Industrial Policy - Directions For Growth


Graeme Campbell





 

This position paper, written in in 1992, was composed when its author was in the Australian Parliament as Member for Kalgoorlie. It was an incisive critism of the internationalism of the Labor governments of the period after 1983. Even now, it serves as a valuable introduction to the new policies needed to win Australian economic independence. There has been a long policy break for those who place Australia first, occasioned by the advent of the pseudo-popular-conservatism of the One Nation party. That party paraded itself as the advocate of policies which seemed akin to those you will examine here. Perhaps it is time to develop a genuine nationalist response to globalisation? If so, this pamphlet may have a place in a new literature.



 

I- OVERVIEW Page 1

1- What is Industry Policy?: An Integrated Approach

2- City and Country

II- DEVELOPING AN INDUSTRY POLICY Page 5

1- Where to start

2- Analysis of industry sector

3- Division of industry into broad groups

4- Hope of gain or fear of loss

5- Industry policy analysis checklist

III- ADDRESSING SOME ASPECTS OF INDUSTRY POLICY

A- INDUSTRIAL RELATIONS

B- IMMIGRATION POLICY

1- Labour policy

2- Multicultural policy

C- TAXATION

D- FINANCING

E- RESEARCH AND DEVELOPMENT

F- GOVERNMENT PURCHASING POLICY

G- MARKET OPPORTUNITIES

1- No truck with...

2- Sour grapes

3- Ships that pass in the night

4- A bit of woolly thinking

5- We eat what we can, what we can't, we can

6- Harvesting the crop

7- Minding the mines

8- A flying start

9- The good news

IV- SUMMARY Page 20

V- APPENDIX : PROFESSOR HOBBS' PAPER

I- OVERVIEW

1- What is Industry Policy?: An Integrated Approach

Industry policy is the arrangement of circumstances to provide the best opportunities for chosen industries to develop, thrive and to continue. It is not just directions for manufacturing in isolation, it has to be integrated with influences as diverse as industrial relations, immigration policy, social welfare policy, taxation, environmental policy, research and development policy, foreign aid, government purchasing policy and above all, government attitude to its own people and country.

Industry Policy has to be sensibly integrated with such other policies, because taken together they have a direct bearing on employment opportunities and the future prosperity of Australia. For example it is absurd to continue to bring in large numbers of unskilled, non-English speaking people in our immigration program when employment opportunities for people of this background are dramatically shrinking.

I have repeatedly made this point - and began making it well before Mr Ruddock garnered the courage to speak out - only to be attacked by multiculturalists and rebutted by the Bureau of Immigration Research. Ironically, in its' recent publication, Immigration and Industry Restructuring in the Illawarra, the BIR belatedly seems to have acknowledged the shrinking employment opportunities for people of this background.

Government, though the tax system and other means should encourage investment in productive industry and not mere property development and speculation. This unproductive squandering of investment in property for short term gain was not only a feature of the 1980s, but has occurred repeatedly through our history. Immigration has historically been used to fuel such booms -most notably in the 1830s and 1880s - only to end in devastating economic depressions and severe debt. If the pattern continues there will come a day where our debt will be so large it will cripple us.

Government spending in general has to be very closely scrutinised and the massive wasted funding which goes to various unrepresentative lobbies and their fat cat bureaucrats redirected productively to the benefit of the community. This will involve a front-on attack on various politically correct holy cows, including the socially divisive policy of multiculturalism. There will be a media storm, but any government with the courage to ride out the empty sound and fury will find they have the support of the vast bulk of the general public.

We also have to reward initiative and work against the mentality that the country owes people a living. To do that though we have to create jobs and that needs a common sense industry policy.

But before even considering which industry policy approaches to pursue, much more fundamental questions have to be asked: do governments accept the principles, firstly, that the interests of the residents of Australia should be their first priority? And secondly, that this country is a democracy and that therefore the government should not pursue policies which run directly counter to the will of the great bulk of its population?

It might seem extraordinary that such questions be put, but since the late 1970s there has been plenty of evidence that successive governments do not accept these principles. At least they have pursued policies which have not only directly worked against the interests of locals, but seem to have held the opinions of locals in contempt.

The contempt for the general public among various vested interest bureaucracies has been palpable. They have actively conducted propaganda campaigns against the general public at public expense. They have put one hand in the public's pocket and slapped its face with the other.

Australians have been smeared by these government sponsored and politically correct bureaucracies as lazy, racist, backward and ignorant. These bureaucrats and academics have claimed that we have used this country so poorly that it is effectively terra nullius and migrants by the hundreds of thousands are our only chance for salvation. To this end, there has been a concerted attempt to undermine our moral right to occupancy of this country - and therefore to chose who comes here - involving a cynical use of Aboriginal people by multiculturalist lobbies.

Our leading politicians appear to have so little faith in us that they want to erase everything that has gone before and start with a new slate. We have to become Asians and if we resist this absurdity of social engineering, it only confirms that we are racist. These propaganda campaigns have involved such distortions and outright lies that it is a wonder that Australians believe anything their governments tell them any more.

And yet these campaigns have been quite effective in undermining local morale and increasing social tensions, both of which obviously run counter to Australia's best interests. As far as our economy goes, it is a common sense fact that good morale is fundamental to a healthy economy. And while Australians have been used to various foreign-orientated academics smearing them as second-rate, they have not been used to being relentlessly undermined by guilt-ridden instrumentalities of their own government, who at various points, have even called their value as human beings into question.

