Government the problem, not the solution (letter)

by Reg Brownell

News Weekly, August 5, 2006
Sir,

Pat Byrne raises a critical issue in his article, "A domestic car industry could slash foreign debt" (News Weekly, July 8, 2006).

Australia's manufacturing sector is in long-term decline with the specific risk that the automotive sector could close down over the medium term. I agree that this is a very likely scenario.

However, a solution of subsidising the automotive industry, proposed by Craig Milne of the Australian Productivity Council - and canvassed by Byrne - is most improbable.

Where do we find success stories for such government-led initiatives? The Victorian Cain Labor Government? Malaysia's looming failure with their national car, the Proton? The command economies of the former communist countries (East Germany's Trabant car setting a worrying example)? Lakes and mountains of agricultural products in Europe? Our own inspired foray into stabilising/managing wool prices? The poor service and high costs of telecommunications and air travel in Australia when dominated by government ownership?

This list is just a sample. I cannot think of any success stories among protected industries, and certainly not on the scale which would be involved in building an automotive industry with a capacity of one million plus cars annually.

Nor does the answer lie in providing guaranteed markets. These are guaranteed simply to result in poor design/innovation, quality, service and ever-increasing costs.

The question which needs to be asked is: what conditions encourage manufacturing industry to remain, to grow or to establish itself in Australia as opposed to elsewhere? We then need to create the said conditions which will provide an environment conducive to business-building.

There are a number of very obvious areas where the present business environment contrasts poorly with alternatives. A few examples are: excessive government regulation; restrictive, rigid and costly work practices; uncertainties about the future of both of these and the potential for them to become worse, depending upon the mood of government and unions; high building costs; the cosy club around corporate boardrooms with their grossly overpaid directors.

The key elements to providing a better business environment are a well-educated and trained workforce, raw materials and adequate infrastructure.

Until we acknowledge these answers and are prepared to act upon them, our problems will not be resolved and we will suffer a long-term decline in the prosperity of the Australian economy.

In addition to the above comments, Australia is very dependent on trade and to follow Milne's path would invite retaliatory action from overseas which would likely compound our problems.

I certainly agree with Byrne that some serious political vision is required, but the Milne proposal is the very opposite of what is needed.

Reg Brownell,
Camberwell, Vic.