Archive for category: News

The Australian Automotive Industry

Paper 2

Automotive industry is vital to Australia’s future – but it requires a whole new mindset!

Yet another announcement of job cuts at Holden has lead to ex Ford leaders announcing that further reductions will inevitably create a domino effect on the supply base as it tries to fight the reduction of scale and the increase of costs.  These views support the economists who believe free market pressures should just be allowed to play out and government subsidies could be far better spent in other areas of the economy such as university spending as suggested on Q&A recently..  While SA unionist’s march for manufacturing and construction, Michael Filazzola, Director and GM of Global Purchasing at Holden’s publically attempts to justify, the economic benefits of the continued support for the industry.  Is the money, said to be over $4.5b from 2008 to 2020 really going to save the automotive industry?  Is it time to give up on manufacturing all together and move to a service driven economy?  This paper, on behalf of the Vernier Society, argues that an automotive industry is vital for the whole of the manufacturing sector, but it is not this current industry.  It is an industry with a future, of the future that will lead the manufacturing sector of the future.

The industry is a vital sector in manufacturing

The view that the industry should be left to free market forces is easy to understand.  The industry produces gas guzzling, mediocre quality, dated models in a high cost, low productivity environment and Labor’s justification of jobs at any price just seems another form of union patronage.  The GM Holden’s Chairman’s statement that, “Our current agreement with the Federal Government does not include minimum employment levels. [The assistance] is designed to generate the capacity to build things… and jobs flow from that.” (Manufacturers Monthly 10/4/13) makes job protection just a chimera rather than reasoned and justified economic benefit.  Death seems inevitable so let’s find a better use for the palliative money.

Yet there are strong arguments for, as Shakespeare says, ‘not going easily into this grey dawn’.  First is the market potential.  According the CEO of Renault in 2012, while the current world market is 600m cars he forecasts demand will rise to 3 billion by 2050.  The second is that 75% of the world’s trade is in manufactured goods; innovative products drive the world economy and leading industries like automotive drive innovation.  Then there is the state of the current economy in Australia and the recognition that the industry does employ about 47,000 jobs across the sector.  While the economic rhetoric  on the relativity of Australia’s financial support per capita is confused, the conclusion as Filazzola points out is that virtually all of the 15 countries in the world that produce automotives heavily sponsor their vital industry, including Germany who it could be argued to have the most vitalised and envied car industry of any country.     Our industry without continued financial support will die.  The Vernier Society believe a successful automotive industry is vital to the future prosperity of Australia.  However, the current state and the real challenges facing the current industry must be acknowledged by all the players; the government, the car companies themselves, the unions, the employees and the public.  What has to be accepted for certain is the industry has to dramatically change to sustain.

The argument for subsidies

Holden, Toyota and Ford each face their own particular challenges in the global market, let alone in Australia.  Domestic car sales are dropping and as Filazzola rightly states, over the last couple of years there has been a structural shift in the small car market but this cannot all be blamed on the high dollar.  It has a significant contribution but environmental issues, city congestion and a younger purchasing demography are additional pressures for change.  One only has to look at the car profile in the UK and the US to see the compact has changed the middle market and certainly two of the three makers have been slow to react.  At the same time, reliability has played an increasing role and increased warranties have been a clear market penetration strategy for new entrants.  Quality across the higher end market has also played a significant role and as Filazzola admitted in 2009, Holden’s plans to develop the Middle East export market had been affected by their quality problems.  The domestic market share will inevitably continue to reduce and result in even further job losses.  The writing is on the wall for Ford in 2016 if both anecdotal evidence and lack of visibility in the current debate is an indicator.

What does the loss of 47,000 jobs from the auto industry mean to the economy?  There are those like John Daley from the Grattan institute who says that traditional supporters of manufacturing, like Vernier, should not be concerned because job losses will be replaced by newly created jobs as the economy adapts to a more service based economy.  Curtin University’s labour market economist stated in the AFR recently that 1000’s of jobs are lost and created in the market every week and while the loss of 50,000 jobs may sound a lot, it will be barely noticed as far as the unemployment rate goes.  This sounds rather preposterous; because the beach has ebb and flow tides each day, high storm tides don’t do any damage?  Tell that to the seawall!   What is also not fully appreciated in this argument is existing skill levels.  In the 2008 Bracks Automotive Report it was acknowledged that nearly 50% of the employees had no formal qualification and while government funded training has been utilised, the challenge of transitioning to new skills and industries is severe.  At the same time, automotive companies cannot and should not guarantee employment.  All businesses need to manage their bottom line and their productive cost base and companies must ensure their revenues and cost ratio’s are at least maintained.  The discussions between the government, the unions and the companies were confidential but it is incredulous to believe that the automotive companies did not clearly state that these subsidies in no way guaranteed jobs.  The outcome was not job security.   The makers got continuation of necessary subsidy support, the unions got increases pay rates and the Labor government got silent compliance for a false message that endorsed their political rhetoric.  Bandaging the patient will only prolong the situation; only major surgery and lifestyle change will save life.