At the same time these new class ideologues have embraced utopian delusions about other people and cultures. While being ultra-critical about the culture and the country which supports them, they suspend their critical faculties when they gaze with wonder and awe upon others. Various Asian countries in particular are supposed to be marvels both economically and socially. As a result we not only have to emulate them, we have to - by some mysterious process of metamorphosis become them.

There is no doubt about the economic strength of Japan or the economic progress of the Asian tigers, but how many Australians would really want to live there?

On the contrary people from those countries want to come here.

While the development of a sound economic base is fundamental, and the major theme of this paper, this can only be done by building upon the strengths of this country and its people, of which their are many. While we can learn from the successes of other countries, we cannot progress by trying to become something we are not.

The government will not be able to impose its delusion that we are part of Asia and must become de facto Asians - aided by a counterproductive social engineering immigration program - upon a public which will not accept it.

Governments must work with the public and not against it in matters as fundamental as those involving basic questions of identity. A people will not change its identity to suit the whims of various governments.

We are not part of Asia and we do not need to become part of Asia to be successful. As I have said before the belief that we do really betrays a pitiful colonial cringe. Our leaders seem to feel the need, not only to apologise for being different in the region, but to erase that difference by erasing our identity.

A truly outward-looking intelligent, nationalist leader of Australia would emphasise the fact that we are a sovereign nation and a sovereign continent. As our first Prime Minister Edmund Barton said "A nation for a continent and a continent for a nation". Australian nationalism is not like some expressions of nationalism in Europe. It is not expansionist or imperial, it is fundamentally and deeply democratic. It rejects the policy of multiculturalism, which we must do if we are truly to remain one nation, but it offers a place to all residents of whatever background as Australians. It actively encourages our best traditions of free speech, free assembly and tolerance. For whatever the anti-Australian propagandists may say this is among the most tolerant of all nations.

Of course we should work at good relations with Asian countries and do what we can to increase our trade share with them, but we must take a world view. Far from being isolationist I advocate taking the whole world in view and not just attaching ourselves to one part of it.

But this must be done from a firm home base, with the confidence to stand up and be counted as an independent nation and not an appendage of any illusionary monolith called Asia. It is the government's role, among other things, to foster this belief in ourselves. To emphasise the great achievements of our past, to work with the best of our traditions and abilities and against the colonial cringe and cargo cult, for a bright future.

The solutions to our problems do not lie abroad and cannot be imported from there, they lie with us. There is no quick fix, it will be an ongoing battle, but we have the people and the attributes to succeed. Central to that success is the need for a strong industry policy.

This is the phil6sophy which underlines and informs my industry paper and which has to inform the country if we are to advance. That is why I say government attitude is so important. To sum up, we must put Australians. and Australia first.

City and Country

Apart from the problem of self-inflicted disasters such as multiculturalism, the biggest obstacle to Australia remaining one nation is the growing divide between city and country.

People in cities should realise that the great bulk of our export wealth which earns our way internationally comes from the country in the shape of agriculture and mining. The country effectively subsidises the city, but select people in those cities who produce no exports themselves - and again are usually funded by government - are attacking the very basis of our export capacity, which make our standard of living possible.

It is the legitimate role of government to clearly highlight the importance to Australia of these sectors. City people in general do not realise how Australia's export wealth is made. However these vital export industries do not provide enough employment for young people in country towns, who increasingly are coming to cities to look for work. Our cities are already overcrowded, yet people are leaving the countryside.

At the same time country services are being cut back or allowed to run down by Governments. This is particularly so in the vital area of communications. Australia Post has already closed down a number of offices in country areas and if the Industry Commission has its way much greater cutbacks will occur. Telecom has also cut regional staffing. This rundown of services makes it even more likely that people will leave country areas.

This cut back in services represents a very narrow blinkered view of user pays on a population basis, rather than looking at the overall picture, whereby the country actually subsidises the city. It is only reasonable that the country should be subsidised in these vital ways by the government in return.

Governments should encourage the development of regional industries to provide employment in the country. One obvious example which could be pursued is the harvesting of kangaroos and emus. While various species of small kangaroos and wallabies are in danger of extinction, mainly because of the depredations of foxes and cats, the grey kangaroo exists in abundance.

In fact the eastern grey is presently in plague proportions in western NSW, yet farmers are not allowed to harvest them. If the kangaroos were harvested, their numbers could be kept in check, instead of there being an explosion of numbers followed by collapse as they eat out the food supply, both for themselves and domestic animals. There is clear potential for the use of kangaroos and emus for meat and skin products. Kangaroo fur can be worked by local craftsmen and sold in the cities and internationally. With a little bit of imagination there can be many spin offs.

We cannot allow the country to wither and people in the cities to suffer high unemployment. We are all Australians and must emphasise the overall picture and the ties which bind us together.

II- DEVELOPING AN INDUSTRY POLICY

1- Where to start?

The starting point is an understanding of what we do well industrially and technologically, what our strategic advantages and needs are, and an understanding of our people.

A- In both agriculture and mining, Australia is a technological leader and highly competitive. But these are not enough in isolation. As an example in the West Australian economy in the years 1990/91 the value of mineral production (mostly exported) rose 15% on 1989/90 to $12.7 billion while the employment in this sector fell marginally. As there were reductions in almost all commodity prices, this means we increased our production by much more than 15%. The reduced labour demand was due to improved productivity. Since this trend will continue, mining in general is not the answer to our employment problems, though new mines in outback areas provide the best hope for the employment of Aboriginals in those regions.

In advanced technology development, particularly instrumentation, special vehicles, telecommunications, and medical technology, Australia is well recognised and a substantial exporter.

