The billionaire philanthropist Warren Buffett once remarked in relation to a stock market crash and individuals out of their depth, that ‘it’s only when the tide goes out, can you see whose been swimming naked’.
The one thing the Coronavirus has done above all else, is focus the collective minds of Australians and hopefully our political class on the exposure of our supply chains because ever since the signing of the Lima Agreement in 1975 by the Whitlam Government, regarded by many as the greatest act of economic self-harm and economic vandalism that a nation could possibly do to itself, manufacturing in Australia has been in terminal decline.
Like Buffett’s ebbing tide analogy, the Coronavirus has simply exposed just how embarrassingly naked and dependent we are on others, particularly China. All it took was an invisible virus.
The results that flowed from the signing of the Lima Agreement all those years ago has been no accident. It’s worked exactly as designed.
It was a deliberate act, to encourage manufacturing to move out of Australia into third world countries to help them develop and lift them out of poverty and started with the surrender of our textile and footwear industries.
The idea was that developed first world countries like Australia would gradually shift our economies to the service industry sector — soft industries, like the tourism and education sectors, particularly universities with overseas paying students.
Then in the 1980’s and 90’s Australia hooked up with globalism, free trade and the dismantling of tariffs which to be fair has its upsides as well as its downsides, that treated the world economy as one big market bizarre so it really didn’t matter where your stuff was made as long as it was a mutually beneficial arrangement.
In this case, the third world got the turbo-charge to their economies and we got the benefit of the cheap labour of China, Vietnam, Indonesia and India reflected in the cost of our imports.
By way of example. the upside has been the vast array, choice and availability of the sixty four different cars we can buy today at a relatively cheap price and of higher quality compared to the five or six local makes and models back in the seventies. You could buy an imported car but with very heavy tariffs designed to protect our local car manufacturing.
The downside apart from the now exposed reliance on others and the tenuous supply chain, has been the loss of our own uncompetitive car manufacturing and the associated industries and trade skills down the production line.
Everything from steel, to windscreens, tyres, glass to even the headlight manufactures.
Now, apply that same outcome and multiplier effect of the car industry to the many other local manufacturing industries and the problem begins to crystallise.
That is how we got to where we are today. And now there’s yet another government inspired roadblock and impediment.
Into the 2000’s and on top of the Lima Agreement, globalism and unfettered free trade, over the last ten or fifteen years as part of the push for green energy, we’ve seen the deliberate surrender of our comparative advantage in energy costs and the push away from cheap, available and reliable coal fired power to subsidised renewables and as a consequence our power prices have sky rocketed.
This in turn has caused those remaining local manufactures to reconsider their positions and arrive at the conclusion that manufacturing in Australia is uncompetitive and just too expensive and so they have either closed down, moved off shore or switched to importing and distributing the very things they used to manufacture.
But now in 2020, with the Coronavirus, a whole lot of chickens are coming home to roost from a whole out of different directions which presents the government with a nightmare dilemma in that if we want to bring back manufacturing to Australia to reinforce and embed our supply chains, the government is going to have to address energy costs and make them attractive once again by very delicately threading the political needle between the cost of renewables versus the cost of coal-fired power.
Renewables are and always have been, niche and boutique at best and can’t compete with coal without taxpayer subsidies.
If the government is serious about lower energy costs to attract manufacturing the choice for available, reliable and affordable electricity is abundantly clear and involves going all in on coal fired power at least in the short term while nuclear is ramping up over the longer term.
It should be a no brainer.
There are no other choices and the Dusty Springfield option of ‘Wishin’ and Hopin’ is no choice at all.
Make no mistake, this Hobson’s choice, this dilemma, has been created over fifty years solely by our political class.
As Professor David Flint observed several years ago:
“..It’s hard to think of even one of today’s problems which, if it weren’t created by government, they’ve made them significantly worse. From replacing the lowest energy costs in the world with the world’s highest, today’s politicians have hardly earned our confidence..”