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Australia needs an industry policy to guide post-pandemic recovery


Ideology led Australia to give up on the idea that government policy and intervention can help create a competitive advantage for industry. Our post-pandemic recovery depends on overturning this falsehood, writes former senior South Australian public servant Lance Worrall.

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The fight against COVID-19 is a fight for our survival.

If, as politicians are telling us, this is the equivalent of war, we would do well to recall what followed our last war for national survival.

On the other side of World War II came the commitment to full employment as an overriding national economic goal, including a degree of self-sufficiency, a welfare state and progressive taxation.

And our new deal manufacturing imagery recalled the profound changes led by FDR, US President during both Depression and war, that resolved to change society fundamentally, and not go back to the past when the immediate crisis had eased.

I have two contrasting takeaways from all the thoughtful contributions from the community over the past month or so.

The first is how much positivity and initiative is coming from so many committed organisations and individuals: from businesses, trade unions,  universities, leaders of programs and industry services, and often from state governments that cannot afford to ignore their industrial development.

The second is the realisation that Australia can’t get away with making just a few changes to our national approach to industry in light of the new world.

No. The truth is, Australia gave up on having an industry policy years ago.

Today’s reality is that we desperately and urgently need to get a national industry policy.

The hollowing out of our manufacturing to a pitiful 6 per cent of GDP was not inevitable. More than most people would credit, it is substantially a function of the outright and strident ideological repudiation of the very idea that a national industry policy should even exist.

The neo-liberal ideological consensus is one of “small government”, almost totally flexible labour markets, service and infrastructure privatisation and corporate tax cuts and financialisation.

It also says our economic structure should be determined by static comparative advantage based on our “endowments”, rejecting the idea that policy and public intervention can help create competitive advantage.

A key function of industry policy is to influence and help steer the industry structure of a national or regional economy to focus on activities that have high returns to society.

Manufacturing is critical to our ability to be part of the knowledge economy. It is at the very centre of “economic complexity”, a synonym for the knowledge-intensity of the economy: “what a country makes is what it knows”, as Hidalgo and Haussmann’s Atlas of Economic Complexity tells us.

It is true that the COVID crisis has exposed our vulnerability to global supply chains. More profoundly, it has shown that deindustrialisation is synonymous with the deskilling of our economy.

And it has highlighted that, on the other side of this crisis, Australia needs to get a 21st century industry policy.

We find some state governments doing their best to develop manufacturing programs. There are discrete initiatives in universities and CRCs (usually quite small), and admittedly a good number of these are Commonwealth-funded.

But what we cannot find – the large defence sector procurement program notwithstanding – is an industry policy for Australia in the 21st Century.

Decades ago, the adoption of lazy “comparative advantage” policies was a choice, not a destiny.

To persist with no national industry policy into the future would also be a choice – a disastrous one. It would sacrifice the living standards of the many, and consign hopes of anything like full employment to the economist’s extremely long run – when ‘we are all dead’. On present indications, very dead in fact.

On the other side of this crisis, Australia needs to develop and then adopt an active future-oriented strategy geared not just to the problems of yesterday but to current and future opportunities.

Central to this concept needs to be the establishment of a National Industrial Strategy and Commission, proposed early in the New Deal discussion, that would be fundamental to bringing into full effect the important recommendations underpinning any new deal for manufacturing.

The Strategy and the Commission needs to be guided by four key principles and approaches:

Such formalised processes help coordinate, accelerate and reduce the costs of exploring and opening up new opportunities, which is exactly why we need a national industry strategy.

That would give us part – a critically important part – of a way forward to our post-COVID future.

Lance Worrall was a policy adviser to Mike Rann as both Opposition Leader and Premier of South Australia. He has been a senior public servant and most recently worked on industrial transformation initiatives for the Innovative Manufacturing CRC and Flinders University.

A version of this article was previously published by the Australian Manufacturing Forum.

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