B- The strategic advantages of Australia are a wealth of sunlight and desirable environment, enormous marine resources, a range of climates for production of all forms of agriculture, massive mineral resources, political stability, large land mass relative to population, natural social cohesion -although in recent times this has come under threat - a comparatively well educated population, and the ability to undertake world class research and development.

The major strategic needs are cost effective transportation, clear communications, adequate surveillance, relative medical self sufficiency -especially tropical medicine, adequate regional defence capability, key elements of the construction industry and management of water resources.

C- It is important to recognise that the Australian people, being comparatively well educated are less suited to menial, routine and boring tasks. The great majority of jobs created in tourism will be of this type, with only a few positions available for challenging careers. At any rate the challenging positions have been largely filled by foreigners. Jobs at the tour guide level, which are among the best of the tourism-related jobs, have also largely gone to foreigners. Governments have shown very little resistance to this trend. Young well educated university leavers expect better than the menial jobs which may remain.

There are grave dangers in presenting tourism some sort of cargo cult solution to our economic and particularly employment problems. There are benefits to be gained from tourism certainly, but only if it is approached sensibly, with the interests of Australians as our major consideration. The tourism minister Mr Griffiths has some deluded idea that we have to undertake a massive construction program of luxury hotels. Who will this benefit? Even more debt will be accumulated, building up unproductive infrastructure for rich foreigners. We will be at the mercy of the whims of tourists and no doubt left with white elephants dotted along the coastline. A sensible tourism policy will merely be the icing on the cake of a integrated policy approach which makes the development of our industrial base the major goal.

Analysis of industry sectors.

The next aspect in developing a policy is an analysis of industry sectors based on strategic need and strategic advantage. The key yardsticks for such an analysis are:

* Control - Australian or Overseas (not Ownership);

* Extent and Value of Australian Intellectual Property

* Domestic Demand;

* Degree of Control of International Market by Australian versus Overseas industry;

* Existing and Potential Export Market and

* Potential Natural Advantages.

Division of industry into broad groups

Review of these key elements leads to division of industry into two broad groups 'Industries Necessarv for Commercial Stability' & 'Strategic Growth Industries'.

Any industry which exists and is profitable, fits into the first category. For an industry to be in the Growth Sector it must have most of the following attributes:

* Significant Australian Control;

* Significant Australian Intellectual Property;

* International Market Place Accessible to Australia and

* Natural Australian Advantage Identified.

As an example, there are sectors of the textile industry which would fit into this category on the basis of utilisation of Natural Advantages, Australian Control and Access to the Market Place - hence, profitability. In fact the major reasons for an industry to be non-viable in Australia are the existing control of the market place by a few large international corporations, small domestic market, and protectionism in addressable markets. The issue of freight costs and delays is more often an excuse than a reason for non viability.

It is opportune to revise the existing definitions of industry sectors and subsectors to take into account the new markets and technological development. By using the criteria set out on the accompanying industrial check list and basic statistical analysis, it will be possible to eliminate the ad hoc approach to prioritisation of industry and to provide a real economic and social basis for industry growth.

Such a suggestion will raise, at once, the mindless chorus from the flat earthers, that "you can't pick winners'. All successful countries have of course done just this. However, it is not necessary to pick actual winners merely to pick the directions that should be pursued.

To date, the sole tool for such an analysis has been 'flat earth' rational economic theory, a tool which is at best the second derivative of real industrial activity. It is imperative from a national perspective that the social costs of industry policy be accounted, for it is the society which creates and serves industry and the society which benefits from industrial growth. Destruction of a regional industry and hence, a whole rural community for example is a cost which should not be acceptable in a mature society.

Whether we approve or not, the French ethos to support local agriculture in the short to medium term is both humane, and, ultimately, for France the cheapest alternative. Education of the next generation for more appropriate skills is by far the preferred approach to the guillotine - evolution rather than revolution.

It is neither the right nor role of government to destroy its own national industrial base for the 'international good'. It is pleasing that countries such as France and Japan have national social responsibility and it is apparent that their societies reap the benefits. This is not to defend for all time the existence of nonviable, non-strategic industry, but to highlight that the treatment of industry by arbitrary tariff reduction, failure to protect from such practices, and ineffective anti-dumping legislation, is inappropriate and destructive to the long term economic viability of the country.

Hope of Gain or Fear of Loss.

It has become very fashionable to blame 40 years of tariff protection for our failure to develop competitive industries. While there certainly has been an overreliance on protection, this simplistic view ignores the fact that Japan used the same 40 years of even more stringent trade barriers to build up its own industries. The problem is more complex than generally allowed. As late as 1959, Australia produced more motor vehicles than Japan. Yet in the year 1990-91, Australia produced 368,000 vehicles, while Japan made about 13.5 million.

Because Japan owned its own industries, Japan had an export orientation, Japan used its very severe protection to develop its industries. The Japanese acted out of 'Hope of Gain'.

Let's contrast the Australian car industry in 1946 when the Chifley Government was contemplating a car industry for Australia. The Government had been advised by Mr Harnett, the then general manager of General Motors in Australia that in contemplating a car industry, it was essential to have our own car.

The Government however took an easier line and invited General Motors to build a car in Australia. So we had an American design that we could never market where the Americans did not want, or develop for our special conditions. General Motors was happy with the domestic market, protected behind tariff walls. We had the chance to design and build a car to suit our conditions - also the conditions of South America, South Africa, India, the Middle East and the Gulf States. We had the chance to develop the Volvo of the Southern Hemisphere but our leaders acted out of 'Fear of Loss' and a lack of faith in the abilities of locals.

