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Talking Politics

Even highly automated production needs highly skilled labour to manage workflows and keep everything ticking. Highly skilled professional labour cost more, not less. So for me it's not about workers being paid less, more about having the right skills for the right industries, whether manufacturing, service, etc.

We'll never compete with Asia on labour costs, so we have to be smarter in terms of picking technologies, industries and markets. Once upon a time we were world leaders in solar and renewable energy technology - but the powers that be considered it better to sink more money into oil and gas subsidies.
 
Labour cost is definitely a major factor. I spent many years in consumer products and cost of production in lower labour countries in Asia was a major factor for where we produced. The Labour cost differential is so high that even halving Australian labour costs would not necessarily make a difference. Automation would help but US companies as an example tend to not want large scale capital investment and increase their exposure to foreign currency. They like to keep their capital base low.

Low capital base, low labour cost, low land and building costs are a great incentive to foreign manufacturers and that is where a lot of the developing world has a competitive advantage and a large one.

There is no doubt that our labour practices, some of our indirect taxes and things like the carbon tax do increase our costs but where I differ to some of the statements on this is that I don't believe any of them make enough difference to change the basic economic model of manufacturing in low labour cost countries in most cases. None of them is the reason why we are losing manufacturing base, it is just the natural cycle of an international economy where manufacturing moves to the lowest cost and we are not the lowest cost by a very large margin. We are far too affluent as a nation to be in that space.
 
Baloo said:
Asians is a pretty big catch all. From India to Japan. That's got to be about 50% of the population.
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population-map-1024x626.jpg
 
Sintiger said:
Labour cost is definitely a major factor. I spent many years in consumer products and cost of production in lower labour countries in Asia was a major factor for where we produced. The Labour cost differential is so high that even halving Australian labour costs would not necessarily make a difference. Automation would help but US companies as an example tend to not want large scale capital investment and increase their exposure to foreign currency. They like to keep their capital base low.

Low capital base, low labour cost, low land and building costs are a great incentive to foreign manufacturers and that is where a lot of the developing world has a competitive advantage and a large one.

There is no doubt that our labour practices, some of our indirect taxes and things like the carbon tax do increase our costs but where I differ to some of the statements on this is that I don't believe any of them make enough difference to change the basic economic model of manufacturing in low labour cost countries in most cases. None of them is the reason why we are losing manufacturing base, it is just the natural cycle of an international economy where manufacturing moves to the lowest cost and we are not the lowest cost by a very large margin. We are far too affluent as a nation to be in that space.
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I imagine the end of the cold war didn't help much. Maybe as such a small economy we shouldn't have dropped our tariffs, maybe Keating was wrong (wash my mouth out!)
 
KnightersRevenge said:
I imagine the end of the cold war didn't help much. Maybe as such a small economy we shouldn't have dropped our tariffs, maybe Keating was wrong (wash my mouth out!)
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Mercantilism just won't go away.
 
Giardiasis said:
Mercantilism just won't go away.
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Well then how do we compete? A small nation, any small nation, that didn't participate in and expand during the industrial revolution is now hamstring aren't they? Imagine you are visited one night by the PM and Treasurer and they ask you to be the architect of a program of change that will take decades or more but will ensure Australian economic success. What would be you're formula? What area would you first reform? Who would bare the lion's share of the burden and how would you justify it to them?
 
We used to have cheap energy and high labour costs, now our energy isn't cheap.

But high labour costs usually mean everything costs more. Land, Building, Toilet Paper, Coffee the whole shebang.
So your not going to get investment in anything but services.

I reckon Education would be a good one. We are close to a huge population that needs to be educated. We are reasonably well educated ourselves we are relatively safe. You don't need cheap labour
 
Don't disagree. Education for international students until recently was our 4th biggest export. It's dropped off recently because of the high Australian dollar, perceptions of the quality here, publicity over racism towards international students, and other western countries getting better at promoting their offerings.
 
KnightersRevenge said:
Well then how do we compete? A small nation, any small nation, that didn't participate in and expand during the industrial revolution is now hamstring aren't they? Imagine you are visited one night by the PM and Treasurer and they ask you to be the architect of a program of change that will take decades or more but will ensure Australian economic success. What would be you're formula? What area would you first reform? Who would bare the lion's share of the burden and how would you justify it to them?
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When you say how do we compete, you are referring to a specific group of people, namely Australian producers. This group needs to be separated from the real group of people that we should concern ourselves with, that being Australian consumers. Setting protectionist policies such as tariffs etc work to benefit producers, at the expense of consumers.
The interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.