The case for change

Manufacturing across a wide range of sectors drives the world economy.   Michael Porter’s ‘Competitive Strategy’ analysis states that companies need to differentiate in one of three areas; cost, service or innovation.  The emerging nations are the leaders in a cost  commodity strategy, as was shown initially by China and SE Asia and now as companies like IKEA are showing production will migrate to new lowest cost economies.  So we have to compete with service and innovation.    The automobile is a relatively high priced necessity of life; nowhere more so that Australia with its huge land mass.  While Australia has a small share of the current sales market, the growth potential is enormous.  By 2050, car sales will grow to 3 billion with much of that growth, right on our doorstep, as part of the Asian century.  The economic share of this capability alone is staggering.  The automotive industry is a major contributor to our economy.  Holden alone put $32b into the Australian economy over the last 12 years.  It provides nearly $5b of added value to the economy, employs around 5% of the total manufacturing workforce and most importantly over 20% of the R&D investment in manufacturing.  Transport is the future.  In every futuristic movie made, innovative transport is ubiquitous, on auto guided highways or flying between skyscrapers.  Spaceships reach for the stars, shuttles make routine visits to neighbouring planets.  The future is an automated world of alternative energy sources.  The climate change debate shows that we need to start moving towards alternative energy sources and so the hybrid, the electric or other forms of power sources are the future differentiators and these require radical and highly innovative thought about the whole industry.  Other countries have already got this message.  Every month a new book preaches the need for high cost countries like America to lead a manufacturing renaissance.  For real innovative success one only has to look at the Swiss achievement in a manufacturing economy driven by leading edge products.   South Australia has already recognised this with the bold recruitment of leading academic on innovation, Goran Roos, to head their new manufacturing initiative.  Australia’s future must include a thriving manufacturing sector with automotive a major component.  However, it will require a much changed industry.  We need to build a new innovative model for our future automotive industry; the current one is atrophied.

How do we change?

Our current situation is like asking someone in the street for directions only to be told “Oh if you want to go there I would not start from here”.   But this is where we are and so to have a futurist leading automotive industry we need to do three things.  First have an honest assessment on the current state of the industry; secondly create a vision of where we want the industry to be in the future and finally develop a plan to get from where we are to this future vision.  Each of these tasks requires radical thinking by experts from all the aspects of the industry and will require time and an in depth evaluation with honest and realistic admissions.  This analysis must take a radical approach, traditional thinking will not take the industry to where it needs to be.  This is the approach we must take to building a new automotive industry.  Sinecures like increasing government purchases of Australian made cars, waiting for the dollar to fall, iterating design rather than innovating it, are not sufficient.  We need to follow the Tom Peters old management maxim- if it not broke, break it.

Effectively, no real decisions on the industry can be made until after the election in September.  One of the first steps would hopefully be to appoint an expert taskforce to set out a ten year roadmap for the industry.   In a year we need to have the blueprint action plan.  This would seem to fit with the current horizons establish under the current regime and so existing support financial plans will need to stay in place even with a resignation to further labour losses.  A new innovative model for the automotive industry needs to be conceived on a number of building bricks.  The leading edge types of product being produced and the research technologies required to support this edge; the radical production processes that can produce cars at relatively competitive prices and support the total productive competitive advantage and a totally new industrial climate with a new paradigm in management and worker collaboration instead of the old adversarial industrial relations division.  All of this has to be underpinned by a government that clearly understands such industries need judicious and targeted government support.

