free markets

The Erosion of Australian Industry: A Cascade of Losses adn a Looming Monopoly

The closure of Australia’s last car manufacturing plants in 2017 marked a pivotal moment, signaling a notable shift in the nation’s industrial landscape. This wasn’t an isolated event, but rather the culmination of decades of policy changes and global economic forces that have steadily eroded Australia’s manufacturing base and left it increasingly vulnerable to external control.

Initially, protective tariffs shielded Australian car manufacturers from cheaper imports. However, thes safeguards were progressively dismantled. By 2005, the tariff stood at 10%, and was then halved again within five years. This reduction coincided with a period of significant economic upheaval – the global financial crisis and the booming Australian mining sector.The latter drove the Australian dollar to unprecedented heights, peaking at $US1.10,granting Australians remarkable purchasing power internationally.

The consequence was a surge in imported vehicles, rendering domestic production by Ford, General Motors, and Toyota unsustainable. The resulting job losses were substantial, estimated at nearly 400,000. But the impact extended far beyond the automotive sector. The decline triggered a ripple effect, accelerating the decline of crucial supporting industries like industrial design, toolmaking, specialist engineering, and electronics – all vital components of a robust industrial base.Adding to the pressure, a simultaneous increase in Australian energy prices, driven by escalating gas exports, further disadvantaged local energy-intensive industries. The promise of “comparative advantage” – the idea that australia shoudl focus on what it does best – rang hollow as China aggressively subsidized it’s heavy industries, effectively controlling the pricing of moast commodities, with iron ore being a notable exception.

The consequences are starkly visible today.Australian nickel production has dramatically decreased in the last two years, as Chinese investment transformed Indonesia into the world’s leading supplier and processor.China now dominates the refining of rare earth elements and holds complete control over the supply of heavy rare earths, essential for numerous high-tech applications. It is indeed also a dominant force in the processing of most other industrial metals.

According to industry expert Dr. John Green, Australia faces a critical juncture. Without matching the substantial subsidies offered by China,or innovating to achieve more cost-effective processing methods,Australia risks being priced out of the market for the very materials it produces. He advocates for a shift away from relying on inherent comparative advantage and towards creating comparative advantage through the development of robust value chains.

The stakes are high. Allowing China to establish a monopoly in these vital metals and materials would jeopardize Australia’s future economic security.as Green powerfully states, “Every closure of a manufacturing facility is a loss of sovereign capability and compromises australia’s ability to build a more complex and dynamic knowledge-driven economy.” The future of Australian industry hinges on a proactive strategy to rebuild domestic processing capabilities and secure its position in the global supply chain.