-term government and business collaboration.
Not since the days of Robert Menzies have Australian politicians and public servants had the experience of actually building industries. Rather, their experience since the 1970s has been of hollowing out Australian industries.
Reindustrialisation is going to require a major change of thinking among our political leaders for three major reasons.
Beijing’s cultivation of extreme nationalism, which could intensify if the Chinese economy stalls, involves a massive military modernisation, at the same time that the United States faces a possible depression and other problems that will weaken its capacity as a strategic ally to Australia.
The Defence Department’s recent draft strategic update (not yet fully released) is said to argue for what many have long argued for: far greater defence self-reliance.
The strategic objective should be to make it impossible for Australia to be overwhelmed by making the cost to an aggressor unacceptably high, even to a superpower. This means “area denial” at sea and in the air: and this means Australia’s military being equipped with many more submarines, sophisticated underwater mines, long-range bombers and long-range anti-ship missiles.
While much sophisticated weaponry needs to be imported, Australia has the ability to produce again considerable defence requirements domestically.
DISRUPTED GLOBAL SUPPLY CHAINS
The covid19 crisis has highlighted fragilities in global supply chains.
Complacency has resulted in failures to assess risks from pandemics, natural disasters (tsunamis, floods, droughts, fires, earthquakes), strategic conflicts, civil turmoil/wars, economic downturns, forecasting errors, industrial disruptions, reliance on one supplier, supplier bankruptcy, telecommunications breakdowns, corruption, government controls (for example, limits on exports), transport accidents, financial failures (like the global financial crisis), currency collapses, price volatility and volatile exchange rates.
China and India are now the world’s major suppliers of pharmaceuticals. Due to supply chain disruptions, since January Australia’s Therapeutic and Drug Administration (TGA) has published “information about all [drug] shortages that have a critical patient impact”. As of May 28, 73 drugs were in critical shortage, seven shortages were anticipated and 47 shortages were resolved.
Given our heavy dependence on global supply chains for pharmaceutical, medical, military, transport, communications and IT equipment, liquid fuels, chemical and consumer goods, Australia’s requires varying degrees of self-reliance across many industries that need to be declared as strategically important to the nation.
Only by government and businesses working together can we build strategic industries. They won’t be built if we rely solely on market forces.
Unemployment is set to worsen with a coming wave of company failures. Temporary income support schemes are necessary.
But in the end reindustrialisation is needed, with a development bank working with government and industry as a growth engine, to provide full employment. Many new jobs will require skilled training.
If the Morrison government wants to survive the next election, common sense ought to over-ride outdated economic ideology; and survival instincts should override the vested interests of companies that are foreign-owned or dependent on China.
Patrick J. Byrne is national president of the National Civic Council.