What are some of the broad brush strokes that should be considered in this new age?  The vehicles of the future will not be solely oil powered, so research and development into new forms of power has to be a priority.  It would seem that investing in a dedicated Centre for Automotive Power Innovation in accordance with the Labor Manufacturing plan would be and ideal way to start.  It would also seem that identifying a leading university and TAFE institute to develop knowledge and skills for the future industry should be given impetus with appropriate incentives.  As electronics is already a crucial, competitive differentiator in today’s car and all of this technology is outsourced overseas, there is going to have to be major technology partnerships set up with the world’s leading companies.  While this sounds easy, the issues around intellectual rights will be extremely complex and these types of joint venture will new considerations.  Government has to do more that passively make funds available as with the latest funding  for Innovation Centres; the government has to direct funding to specific organisations and technologies.  It has to force collaboration.  This is an area currently that Australia is not good at.  Government has to have the courage to direct spending in collaborative technologies but this requires a level of courage not seen in governments of either persuasion.

The second major area of change is in the total automotive process.  Currently manufacturing is driven by scale.  But the new industry will not have scale and so will require a new process concept based on some form of cellular production with tiered suppliers much more integrated into the total process, both by Geographics and status.  Tiered suppliers will share in the total process rather than the current methodologies where hierarchical power, forces pricing pressures down the tiers and futures are only proportional to the length of contract.  There will need to be a new level of integration rarely seen in the current processes.  This extends the concept recently put forward by Manufacturing Focus’s Mark Fusco, based on collaboration projects that already exist in other countries with companies sharing facilities and resources.  Productivity is another key driver in manufacturing and while there it is suggested there has been recent improvement in this area; Australia does not have a good record.  Australia’s industrial relations climate is a major deterrent and while management performance must also be improved as leading economist Saul Eslake recently suggested in the AFR, this is a chicken and egg argument as to which came first?  A new management – worker paradigm cannot wait until we have a new industry as further job losses will just enforce traditional divisions.  A new industrial relations climate needs to start now.  One way would be to scrap the current EBA system and introduce management/worker boards on the lines of what happens in Europe.  These boards work together without third party unions to negotiate across a whole range of productivity issues.  With a more enlightened attitude from all sides Industry, Unions and Government could then work together on the bigger strategic issues.  Finally, what role should government pay in this?  The almost ubiquitous cry from businesses is the need to reduce the regulation of industry and the automotive industry must surely benefit from taking positive action in this regard.  Of course, the folly of the carbon tax with its increased costs for no benefits must be addressed.  The Alternative energy fund should be focused on to the industry in recognition that car pollution is a major issue.  Utilising Australia’s natural energy resources to assist the industry as Dow Chemical’s Andrew Liviris’s suggests would again provide further assistance to a new industry.

A brave new world

These are but a few suggestions from a society of passionate manufacturing people who believe that both a manufacturing industry and an automotive industry are crucial to the future prosperity of this country.  One of the Victorian Government’s new principles is collaboration and much of this paper builds on a new regime of collaboration within the industry.  It also relies on a new form of positive and supportive government.  The existing automotive industry is heading to the extinction cliff edge and we will lose much more than an automotive industry, we will lose the bedrock of a manufacturing industry that will never to able to be replaced.  But it requires action not complacency.  As the CEO of the CPA Institution stated at their launch of building a ‘Competitive Australia’ the government’s plan for another innovative and key manufacturing industry, ‘Fast Rail’, took 32 months to produce a plan that will take 65 years to implement while China actually planned and built theirs in just 38 months!  It requires a quantum change of mindset to create this brave new world.

Automotive industry is vital to Australia’s future – but it requires a whole new mindset!

Yet another announcement of job cuts at Holden has lead to ex Ford leaders announcing that further reductions will inevitably create a domino effect on the supply base as it tries to fight the reduction of scale and the increase of costs.  These views support the economists who believe free market pressures should just be allowed to play out and government subsidies could be far better spent in other areas of the economy such as university spending as suggested on Q&A recently..  While SA unionist’s march for manufacturing and construction, Michael Filazzola, Director and GM of Global Purchasing at Holden’s publically attempts to justify, the economic benefits of the continued support for the industry.  Is the money, said to be over $4.5b from 2008 to 2020 really going to save the automotive industry?  Is it time to give up on manufacturing all together and move to a service driven economy?  This paper, on behalf of the Vernier Society, argues that an automotive industry is vital for the whole of the manufacturing sector, but it is not this current industry.  It is an industry with a future, of the future that will lead the manufacturing sector of the future. 

