Australia: Manufacturing and Technology?

First draft 

 
Where is Australia going with manufacturing and technology? The short answer is rapidly to Asia. Our white goods are mostly manufactured in Korea, our electronic goods somewhere in Asia; mostly China. Our cars: still here for the bread-and-butter Holden, Falcon and Toyota but mostly overseas in either Japan or Europe (which can mean Asia or South Africa). Clothes: Asia mostly even if they do carry fashionable labels. No doubt the reader could add to the list.
 
Yes we still have a chemical industry, a food processing industry, brewing and agricultural products industries but even these could migrate if the businesses concerned could see a way to manufacture in a lower-wage, lower-cost environment. We process petroleum but significant amounts of fuel also come in from Asia where refining is cheaper. We import our agricultural machinery, our heavy machinery, most of our trams and trains and our aeroplanes. Certainly we manufacture some transport under license, but the original vehicles and ideas are usually imported. The salient point here is that as recently as a generation ago we had a vibrant, functioning manufacturing sector making many of the things we now import. What has happened? Easy question to answer; Asian employees work harder for far less return than we do and for owners and managers far more ruthless (and sometimes corrupt) than we would ever tolerate. It is cheaper to export raw materials then import the finished product than to manufacture goods ourselves. The result- our smart country is rapidly becoming an appendage of a supply chain which starts here, travels to Asia and returns as finished goods. We are losing the engineering and manufacturing skills and facilities which once made this country the equal of any other per capita.
 
More seriously, our universities now produce fewer engineering and science graduates, as a percent of graduates, than ever before. Many of our smarter youngsters are taking positions in the finance industry where the returns are greater, responsibility often less and there is less need for stressful, risky innovation. Other bright sparks take up law or medicine, worthwhile and necessary professions but neither helps the country’s balance of payments much. The result: since universities must fill their Engineering and Science faculties there has been a substantial lowering of academic requirements to enter these disciplines and a consequent lowering of the standard of graduates. Thus our manufacturing and technology industries are damaged at their very foundations.
 
Another serious, but little-talked-about, problem is the depressingly poor standard of the Australian secondary education sector. Family dislocation, left-wing educational philosophies prevailing in education departments and a general decline in the quality of the teaching profession (another victim of lower university entrance requirements) has meant that secondary academic standards are dangerously low. Better teachers often prefer to teach in the non-government sector and this has meant that, on the whole, non-government schools perform better than their government counterparts.  In Victoria more than 40% of school children are educated in non-government schools. This is a truly dreadful inditement of government schools and an indication that parents may have lost faith in them.  As recently as a generation ago we had many government schools which routinely produced the equal of their independent competition. Not now. None of this is the fault of teachers in government schools. They are victims of our seemingly inexorable descent into accepting poorer levels of school behaviour and government education departments producing less demanding curricular to keep more students at school longer. Interestingly, caretaker Prime Minister Gillard has mooted an Australian Baccalaureate as part of her education policy for the next term if elected. This is, at best, an admission that things have slipped a fair way. Anyway if we are serious about baccalaureates why not use the existing International Baccalaureate: a high-standard, internationally recognised qualification? 
 
 However, whether government or non-government school the academic standard expected of schools has declined substantially over the last 30 or so years. Having been involved in science and maths teaching between 1972 and 2006 I can attest to this. Also, unsettlingly, having taught many foreign (mostly Asian) students during this time I can also report their surprise at the low standard of our secondary schooling and the low expectations we have of our students. Time and again, for instance, I was teaching material to boys from Korea and mainland China which they had covered much earlier in their own schools and at a more demanding level.
 
Paradoxically we now list “Education” as a major export industry. Perhaps we should say back-door immigration instead. Most of the students coming here for a secondary education would find higher academic standards in a good school at home. Many of those coming for a ‘tertiary’ qualification are training to become hairdressers, low-level finance industry operatives and the like spawning a plethora of institutions which are anything but academic. Our exporting of ‘education’ has not helped build academic standards here.  
 