The foreign owned car industry is still important because of the employment it creates and the current account outlays it replaces. We have to be careful that we do not throw away this residual value with inadequate tariff protection before we have the other jobs on stream.

We are much better placed with the truck industry and we have to make sure we do not repeat our previous folly. 7

- ADDRESSING SOME ASPECTS OF INDUSTRY POLICY AND INDUSTRIAL RELATIONS

Australia needs a new era of management-worker cooperation in manufacturing if we are to advance. Both sides must realise that both their futures, including the future social stability of the country, depends on intelligent and fair dealing with each other. The cost of division will be failure.

Many large companies seem able to get on very well with the union movement and many overseas experts say that the problem in Australia has been at least as much the fault of management as of labour.

Many of the new industries that evolve are going to be small to medium sized operations where there is a great deal of communication between management and workers. Whether or not such enterprises are unionised will be resolved at the work place. There will be a far greater participation and identification by the work force in all facets of its business and it is most likely that workers will be paid over the award rate or participate in profit sharing schemes or in some cases own the business.

In a society with a sense of direction, a sense of unity and reason to be confident about the future, industrial relations are bound to be less confrontationist. There can however, be no place for the nineteenth century attitude of some major mining companies and prominent people. In passing it is probably worth considering the behaviour of North Broken Hill and their subsidiary Robe River in relation to their own shareholders.

One of the great problems facing this country is the fact that we seem to be irrevocably driving down the American road of litigation. Unless corrected, this is going to place a cost on our industries that will more than offset any gain from Micro Economic Reform.

The resource industries are very vulnerable as access to the resource is fundamental to their continued existence. The recent 5 - 1 decision in the MABO case by the High Court will set off another round of litigation where, funded by the public purse, all manner of objections will be raised by the new class who have already done so much damage to this country.

In view of the unwillingness of all major political parties to take on the extremist movements, the best ally the resource companies can have is the trade union movement. Yet North Broken Hill enthusiastically embraces resorting to legal actions against not only unions but individual workers.

This is the sort of action that the company may get away with in times of economic downturn, but the worm will turn and the shareholders may have cause to regret the 19th century ideology of their management. In the meantime, expecting individual workers to be able to deal in any sort of equality with a company with this mentality is absolute nonsense. In the long run best returns to shareholders will come from cooperative programs such as TQM (Total Quality Management).

IMMIGRATION POLICY

1- Labour Policy

This subject has been written about extensively (see my papers Immigration and Consensus and Immigration Policy Proposals). It is madness to continue immigration when we have over 10% unemployment and the simple truth is that importing skills means that our youth miss out on training opportunities.

It is time that all political parties start listening to the overwhelming voice of Australia and not kowtowing to the vocal new class which may be loud in voice, but is small in numbers.

As my general position has been outlined in detail elsewhere, I will pause here only to consider the specific and less scrutinised example of immigration from New Zealand, including short term stays by itinerant workers. In particular I want to commend Clyde Holding on the paper he has written on the subject: "Proposals for Caucus regarding New Zealand immigration".

When the Trans Tasman Travel Agreement was introduced, it was at a time when Australia and New Zealand were moving closer together and in the mind of many, a merge was quite possible. Since that time the two countries have drifted much farther apart. There is very little benefit left for Australians in having automatic right of residence in New Zealand - in practice the benefits are overwhelmingly in favour of New Zealanders. Further as Clyde Holding states, "New Zealand students who study in Australia are treated as Australians in terms of paying the Higher Education Contribution Scheme (HECS), which means that although they come from overseas they do not pay fees upfront". They. are, like Australian students, supposed to pay the money back after graduation when their income reaches a certain threshold. Instead they can return to New Zealand and never repay the money they have borrowed, as they are not part of the Australian workforce. New Zealand students in Australia also are eligible for Austudy after only six months in the country. As Clyde Holding notes, "In April 1992 there were 6,160 New Zealanders on Austudy. This represents 1.73 per cent of all Austudy recipients" although New Zealanders comprise only 0.6 per cent of the university population.

We are subsidising New Zealanders at public expense, while New Zealand also uses Australia to reduce its own unemployment, a luxury we do not have. Clearly a work permit system should be introduced for New Zealanders.

The problem is most acute in the shearing industry where New Zealanders are shearing our sheep, often at under award prices. New Zealand shearers who stay in the country for periods of less than six months and are employed by fellow New Zealanders - a likely event given the widespread use of contractors - do not have to pay income tax in Australia. The tax ':s paid in New Zealand. In other words these shearers can not only take Australian jobs by undercutting the award, they pay no tax in this country. As Clyde Holding states, "New Zealand shearers take an estimated $130 million in wages back across the Tasman each year, with about 42 per cent of the Australian wool clip now being shorn by New Zealanders."

This is a practice which has already caused some violence in country areas and has the potential to cause much more. This will further rip the already strained fabric of our society and make much worse the growing dichotomy between rural and urban Australia.

This is not a reflection on those New Zealanders who have made a commitment to live and pay their taxes in Australia. Indeed, they are often the biggest critics of those opportunists who come over from New Zealand for six months and leave without paying tax in Australia.

Despite the denials of the Government, this is happening and the drop in sheep numbers make the situation worse. This is all the more reason why the government should immediately place work visa requirements on all new entrants from New Zealand.

The claim that freer trade relations between Australia and New Zealand makes necessary free movement of labour between the nations is a total furphy, one does not automatically follow the other. If an Australian government really believes that it does then freer trade with nations such as China would mean freer movement of labour. As the Far Eastern Economic Review noted in an article on 2 April, China officially classifies 200 million of its workers as surplus and is interested in getting involved in the labour export schemes currently running in South-East Asia.

