12 Jan Dan Denning hits the nail on the head
Money Morning Australia
“But there are other factors at work in the weak manufacturing performance of the economy. Manufacturing has been globalised in the last thirty years. The cost of labour is cheaper in many other places and puts pressure on already industrialised countries like Australia and the US. Productivity – output per person – is also an issue in Australia.
Of course you’d have to be an idiot to advocate for wages to be reduced to what they are in China or Vietnam. No one would argue that the way for Australia to be more competitive is to pay wages that no one can live on. That’s not a solution.
But that’s the real trouble here. In a globalised word, if you can’t compete on wage costs, you have to pick and choose your industries carefully. The Germans and the Japanese make their living in high-quality, high-tech manufacturing processes. The Koreans and Taiwanese focus on value-added in electronics. A few Aussie companies like CSL might be able to compete globally on a similar basis.
However, investors face the reality that outside commodity producers like BHP Billiton and Rio Tinto, Australia has very few world-class, best-of-breed companies, manufacturing or otherwise. This is an investment problem, as it leaves you with nothing to rotate into should the dollar weaken. But it’s an even larger economic problem for which there is no easy or obvious solution.”
Australia CAN be globally competitive IF we act quickly and change our approach to education and taxation. If we are going to survive and thrive in the new global labour world, we need some specific strategies. If we don’t make these changes we are in some serious trouble.
See my upcoming book “The Third Wave” for more discussion on this topic. Released January 31st 2013, with free download of the first two chapters here from January 15th.