So what to do? Let’s concentrate on manufacturing and technology and leave the education problems for another article. Clearly we can not compete with lower-wage countries for the manufacturing which they now do. We have also seen the end of tariff protection- a good thing. Thus we are now priced out of the more traditional manufacturing industries. We might fool ourselves that we could become ‘high-end’ manufacturers, only manufacturing the best. This is not going to work as our competitors can easily do the same for less. The answer lies in a substantial move away from traditional manufacturing- we are going to be priced out anyway.
 
 The climate-change debate provides some answers. Whatever our views on the validity or otherwise of theories on the role of greenhouse gases no one would deny that we should be producing less of them; if only to husband resources. We have become used to a lifestyle which is unsustainable, cars are too plentiful and engines too big, new houses are too large, we ‘need’ to travel too much, we eat too much poor quality, over-processed, food, we drive when we could walk or cycle or we fail to share our cars so that single-occupant vehicles make up most of peak-hour traffic. We build huge tower-block apartments which are insulated from the environment to the extent that we have to provide them with artificial environments; and how do you dry laundry when you live on the 24th floor?  We clear land, clog up waterways and pollute the air. Like the Gadarene Swine (Mat 8, 28-34) “we rush downhill to disaster”.*
 
So why not design and build more efficient cars ourselves and I mean really innovative cars not the apologies we have now which rely either on generated electricity to recharge batteries or have engine/battery combines which return poorer fuel consumption figures than small diesel-engined vehicles. Doing this means breaking the stranglehold which the large energy companies have on fuel and power supply- an innovation surely. Why not design and build efficient public transport vehicles and systems which can carry both people and freight quickly and efficiently. This will mean reducing the truck lobby’s powerbase- further innovation. Surely we can design and build houses which are energy neutral and which don’t cost a fortune. The inverse relation between energy use and building cost (saving energy costs more money) bedevils the housing industry. The problem: we lack the innovative will to do the design work- and of course now, the brighter souls to do it! Must apartment towers be so energy inefficient? Of course not but with current energy costs so low where is the encouragement to do better? Perhaps those using more than their fair share of energy should pay a lot more for the doubtful privilege? 
 
 Do we really need to grow crops like cotton and rice which are an anachronism in a dry country? These are best grown in countries where more water, rather than less, is the problem. Why waste valuable energy resources producing crops which can be produced more naturally elsewhere, not to mention the phosphate pollution and water shortage problems such agriculture produces downstream. And why not add value to the crops which we grow really well? We have a manufacturing industry in waiting. 
 
Can we do all of this. Of course we can. Having spent a working life teaching secondary chemistry, physics, maths and science I can attest to the quality of the raw material at the bottom of the intellectual food chain. What is needed is the political will to create manufacturing and technology opportunities here for our brightest and best. Industry will follow. Taxation regimes offer the best federal mechanism to start all of this.
 
And that does brings in the federal government. Federal governments spend much of their time duplicating services and facilities provided by the states. The states ironically create their facilities and services with federally supplied money. So we have this downward spiral of value: federal money spent duplicating spending that the states have already made, using federally supplied money- could Monty Python do better?
 
The federal government should allot money for health, education, and operating transport then leave running these services to the states; these are not federal responsibilities. States can also handle planning matters but under the umbrella of the commonwealth deciding allocation of resources. This is particularly vital when it comes to water and energy management.
 
So the commonwealth would administer, taxation, defence, foreign policy (including immigration) the allocation of resources and most importantly the exploitation and development of technology, development of research and encouraging innovation directed at ensuring Australia’s survival. For instance, research into industries, vehicles and housing which are environmentally clever, devising new crops and cropping systems (and subsequent value-adding) which are energy and water neutral and instituting new ways of generating electricity to supplement coal-fired methods. Land use should also be a commonwealth responsibility with the states fitting into a commonwealth plan rather than the present system where it is every state for itself.
 
That would place the federal government in the position of being in control of the nation’s principal resources and charged with the responsibility of running the country rather than fiddling around fighting and negotiating with the states over matters which either the commonwealth or the states should run but not both! The commonwealth also has the power to take on entrenched monopolies, eg transport and energy companies and unions. Until some of these institutions are deflated little progress will be made with sustainable transport and efficient electricity generation to name two areas needing attention.
 
