Canberra’s new economic plans may lack ambition

THE new Australian Labor government’s decision to pursue an industrial policy – support undertakings that it thinks will promote broad economic development – may draw criticism from ideologues who don’t think that the state should be involved in picking winners. But Canberra should not be dissuaded from pushing ahead. After all, there is considerable empirical evidence from around the world that state backing can not only produce industrial winners, such policies can be a catalyst for social and economic development. More importantly, some industries are vital in these days of abrupt supply chain disruptions.

Australia had a solid industrial base up until the 1970s with about 25 per cent of the labour force engaged in making things. Today only about 5 per cent of all workers are engaged in manufacturing. Successive governments, under the influence of economic rationalists, shifted away from supporting industries because it was cheaper to make things in countries where labour costs were far lower and markets far bigger.

The coronovirus pandemic exposed the folly of Australia’s systemic deindustrialisation. For instance, there was just one single manufacturer of masks in the entire country and none making any other sort of protective gear needed to manage the spread of the virus. The situation was so dire, the government of the day had to order in army personnel to help this surgical mask firm triple production quickly. Canberra found out the hard way there were no health-related supplies to be had to import. Every other country had settled on a policy of hoarding supplies to meet the demands of their own people.