These labourers are contracted out by wealthy third world elites to employers outside their country at very low wages. It is virtually a modern form of indentured labour. Is this the sort of labour market competition that the advocates of the free-trade/free movement of labour/integration with Asia have in mind? If so then one of the oldest of the Labour movement battles will have to be fought all over again. It can be clearly seen that the experience with New Zealand shearers is just the thin edge of the wedge and other Australian workers would be well advised to support the Australian shearers now, on this specific issue, before they find the insidious "free trade means free movement of labour" philosophy is used to dramatically undercut their own wages and working conditions.

2- Multicultural Policy

This policy would be rejected out of hand by the Australian people including migrants, most of whom want to be Australian. No government has ever had a mandate for multiculturalism. It was adopted by both major parties at the behest of those self-regarding elitists who genuinely think that ordinary people cannot be trusted and our salvation lies in their social engineering. The enormous financial costs of this policy have been outline by Stephen Rimmer in his book, The Cost of Multiculturalism.

In the struggle to re-establish full employment, and maintain our standard of living we need a united country with common aspirations. Official multiculturalism must be abandoned in favour of a policy of encouraging people to identify first and foremost as Australians. If people want to have ethnic clubs and activities, that is fine as it always has been in this country, but they cannot expect the government to fund them.

To all those advocates of national service we say that this will not affect the level of employment but it would serve as an opportunity to integrate everyone into a united Australia. It may even enhance individual responsibility. It is however costly and society must determine if it is cost effective. A five year trial period should give a good basis for judgement.

C TAXATION

This is a complex issue. It will be the subject of a separate paper. While there are some aspects of taxation that need to be changed, the problem was in part addressed in the government's 'One Nation' policy.

It is important to realise that taxation is not the most pressing problem. The main problem has always been the lack of a coherent industry policy. The one immediate point that needs to be made is that the present payroll tax is a tax on employment and it should be dropped even if it means redistributing it across the entire population.

 

FINANCING

The recession we did not have to have was brought about primarily because our current account was out of control. We had resorted to borrowing from foreigners to pay for the imports we wanted. Many of these were things we used to make. There was of course the need to finance the money that the entrepreneurs borrowed overseas. These borrowings were encouraged by the tax system that granted tax deductibility for interest payments. With the deregulation of the economy, the only tool left to the government was monetary policy. Interest rates were kept too high for too long.

By definition growing businesses need finance to increase working capital, fund plants and equipment expenditure and expand. This finance is required both in the form of equity and commercial loans. It is necessary to ensure that funds are available in both forms for growing businesses, whether small or large.

Historically the financial community in Australia has had a very short term view of return on investment compared to our most successful trading partners. The Government, or rather Paul Keating, has embarked upon a grand strategy high risk policy of compulsory superannuation. It is high risk for two reasons. Firstly the insurance companies already have too much power in this country and they have shown themselves to be less than competent in ensuring a decent return on the funds invested by their clients and it is doubtful if a captive clientele will encourage any better performance.

There is little or no fiduciary control on insurance companies and it is quite likely that one will fail with all the attendant traumas. Since we are never far from an election in this country, the pressure for a Government bail-out would be irresistible. Besides, there 'is always the equity argument that since it was government compulsion, there is an implied guarantee.

The second risk is that they simply will not invest in genuine industrial development, preferring to spend our money overseas or drive up our real estate values. A part answer for this lies in a charter of duties for trustees of superannuatiQn funds which emphasises the need to invest for the long term gain to match the interests of their investors. The long term gain for Australian retirees is definitely served by sensibly spreading investment, including a portfolio of developing business equity, even at a level of 2%.

The approximate $1,000 billion forecast for the application by the super funds over the next decade would provide over $20 billion for industry, a level sufficient to propel many of the languishing R & D successes into commercial winners.

Trustees and managers should be subject to public criticism and removal for failure to invest in business development. It is essential that this source of funds be tapped. A useful check on the performance of the super funds would be to see how money placed in a bank on fixed deposit and the interest compounded compared on rates of return after 10, 15 and 20 year periods. I suspect that even with the favourable tax regimes of super funds, the money in the bank would beat them.

 

E RESEARCH AND DEVELOPMENT

As a nation we are the Great Researchers, the Great Builders of the prototype. As a nation we spend lavishly on research; where we fail is development.

On average it takes 10 times as much money to go from the prototype to the saleable item, as it does to go from the idea to the prototype. Here again, 'One Nation' recognises the problem and attempts to ameliorate it. It does not go far enough and it will do little for the many small firms who often have the most fertile ideas. Removal of the 150% tax break and the threat to syndications will be the death knoll for small innovative companies.

One suggestion is to take the Development Bank out of the Commonwealth Bank and make it act as its original charter obliged it to do. With investment to a level of 50% of capital by superannuation funds, and an amalgamation of the ATG into this bank, the remaining capital could be open to corporate private investment with a low 10% tax on earnings in the first 10 years of operation.

Clearly that charter is uncomfortable with a semi privatised bank and the present arrangement is entirely unsatisfactory.

In the defence area alone there are over 90 million dollars worth of Industrial R&D projects that have already been looked at and await finance. These projects are both in the; applied sciences and engineering development. Out of these projects there would arise a host of new technology or new applications for existing technology.

In the Department of Industry, Technology and Commerce (DITAC) area the demand is in all probability even larger. The expenditure of $15,000 per annum employs one PHD student and provides an opportunity for invention for the future. The arguments by the Prime Minister that Australia has to develop smarter technologies and smarter approaches to production is very sound.

