It will soon be releasing an Industry and Innovation Statement aimed at manufacturing, likely to provide more support for that sector, perhaps disguised as “innovation” incentives, or more government procurement, or marketing programs (inevitably led by “ambassadors”).
This may provide some limited support for employment in manufacturing, although that sector actually halted its decades-long decline in employment size in 2012.
Some sub-sectors appear to be addressing the challenge of competing in trade-exposed sectors in the era of a safe haven currency. But any short-term support is at the expense of medium-term efficiency in the economy as resources continue to be mis-allocated into favoured industries.
This is perhaps the biggest challenge for the next term of a Labor or Coalition government — which will ostensibly run until 2016. The future of the local car industry will become a major policy issue from as early as 2014. The most vulnerable car maker remains Ford, whose US leadership has shown it is tough on costly offshore subsidiaries, especially those that leak money.
Europe is a major concern for Ford (and GM), but exiting (Ford) or downsizing (GM) could be easy options here ahead of tough decisions about Europe. Toyota is likely to remain the only local manufacturer of note in coming years, but even that is not guaranteed.
Indeed, for a guide to the future of automotive manufacturing, look at what is happening in the local oil refining industry. Big transnational oil companies have abandoned oil refining in NSW and it has proved to be surprisingly easy. Importers like Trafigura are now moving into the import space created by their departure.
Can Ford and GM similarly abandon Victoria in the car-making business?
Influential unions like the AWU and the AMWU will be working overtime in Canberra to ensure Labor does everything it can to prevent them from leaving.
Like the Coalition, the government appears to have no plan to address the ongoing flatness of residential construction (except for apartments, which appear to be picking up) and non-residential construction, which remains “subdued” as Glenn Stevens noted in his statement yesterday.
The RBA is looking to construction as well as private consumption to pick up as the peak of the mining investment boom passes this year (and the PM flagged the passing of that peak as a significant policy challenge).
Both sides are relying seemingly entirely on monetary policy to put some spark into, particularly, residential construction, although both the Queensland and NSW governments have over the last 12 months sensibly shifted first home owner programs in favour of new construction.
For both parties this presents a potential problem that may be emerging as either Joe Hockey puts his feet under the desk at Treasury or Wayne Swan (we assume) returns in September: if construction simply doesn’t respond even to the remarkably accommodative monetary policy currently set by the RBA, what will the then-government do as the mining investment boom recedes in the rear view mirror?
Labor can point to its willingness to ease fiscal policy (which might have some flow-on effects to a softer dollar), and to its efforts to support manufacturing, but both sides at the moment appear to be relying on the RBA to make the transition to a post-boom economy.
At that point, the disappearance of housing supply off the national agenda after 2010 might come back to haunt whoever has stewardship of the economy.
This story first appeared on Crikey.
