Analysis and Commentary

Election 22 the real issues – adding value by Professor Danny Samson

Analysis and Commentary

@AuManufacturing’s occasional editorial series on the real issues in the 2022 federal election continues today. Here Danny Samson asks why doesn’t Australia add more value through manufacturing, and can we ever hope to?

Our economy generally does well, regardless of the fact that we are a commodity-based exporting country, evidenced by the 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 iron ore and other metals exports, and even worse in the current and future era of fossil fuels phase out, coal. We even have a prime minister who took a lump of coal into Federal Parliament and waved it about.

The loss of our automotive industry signalled another step downwards in the richness and diversity of our economy, as measured by the Harvard Index of Economic Complexity where we dropped from 55th, to 86th ranked nation since 1995, and are now wedged between 85th ranked Paraguay and 87th ranked Uzbekistan.

Our commodity resources make us something of an anomaly of a nation in that we hardly add any value to what we dig up and grow (hence 86th), yet we live well, with GDP per capita of $55,000 making us 8th richest country in the world.

Some key questions are of who cares about this and what future does it predict?

On the question of ‘who cares’, part of the answer would seem to be ‘not our politicians’, because they have disinvested (in real terms) for decades in our universities, R&D and innovation infrastructure, and seem unable or unwilling to get seriously interested in opening the economic black box that shows our nation’s riskiness going forward.

This myopic approach is understandable but inexcusable, and definitely not good enough, leading the Harvard index analysts to comment pessimistically about our future prospects.

We also have a risk averse business culture and comfortably profitable and cosy 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 it means tilting the playing field in our favour at least a little bit, as other nations do.

We need powerful national policies and encouragement for energy renewal, sustainable and export-oriented food supply chains, and embracing of digitally enabled exporting of services that are actually bold, and are an order of magnitude more impactful than the current whimpers.

We need strong local procurement policies from all levels of government.

Consider Singapore, Israel, Taiwan, China, South Korea, where there is a focus in each place on specific industry developments.

We have lots of sunrise start-ups here, with all too many of our entrepreneurs going overseas to achieve growth and success, and very few indeed seeing Australia as the best place to build business value.

Good news: it’s not too late.

Can one of the federal political parties please create a bold and impactful national business plan?

If government significantly catalyses it, businesses will come to the party in droves.

Dr Danny Samson is Professor of Management at the University of Melbourne, holding degrees in chemical engineering and business. He is programme director, Masters of Enterprise and Supply Chain Management, a director of the Australian Institute of Management and co-editor in chief of Operations Management Research.

Picture: Dr Danny Samson

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