The answer is in these many already planned technology and product development projects awaiting funding. These projects are part of the answer to our dilemma, a ready source of technological advantage for the near future. The demand for industrial investment is not going to lead Australia to the 21st century. Government support is necessary. The facilities are in many cases already in place, awaiting funding for post graduate students and research staff to undertake the work. We should not pander to the few academics and researchers who demand massive investment in new infrastructure and research tools, but provide immediate support to those who can demonstrate a willingness and capability to proceed with technology development with existing facilities.

In its pursuit of the dual goals of improved employment and the clever country it makes absolute logic for the Government to consider funding this area with an annual block allocation of say $150 million. Such a move would demonstrate the substance of the clever country instead of empty rhetoric.

Roger Price has initiated a comprehensive study by the Defence Department in to several key areas. The relevance of these studies to industry policy in general should not be underestimated as Defence is a major purchasing power in the Australian scene, and if the industry policy and industry development are handled with the vision and strategic value which is expected, defence industry and defence technology could well be leaders in high technology exports.

However, there are two key issues which must be given credence. The first issue is the importance of DSTO to Australia, not just for its strategic role in technology and scientific support to the DOD in areas of sensitivity, but also as one of the two key elements for the development of Australian technology products appropriate to defence requirements. It is obvious that the returns to Australia by purchasing technology from overseas must be substantially less than returns from sale of own technology products. Whether the returns from overseas originated technology is in the form of offset or joint production arrangements or in the case of the submarine, joint venture share, the major value is in the form of employment rather than real long term growth to the economy. Control of own technology products provides for diversification into commercial arenas such as microwave devices for satellite communications, medical sensor technology, aerospace technology, advanced materials for corrosion and erosion resistance, among many; as well as direct export of the defence equipment.

The other key element for success in this strategy is a strong and well funded Defence Industry Development arm having direct links with DSTO and under the guidance of the ADF. Development of strategic technologies as joint projects between DSTO and industry will continue to be of significant strategic advantage to Australia as well as providing a strong technology product base to industry. The second issue is the importance of Defence approaching its needs responsibly and ensuring that the key technologies selected are maintained at a realistic and constant level to ensure that our technological advantage is not lost. In this field of endeavour there should also be a preference for Australian ownership and control to ensure not only that the technology stays in Australia but also that overseas interests do not control or limit the market potential for the products.

It is hoped that the initiatives will recognise the importance of these issues and that the outcome of the study will garner the support of the Minister for Defence.

It would appear that the Department of Defence is more aware of our strategic needs than DITAC. Though a large and vital department, DITAC seems to blunder along attending to its own agenda without any sense of national direction or purpose.

On the other hand they grasp at cargo cult solutions. An example of their attitude has been their enthusiastic advocacy of the ill-conceived Multi-Function Polis project. The Minister Senator Button, has of course been one of the most enthusiastic backers. The shortcomings of the MFP and similar proposed projects such as the Very Fast Train have been pointed out by Dr Joseph Wayne Smith of Flinders University of South Australia in a number of books and pamphlets, including one under the Kalgoorlie Press title.

So what must be realised is that no matter how relevant the recommendations coming out of Roger Price's inquiry without a change in government ethos they will serve only to fiddle with a few internal procedures.

 

F - GOVERNMENT PURCHASING POUCY

This is the nub of Industrial Policy for the government and government instrumentalities are overwhelmingly Australia's biggest customer. We have to recognise that the so called 'level playing field' is a scorched earth policy.

The Government should change its purchasing policy to one of 'Whole of Life Real Cost' where maintenance costs, reliability, government claw back via taxation and savings on reduced unemployment are taken into consideration.

There is absolutely no need to impose tariffs or to offend the sacred GATT, if government and government agencies had a simple philosophy that at the end of the day, they would buy Australian.

G - MARKET OPPORTUNITIES

Let's look at a few examples.

1- No Truck with ...!

Arguably, the best multi-wheel drive off road truck in the world is the Australian R.F.W. made in Sydney. R.F.W. is the only fully integrated truck designer built, left in the country and unless we take urgent action, they too, will disappear.Any objective test will demonstrate the superiority of these machines over the German and Japanese vehicles we buy in most cases.

However, R.F.W cannot ever complete against the predatory opportunity pricing used by these overseas companies. They drop the price $50,000 per unit and we come in like suckers. The people empowered to purchase do not have to consider the through life price of their folly and of course buying the Australian product does not offer the pleasure of the overseas trip, for evaluation purposes of course.

R.F.W have excellent, proven design and the government should encourage them to licence their technology to a group prepared to build trucks and we should ensure that the Army buys Australian when it replaces its present fleet. The French did not buy Mercedes Benz for their army. Australia actually purchased these overrated trucks instead of the perfectly adequate cheaper Internationals that used to be made here.

In the meantime, for specialised off road applications or other specialist applications such as crane carriers or airport tugs, compactor trucks etc, we should ensure that government and semi government entities buy the Australian product.

OKA motor vehicles are another example. This company makes a very good two ton 4x4 vehicle. The vehicle has a unique feature in that all the bodies variant are modules that are fitted to a very rugged well sprung chassis. Otherwise there is nothing radical about the design except that simplicity and ease of service has been built in. The vehicle was designed specifically with the Australian mining industry in mind and is probably the only production vehicle that meets specifications for use in mining operations yet can be dnven very comfortably on the highways. It uses, in the main, Australian made spare parts that are obtainable from any Coventry or auto parts dealer. The company presently has the capacity to make about two and a half vehicles a day rising to about eight when its new additions are complete.