The best way to look at tariffs or import quotas or other protectionist restraints is to forget about political boundaries. Political boundaries of nations may be important for other reasons, but they have no economic meaning whatsoever. Suppose, for example, that each of Australia's states were separate nations. Then we would hear a lot of protectionist sooking that we are now spared. Think of the howls by high-priced NSW manufacturers who would then be complaining about the "unfair," "cheap labor" competition from various low-type "foreigners" from Tasmania, or vice versa.

The market economy is one vast latticework throughout the world, in which each individual or groups of individuals produces what they are best at and exchanges that product for the goods and services of others. Coerced restraints on trade--such as protectionism--cripple, hobble, and destroy trade, the source of prosperity. Protectionism is simply a plea that consumers, as well as general prosperity, be hurt so as to confer permanent special privilege upon groups of less efficient producers, at the expense of consumers (and producers without sufficient political clout to garner government privilege).

To answer your last question, the PM and the treasurer would never be able to understand a situation in which their jobs don't exist (at least in the significance of them), so it would be a rather futile exercise.
 
Giardiasis said:
When you say how do we compete, you are referring to a specific group of people, namely Australian producers. This group needs to be separated from the real group of people that we should concern ourselves with, that being Australian consumers. Setting protectionist policies such as tariffs etc work to benefit producers, at the expense of consumers.
The interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.

The best way to look at tariffs or import quotas or other protectionist restraints is to forget about political boundaries. Political boundaries of nations may be important for other reasons, but they have no economic meaning whatsoever. Suppose, for example, that each of Australia's states were separate nations. Then we would hear a lot of protectionist sooking that we are now spared. Think of the howls by high-priced NSW manufacturers who would then be complaining about the "unfair," "cheap labor" competition from various low-type "foreigners" from Tasmania, or vice versa.

The market economy is one vast latticework throughout the world, in which each individual or groups of individuals produces what they are best at and exchanges that product for the goods and services of others. Coerced restraints on trade--such as protectionism--cripple, hobble, and destroy trade, the source of prosperity. Protectionism is simply a plea that consumers, as well as general prosperity, be hurt so as to confer permanent special privilege upon groups of less efficient producers, at the expense of consumers (and producers without sufficient political clout to garner government privilege).

To answer your last question, the PM and the treasurer would never be able to understand a situation in which their jobs don't exist (at least in the significance of them), so it would be a rather futile exercise.
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I don't in principle disagree with much of what you have said. I would love to live in a world without borders or races or currency. But seeing as that is pretty unlikely I was hoping for was an explanation of a staged transition from our "imperfect" economy to one you envisage as better and what that might look like in the real world?
 
Hornets nest here I come!

Many issues here that deserve discussion.

Knighter asked "how do we compete"? Well in my case I produce and print on textiles (among other activities). This is the industry that Whitlam supposedly killed off when he dismantled the high tariffs that textiles enjoyed up to the early 1970's. And yet my business hangs on by a thread (no pun intended), because I looked at what we could do that the Asians can't. The answer was small volumes because (1) the small $'s don't interest the Asians, and (2) the freight cost on small volumes kills their cost advantage. We also set out to slash our production times so that orders could be produced and on their way to customers within 3 days. If urgent orders are needed then Australian buyers come to us. So Knighter this is one small example of how my tiny manufacturing company competes with the Asians.

Using the over-all term "Asians" is horribly misleading. People think that all Asian economies are low cost and this is just not true. For example, I've imported product (not textiles) from two Chinese companies and a Taiwanese company for nearly 10 years, and they tell me they are reaching the point where they are finding it difficult to compete with low costs out of Vietnam, Indonesia and Bangladesh. We stick with them because we trust them and their product quality. But the point is the Chinese were a low cost economy 10 years ago but their standard of living has increased to the point where they are just now beginning to experience the same sort of problems we in the West have. Their wages have increased way beyond the "low cost" countries like Bangladesh. So please, don't lump all Asians together and assume they all work for $1 a day as some on this forum would have us believe. It's not true, and the recent experience of China reflects this.

IMO Australian manufacturers have to treat "each problem as an opportunity". Don't be negative and think outside the square.

And then there's the opportunities our high standards of Education gives us. R&D by people with lots of letters after their names gave us Cochlear ear implants to use just one example. And Michael's comment on Education as an industry we can export is also a good one.

We also need to understand that as the world's population grows they all need to be fed. And guess which country is well equipped to be the food bowl of our region?