So how do we pay for all this innovation and research: certainly not as at present by making overseas countries (competitors!) a gift of our natural resources. Surely we can add some value ourselves and make our customers pay rather more than they are now. It would be easy enough to devise a tax regime which rewarded companies which did this. Of course there would be some short-term political discomfort so I suppose we need to find people with the courage to begin the process. Also having become a technically innovatory country we might just find there is a market for the technology we produce. There are means of protecting innovatory work by internationally recognised enforcement. How else do Apple and Mr Gates maintain control over their inventions and products? We could actually become the clever country instead of that being a mantra trotted out by aspiring prime ministers at election time.
 
 
So where to Australia?
 
Firstly get rid of the hang-dog attitude about our potential strengths which seems to prevail at the federal political level. We do not have to bend the knee to Asian countries just because they buy our produce and minerals. We can and should compete with them.
 
Secondly, instead of lamenting the passing of industry to Asia, develop new, high-technology, smart industries whose products Asia will want to buy or manufacture under license; i.e. pay us for the privilege. Of course we must also produce the graduates capable of doing and maintaining this.
 
Thirdly, set about putting in place sustainable energy, transport, housing and water policies so that we slow down the rate of use of resources. Also set about guarding our food supply better and developing food technology so that we add the value to our raw materials; not buy the improved product from someone else. 
 
Fourthly devise a system of two-tier, principal government; federal and state where both tiers have separate and well-defined responsibilities with no duplication. Local government could stay largely as it is.
 
JRT
August 2010
 
* To quote Mr Robert Rofe, former headmaster of Brighton Grammar School in Melbourne.


Here is a reply and comment from Mr Frank Miller.  Frank was my boss in the army (in 1967-8!) and after a very successful career in industry retired Director: Cadbury, Australia and New Zealand 

Received 11-08-2010.

A most interesting “read” Jack. Your sentiments are well expressed.
 
A good summation of the problems being endured by manufacturing. The same may also be said of the UK and USA.
 
Our labour costs are ridiculously high. These are so, not necessarily because of what people get in their pockets, but because of the “add ons”. In NZ I found the average hourly Cadbury factory cost per hour to be of the order of 60% of that of their Australian counterparts –yet the amount of that which ended up in their pockets each week was almost the same.
Payroll tax. Long service leave, workers compensation, annual leave loadings, superannuation, nine day fortnights etc really cruelled the Australian pitch.
 
In addition and talking from long experience, dealing with our unions, our awards (which have been cast back to the 1970’s by Julia) the unfair dismissal laws and occupational health and safety make employing Australian labour a complete nightmare. It’s just too hard – so the overseas move is not necessarily cost driven alone. Your employees are now one of your greatest liabilities – rather than assets as should be the case.
 
Looking back, John Howard’s Workchoices was a strong step in the right direction if not poorly executed! 

I’m always encouraged to hear someone from the education field concerned over the dumbing down of standards. I remember Frank Lawson at Monash being quite concerned over the same issue when I raised it with him at a function some fifteen years ago.
 
Much of this dumbing at secondary level is sheeted home to the bureaucrats, education unions and academics. They’ve been very successful!
 
Your arguments on future Government directions were also of interest. My over riding belief is that we should abolish the state governments and have a combination of Federal and far larger (in area and jurisdiction) Local governments.
 
Many of your proposals make good sense. Government should encourage innovation and technology/manufacturing.
 
As a finale, I do wonder whether so much of our decline is attributable to a lowering of standards of behaviour and discipline.

My reply to Frank, 12/08/2010

Yes, I too think that we should get rid of state governments and have a federal system together with local authorities as they have in the UK.  This would require some thought as we have huge variation in population density around the country. However any proposal to get rid of state governments would never pass a referendum.
 
'Behaviour' is certainly a problem in secondary schools and we have now managed to produce an under-educated underclass of young people who have missed out at school largely because of the poor way they have behaved.
 
Unhappily as a government-educated child I must say that the non-government sector will probably continue to prosper mightily as the behaviour standards in the non-government sector, for one thing, tend to be better. 
Non-government schools need not worry too much about government funding being seriously reduced by governments of any persuasion.  Non-government schools represent good value for governments as the parents both pay tax and pick up most of the cost of educating their children.  A bargain by any measure.