What is the Abbott Government doing wrong? Many could argue long and hard over that question, but in this guest article Andreas Bimba points to their strong neo-liberalism as one of their main failings.
In December 2012 Toyota announced the opening of its new engine plant at Toyota Australia’s centralised manufacturing operations in Altona, a western suburb of Melbourne. This was a little more than a year ago. Although times were tough then with a historically high Australian dollar, a fragmented market, almost no trade protection and only moderate government co-investment (to partially compensate for relatively high Australian wages), Toyota must still have seen a future for the Australian automotive manufacturing industry.
These external negative factors have not really changed from one year ago. If anything, the Australian dollar has fallen so conditions should in reality be better.
What is different is the attitude of the current Federal Government, with their hardened attitude of the government’s primary economic advisory body, the Productivity Commission. The Productivity Commission recently recommended that all government support for the Australian automotive industry cease by 2020. This is effectively a decision that declared an Australian automotive manufacturing industry is not welcome past 2020 and that the government’s key advisers want the industry to, simply, close down.
The Abbott Government has politically moved to the right much more than any previous national government. Philosophically they could be described as neo-liberals who promote small government, minimal government intervention in the economy, free trade, globalisation and free flow of capital to the most profitable sectors of the economy. This philosophy currently has wide support in the community, especially from people who work hard, face a high cost of living and resent governments taxing them excessively and wasting that money on unnecessary social services or corporate welfare.
As the inevitable consequences of this ‘dry’ economic philosophy become better known, public support will fall and in fact it is already unlikely the LNP Coalition will win the next federal election in late 2016, even with most of the Australian commercial media being heavily biased towards them.
The neo-liberal philosophy is, however, an overly simplistic and failed economic philosophy. No one, not even China or India follow this philosophy, nor does the United States even though its business leaders often claim to be free traders but the world is well aware of the local, state and national government support US industry receives.
In a country like Australia with a relatively high living standard, the concept of total free trade will inevitable mean a race to the bottom. Firstly, most of the manufacturing industry will disappear, but it will not stop there and eventually much of the service sector will also be transferred to lower cost foreign providers. The internet provides easy trade for information based industries such as accountancy, education, engineering, architecture, IT support and so on. Even work that must be performed in Australia such as construction, food harvesting, plant operators and maintenance services are now often performed by non-resident workers allowed into the country with temporary visas such as the 457 visa.
The only sectors of the Australian economy likely to prosper in such an environment are the bulk minerals/resources industry and the bulk agricultural commodity export industry. Neither of these sectors employ many Australians. The inevitable end result of neo-liberalism is unemployment for most, and fabulous wealth for a few. The classic third world banana republic.
When Toyota closes down its Australian manufacturing operations, this means about 90 per cent of the components and other supporting businesses will go as well. Probably about 40,000 direct jobs, mostly in Victoria and South Australia, as well as some in New South Wales and Queensland. An estimated three times that number will go in the wider economy as the economic demand for goods and services of those auto manufacturing businesses and their employees will subside substantially. Probably as many as 160,000 jobs will go.
As the manufacturing industry will continue to contract under neo-liberalism the service sector of the economy will also shrink and unemployment is going to be much more than it otherwise would have been. If, however, the Abbott Government is frustrated at every step of the way, the level of economic destruction may be lessened.
With China switching to renewable and nuclear power and also transforming its economy across the board to an advanced sustainable economy, it is inevitable that the demand and price for mineral resources will fall substantially. Australia will suffer badly in such a downturn with such a narrowly focused economy.
The global atmospheric CO2 limit that has been set to avoid catastrophic climate change will inevitably lead to a collapse of the coal industry and possibly much of the gas industry in the short to medium term. This is another factor our current government fails to acknowledge. Much of the associated unserviceable loans will fall onto the major Australian banks, the government, and the Australian taxpayer.
The alternative economic approach to neo-liberalism of balanced trade protection which allows a larger and more equitable mixed economy with a healthy manufacturing, service and resource export economy is essential for Australia’s future prosperity. This approach provides a ‘level playing field’ for Australian businesses but does not remove national or international competition.
So with a Labor Government likely to be returned in late 2016 that is most likely to support a balanced trade protection philosophy, why did Toyota announce the closure of its Australian manufacturing operations for late 2017? Will Toyota change its mind about closure of its Australian manufacturing operations after the expected Labor victory in late 2016? I and a few million other Australians certainly hope so.
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