But above all, we need Politicians capable of understanding the challenges and then implementing the changes necessary to make them happen - reform of the tax system, less regulation, less middle class welfare, etc. And we need Union leaders who understand that ever increasing wage demands and other benefits need to be seen as part of the bigger picture of reforming our economy so we can compete. Getting higher wages and benefits (beyond inflation levels) for their members may be self defeating in the long run.
 
Essentially agree with G-man on tariffs, unsustainable.

Antman's point is correct, higher skills means higher pay, but there only finite highly skilled jobs. ie, if all the unskilled factory workers trained as robot mechanics (putting aside their ability or desire to do so), they wouldn't all get a job.

Excellent post Poppa. A friend of mine has a third gen family fishing line factory. He has innovated and battled cheap imports for 15 years by diversifying (whipper snipper line) and better quality. Unfortunately low volume doesn't apply here. Sadly, the writing is now on the wall due to the duopoly in Aus and their buying power and ability to dictate terms (ie. political power). His line is proven better quality and price competitive, but they don;t care. If their margin is 0.001 higher, they'll take it.

Another wider point not being mentioned is the big one: political power. The big boys, the US, Japan, China and Europe, can and do demand their competitors drop their tariffs in their areas of strength, but won't drop their own tariffs in their areas of weakness. Smaller countries like us don't have the military or economic strength to do this.
 
just in case anyone wasnt sure what kind of person Cory Bernadi is he has given more proof (and just a reminder he is the no1 senator for the Libs in SA, so they are very happy to ensure he continues to be re-elected)-

Cory Bernardi calls for debate on abortion in controversial new book

Prime Minister Tony Abbott is under pressure to distance himself from Liberal Senator Cory Bernardi after the backbencher called for a new debate on abortion, railed against "non-traditional" families and called for more flexible industrial relations laws.
Senator Bernardi, a former parliamentary secretary to Mr Abbott, has made the controversial comments in his new book, The Conservative Revolution.