OKA have in hand export orders for Brazil, Gulf States and Africa which they cannot meet without an increase in capitalisation that is presently beyond them. They have had no help from the Federal Government in fact the only contact with DITAC cost them considerable time and money to put together a submission that DITAC rejected because they claimed Australia did not want any more vehicle manufacturers.

Australia is the biggest per capita user of 4x4 vehicles and the stupidity of the department was recognised by Senator Button who wrote a letter acknowledging that this was a much needed market that should be encouraged. The only real help the company has had has come from Argyle Diamonds mines who recognised it's need for a better vehicle and are very pleased with the performance of it's OKA vehicles. Subsequently, Hamersley Iron influenced by Argyle Diamonds have placed orders for OKA. The mining companies would enormously increase their base of influence in the community if we had a manufacturing industry to serve their needs. They should be encouraging manufacturers to get together to build equipment for the mining industry. In the meantime it would be a good investment if the Government gave a grant to OKA to consolidate their position.

Despite the Prime Minister's enthusiasm, building a new Toyota factory in Melbourne will not materially alter our position. It is foreign owned and merely rearranges the deck chairs.

Sour Grapes

The Hewitt brothers in Mildura have pioneered a new market for Table grapes. Great Britain is the biggest market in the world for table grapes. It is however a very sophisticated market that wants a sweet soft skin seedless green grape. This is of course a description of the sultana grape. They devised the slogan "clean food from a clean country" and successfully marketed the grape in Britain getting world record prices and a demand for more and more.

The reaction in this country was for AQIS, the Government quarantine agency to illegally ban the export of sultana grapes preferring instead to see the export of the Johnson seedless grape that was rejected by the British customers. This decision was one that should have been made by the market. However the situation is much worse than this as the plan of the Hewitt brothers was to grow their grapes using trickle irrigation where moisture level determines water flow. This form of irrigation would play an important part in tackling one of Australia's most pressing environmental problems, namely the salination of the Murray River.

It would take five years to increase production to meet this demand and would have opened up European markets for many of our other horticultural products. Europe is a bigger, richer market than Asia and we are entirely stupid if we adopt only the mindless Keatingesque tunnel vision of Asia.

 

Ships That Pass In The Night

For strategic reasons we ought to have a large maritime industry.

There has been a tremendous and on-going reform in our shipping. With better ships our manning rates and wages are competitive with any of the OECD countries. We should not expect our citizens to compete against the rice bowl and rust bucket vessels that pose an environmental threat out of all proportion to the gains that the National Farmers' Federation thinks that their open slather competition will bring.

If we are to have a substantial maritime industry then we should be looking to build the ships here. After all Australia does have certain advantages. We have the best climate in the world for shipbuilding. We have a well trained work force. We can competitively produce quality steel. To be successful we would have to have a single union agreement with a responsible and involved union. We would need a greatly upgraded management skills and the commitment by Government for infrastructure.

A Bit Of Woolly Thinking.

Australia is the world's leading exporter of garment wools, producing about 85% of the wool traded in the area.

Wool is traded internationally as wool tops yet we continue to export our product primarily as greasy wool. The Germans are considering establishing a very large top making plant in Geelong. To this end, they have sought a 20 million dollar grant from the TCF Development Fund. It should be realised that the Germans are considering coming to Australia entirely for their own advantage, one of the reasons being that the resultant pollution is far easier to handle in Australia. What this company i~ doing does not materially alter the wool industry in any way. They will probably relocate here without any Government help, but if the Government put money into this new plant, it should be on the basis of ensuring that there is no transfer pricing and that we get all the benefits of the value adding.

A far better option is the Austop proposal that will see smaller custom scouring and top making plants set up in regional areas thereby creating employment and growth in our embattled rural areas and reducing the cost of production, doubling the value of the product by opening trade in tops.

 

We eat what we can; what we can't, we can

It is an absolute outrage that processed food comes into Australia in the amount that it does. We are surplus food producers and the Government should take whatever steps are necessary to ensure that we process our own food. This might mean special depreciation rates for new plant and equipment, soft loans, and a special task force to study best practices. A good start would be to ensure that any processed food coming into Australia meets the same high standards of production and purity that we demand of our exports.

The "Active Packaging" being developed by ANL should be given the highest priority and every government assistance given to an onslaught on export markets for our fresh fruit and vegetables.

The UK should be a prime target because we produce out of their season. There is a residual memory of good Australian produce and they genuinely like Australia.

Harvesting The Crop

For a country that was in the forefront of mechanical farming, the country that invented the combine harvester, a country that has such a basic need for farm machinery, it is an indictment of our self esteem that we have let this sector vanish from the land. It is probably a function of the overwhelming foreign control and it should be addressed if necessary by a phasing out bounty similar to that successfully applied in the Shipbuilding industry.

7- Minding the Mines

Australia is a large and efficient miner by world standards. The attached paper by Professor Hobbs of the CSIRO Division of Geomechanics lays out the case for manufacture of mining equipment here in Australia.

Manufacture here would lead LO export demand as we are recognised as being in the forefront of best mining practices.

A Flying Start

Australia came out of the 1939-45 war with considerable expertise in aircraft production. For a country rich in aviation history and having a geography that cries out for aviation, this is not surprising.

We forfeited any chance we had of staying competitive in the fast evolving world of jet aircraft when we refused to join the UK in a joint venture to produce the TSR2, opting instead for the security blanket of the American aircraft industry. We should however look at the light aircraft section of general aviation. Most of the engines used in light aircraft are by now forty years old in design. They are by today's standards, inefficient with an unacceptable power weight ratio.