Senator Cory Bernardi has called for the traditional family model to be restored to "prime position". Photo: Andrew Meares
In his book, Senator Bernardi accuses some women of using abortion as "an abhorrent form of birth control" and branded those who advocate for abortion to be available as "pro-death".
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He writes that the number of abortions performed each year in Australia by the "death industry" is "horrendous and unacceptable".
"The political pressure from the left has ushered us into a morbid new world. It is not enough to stop the trend. What is needed is a reversal back to sanity and reason."
Interviewed on ABC TV on Monday, Senator Bernardi stood by his book, and called for a fresh debate about abortion.
"The question is for everyone in this debate, where does life begin?" he said.
"For me it's at conception, for other people it is 24 week of gestation, others say it's not until the child is born and a sentient being, some weeks after birth.
"I haven't said we should outlaw or prohibit abortion, I have said there is a right-to-life issue we should be exploring."
In his book, the South Australian senator calls for the traditional family model to be restored to "prime position" over other family arrangements such as step families, same-sex and single families and couples with children born via surrogacy.
"Given the increasing number of 'non-traditional' families, there is a temptation to equate all family structures as being equal or relative," he writes.
"Why then the levels of criminality among boys and promiscuity among girls who are brought up in single-parent families, more often than not headed by a single mother?"
He writes that it is "perfectly reasonable and rational" for the state to "reinforce and entrench those aspects of traditional marriage that work, not undermine them and promote 'alternatives' which have led to social chaos".
Senator Bernardi also writes that government programs to assist disadvantaged children such as breakfast clubs undermine parental responsibility by fostering a mentality that the state would provide.
He said the diminished influence of religion in Australian society had left the country lacking direction.
"I believe that by stripping God and religious principles from our culture (and our politics) we have become a nation which does not know which port it is sailing to," Senator Bernardi writes.
But he identified Islam as a threat to the Western way of life, and also attacked what he called the "green agenda" which he said gave a greater value to plant and animal life than humanity.
Senator Bernardi also called for more flexible workplace laws, saying some parts of John Howard's WorkChoices laws deserve revisiting.
"Surely an employee should be free to negotiate an acceptable workplace agreement directly with their employer ... free from government or union interference," he writes.
"Small business needs to be empowered to hire and fire employees free of illegitimate government interference."
The comments are likely to prove an unwelcome distraction for Mr Abbott, who has sought to neutralise the issues of industrial relations and abortion.
During the 2010 and 2013 election campaigns Mr Abbott insisted WorkChoices was "dead, buried and cremated". And in 2013 Mr Abbott pledged the Coalition had no plans to change abortion laws after then prime minister Julia Gillard gave a speech warning "men in blue ties" would make abortion rights their "plaything" if the Coalition won power.
No stranger to controversy, Senator Bernardi was re-elected to the Senate in last year's election in the No.1 position on the Liberal Party's South Australian Senate ticket.
Senator Bernardi served as Mr Abbott's parliamentary secretary in opposition for more than two years, until he was demoted in 2012 for a speech in which he said sanctioning of same-sex marriage would lead to demands to legalise bestiality.
In 2010, Senator Bernardi called for a ban on wearing the burqua in public, and in 2011 he declared it was "wrong" for the government to pay the funeral expenses of asylum seekers who had drowned.
In December, Senator Bernardi issued a public ultimatum to Liberal frontbencher Malcolm Turnbull to either quit the ministry or stop publicly advocating for same-sex marriage.
Senator Bernardi said on Monday as a backbencher he was not bound by cabinet solidarity.
Labor frontbencher Anthony Albanese on Monday called on Mr Abbott to distance himself from Senator Bernardi's most latest remarks.
"There is nothing fair and nothing reasonable about these extremist remarks from Cory Bernardi."
"He says that he's pro-freedom, but he's against women's right to control their own bodies."
"He says he's pro-religion, but he's against any religion that isn't the same as his."
"He says he's pro-individual rights, but in his advocacy of WorkChoices, he would take us back to the Howard era that saw division in the workplace, that saw workers discriminated against, and rights being taken away."
Mr Albanese, who was raised by a single mother, said Senator Bernardi claimed to be pro-family, "but he's against any family that doesn't resemble his depiction of what a family is".
"This is an offensive contribution to the policy debate. He's a confidant of Tony Abbott, and it's up to senior Coalition figures to dissociate themselves, if in fact they disagree with Cory Bernardi."
Acting Greens leader Richard Di Natale, condemned Senator Bernardi for what he described as his "hateful and offensive" statements.
“Former Prime Minister John Howard was rightly criticised for his failure to condemn Pauline Hanson's hateful views and these views are just as abhorrent. They have no place in modern Australia, let alone in a mainstream political party and Tony Abbott must condemn them unequivocally," Senator Di Natale said in a statement.
“The concern for many Australians is that Tony Abbott and Cory Bernardi are cut from the same ideological cloth but that unlike the Prime Minister, Senator Bernardi is not trying to hide his views or disguise his brutal agenda.
“If Tony Abbott doesn't agree with his former Parliamentary Secretary and confidant then he should immediately condemn these statements. If Tony Abbott fails to clearly distance himself from Senator Bernardi then it will be impossible to escape the conclusion that he is quietly pleased that his dirty work is being done.”

Read more: http://www.smh.com.au/federal-politics/political-news/cory-bernardi-calls-for-debate-on-abortion-in-controversial-new-book-20140106-30cob.html#ixzz2pa3grePZ

"pro-death" and "death-industry" are particularly lovely choices of language to describe anyone who has an abortion.
"Why then the levels of criminality among boys and promiscuity among girls who are brought up in single-parent families, more often than not headed by a single mother?"- is promiscuity not a problem for boys? of course not in the conservative world of the Libs.
and of course anyone who is not religious lacks direction.
 
Is there anyone here who doesn't think Bernandi's comments and attitude are abhorrent?
 
he's doing for Abbot what Hanson did for Howard rosy. Spout some extreme far right-wing views to make the government far right-wing views look moderate. It was effective then, not sure it will be now. I didn't think a new LNP government would try to drag the agenda further right than Howard, I was wrong, but it may be their undoing.
 
Yeah, the real long term danger for the libs is that the Tea Party type attack dogs get more power and shift the party too far to the right as has happened in the US, making most Republican candidates running for President unelectable.

There's less chance of that happening here, but it will still drive some moderates away from the Libs.
 
Giardiasis said:
The right think the left are wrong, the left think the right are evil.
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Hah! Plenty on the right see communism/socialism as evil and any shades left of centre as shades of evil.

For historical reference I refer you to Ronny Raygun's "evil empire" speech. If you want a contemporary example just type "Obama is.." into Google and see what results come up.

Too simplistic a dichotomy my dear Giardiasis.
 
Giardiasis said:
The right think the left are wrong, the left think the right are evil.
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i dont think the 'right' is evil, i just strongly disagree with someone in a position of power who makes comments with such little sensitivity, and who's views show such little compassion or consideration to anyone who lives a life that doesnt fit what he considers the way we should live.
 
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