Since the Sarich fuel injection system seems to have remedied the defect of the two-stroke engine, we should look at adapting the Sarich engine for aircraft and utilise the higher power weight ratio that two-strokes offer n6w that their previous unreliability and heavy fuel usage have been overcome. Engines are the heart of any aircraft and aircraft engine manufacture would be a big business. Perhaps we could fund the RAAF apprentice school and DSTO to modify and develop the Sarich engine for this purpose.

 

9- The Good News

Despite the gloom, there are some areas of good news.

The fast aluminium ferry and luxury yacht manufacturing on the Kwinana strip is an example. Australia leads the world in this type of vessel and there has been some flow-on to other industries. For example:- the Victorian Tapestry Workshop was commissioned to make wall hangings for Oceanfast luxury yachts and as a direct result several tapestries have been commissioned from overseas. The work done in Victoria is considered equal to any in the world and is very competitive in price. The same success has been enjoyed by the artists commissioned to do painting on silk and the works have subsequently found a market in London.

The manufacturing of high speed aluminium boats is particularly buoyant and would probably survive without the 10% ship building bounty. However, the bounty is a useful margin and instead of phasing down over two years at 5% it would be much better to provide one year at 10%. Even better would be to continue the bounty at 10%, especially if it could be levied into research and development on new designs or materials.

This industry has made very little use of government research and development incentives as they claim the paper work necessary to get the assistance is too onerous and in any case it is too hard to access as it is allocated by people who simply do not realise that the application of an existing technology is both expensive and time consuming. The continuation of the bounty at 10% would in fact be reasonable compensation. It also makes a lot of sense to assist the industries that are doing well and help them stay in front. Beyond aluminium there is composite materials and perhaps titanium or magnesium.

The Oceanfast vessels are particularly good sea boats and afford much higher speeds and fuel economy in following and beam seas than our naval patrol boats, even head-on in heavy seas they perform better than naval craft. It is bizarre in the extreme that for the next generation of naval patrol boats we are allowing the navy to mess ar9und with a demand for proven designs from overseas.

We are the leaders and it is unbecoming for the R.A.N. to affect the cultural cringe and unforgivable for any government to allow them to do so. There are more good news stories but they are overshadowed by the many more bad news stories of good products and ideas failing for want of capital, marketing expertise, simply going offshore or falling into foreign hands.

 

H - SUMMARY

Full employment is a government responsibility. This does not mean that the government should provide all the jobs. Indeed history is littered with the wreckage of such experiments where governments do create jobs. The employment should be in projects of long term value, projects of needed infrastructure that are currently not economically viable. In rural areas there is a great need for infrastructure and amenities that will not only provide for the future but inject desperately needed cash in the local economy. Local government is probably the best vehicle for such venture.

Government should provide the necessary incentives to encourage, indeed lead the private sector in the chosen direction. There is ample evidence that market forces alone are totally inadequate. Government should

1- set the scene

2- help, not hinder

3- ensure that seed capital is available from somewhere and if necessary provide it at sufficient levels to get the job done.

Governments must realise that if we are ever again going to attain full employment, then the right industry policy is the missing link. If we use sensibly integrate our policies and refer to and in the accompanying check list, we can intelligently determine what industries we should foster. Then we can use our resources including government purchasing to pursue them.

There is very little that is rational about the so called rational economics that we have been pursuing. Its practitioners and advocates were for the main part neo classical adherents. They would extol Adam Smith but unlike Adam they assumed that the whole world would play their game and act rationally. It is amusing to see so many of the big name academics shifting their ground and now maintaining that rational economics is something else.

There are of course still the dogmatists like Professor Garnaut who preach the level playing field and say we should not assist manufacturing in this country. It is amazing that such a shallow doctrine has claimed so many adherents on both sides of politics in this country.

Already the warning signs are there to see for our greatest export industry, mining. The Australian mining companies are getting access to the Pacific Rim, South America and lately Mongolia where wages are about A$37 per month. Because we, the greatest mining country in the world have never produced our own equipment, it is quite possible that our miners will go increasingly off shore and we will be left with nothing. Cutting wages is not the answer. Someone somewhere will always cut them more. The ethos in Australia always used to be a fair day's work for a fair day's pay. Given the right leadership and visible equity in distribution of the rewards, instead of the deepening chasm between have and have not, the Australian worker will respond. We have to add value where we can. We have to innovate. We have to restore dignity to the working man. It is probably not worth the effort to challenge the humbug of craven academics, safe in their ivory towers. Better to pass them by but insist that our politicians put Australia first and the internationalists have had their day, although they have always been a minority. They have been the elite, they have had with a few exceptions the slavish support of the media, academics and many politicians eager to thrust themselves on the world stage. Now is the time for some good honest outward looking nationalism.

The following policies are key to an integrated Industrial policy

* Identify our industry sectors with growth potential and support them

with sensible bounties, taxation incentives and accessible finance.

* Use government purchasing policy and a real economic cost model to give these growth sectors a sound domestic base.

* Integrate (not diversify) our workforce. Stop supporting multiculturalism.

* Reduce immigration, especially during recession.

* Establish a charter of duties for trustees of superannuation funds,

leading to long term investment in developing business, to match the long term requirements of retirees.

* Re-establish the Commonwealth Development Bank as the source of development finance for new and growing productive business.

* Immediately increase funding for Defence, DITAC, and DEET R & D programmes, especially those which use young researchers who are unemployed.

Such a policy requires a sense of purpose and above all a sense of our own worth. The pressure groups that exert so much influence on governments are living demonstration of the truth that illusionary power is just as good as real power if it is not challenged.

August 1992




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