The industry is a vital sector in manufacturing

The view that the industry should be left to free market forces is easy to understand.  The industry produces gas guzzling, mediocre quality, dated models in a high cost, low productivity environment and Labor’s justification of jobs at any price just seems another form of union patronage.  The GM Holden’s Chairman’s statement that, “Our current agreement with the Federal Government does not include minimum employment levels. [The assistance] is designed to generate the capacity to build things… and jobs flow from that.” (Manufacturers Monthly 10/4/13) makes job protection just a chimera rather than reasoned and justified economic benefit.  Death seems inevitable so let’s find a better use for the palliative money. 

Yet there are strong arguments for, as Shakespeare says, ‘not going easily into this grey dawn’.  First is the market potential.  According the CEO of Renault in 2012, while the current world market is 600m cars he forecasts demand will rise to 3 billion by 2050.  The second is that 75% of the world’s trade is in manufactured goods; innovative products drive the world economy and leading industries like automotive drive innovation.  Then there is the state of the current economy in Australia and the recognition that the industry does employ about 47,000 jobs across the sector.  While the economic rhetoric  on the relativity of Australia’s financial support per capita is confused, the conclusion as Filazzola points out is that virtually all of the 15 countries in the world that produce automotives heavily sponsor their vital industry, including Germany who it could be argued to have the most vitalised and envied car industry of any country.     Our industry without continued financial support will die.  The Vernier Society believe a successful automotive industry is vital to the future prosperity of Australia.  However, the current state and the real challenges facing the current industry must be acknowledged by all the players; the government, the car companies themselves, the unions, the employees and the public.  What has to be accepted for certain is the industry has to dramatically change to sustain.

The argument for subsidies

Holden, Toyota and Ford each face their own particular challenges in the global market, let alone in Australia.  Domestic car sales are dropping and as Filazzola rightly states, over the last couple of years there has been a structural shift in the small car market but this cannot all be blamed on the high dollar.  It has a significant contribution but environmental issues, city congestion and a younger purchasing demography are additional pressures for change.  One only has to look at the car profile in the UK and the US to see the compact has changed the middle market and certainly two of the three makers have been slow to react.  At the same time, reliability has played an increasing role and increased warranties have been a clear market penetration strategy for new entrants.  Quality across the higher end market has also played a significant role and as Filazzola admitted in 2009, Holden’s plans to develop the Middle East export market had been affected by their quality problems.  The domestic market share will inevitably continue to reduce and result in even further job losses.  The writing is on the wall for Ford in 2016 if both anecdotal evidence and lack of visibility in the current debate is an indicator.

What does the loss of 47,000 jobs from the auto industry mean to the economy?  There are those like John Daley from the Grattan institute who says that traditional supporters of manufacturing, like Vernier, should not be concerned because job losses will be replaced by newly created jobs as the economy adapts to a more service based economy.  Curtin University’s labour market economist stated in the AFR recently that 1000’s of jobs are lost and created in the market every week and while the loss of 50,000 jobs may sound a lot, it will be barely noticed as far as the unemployment rate goes.  This sounds rather preposterous; because the beach has ebb and flow tides each day, high storm tides don’t do any damage?  Tell that to the seawall!   What is also not fully appreciated in this argument is existing skill levels.  In the 2008 Bracks Automotive Report it was acknowledged that nearly 50% of the employees had no formal qualification and while government funded training has been utilised, the challenge of transitioning to new skills and industries is severe.  At the same time, automotive companies cannot and should not guarantee employment.  All businesses need to manage their bottom line and their productive cost base and companies must ensure their revenues and cost ratio’s are at least maintained.  The discussions between the government, the unions and the companies were confidential but it is incredulous to believe that the automotive companies did not clearly state that these subsidies in no way guaranteed jobs.  The outcome was not job security.   The makers got continuation of necessary subsidy support, the unions got increases pay rates and the Labor government got silent compliance for a false message that endorsed their political rhetoric.  Bandaging the patient will only prolong the situation; only major surgery and lifestyle change will save life.

The case for change

Manufacturing across a wide range of sectors drives the world economy.   Michael Porter’s ‘Competitive Strategy’ analysis states that companies need to differentiate in one of three areas; cost, service or innovation.  The emerging nations are the leaders in a cost  commodity strategy, as was shown initially by China and SE Asia and now as companies like IKEA are showing production will migrate to new lowest cost economies.  So we have to compete with service and innovation.    The automobile is a relatively high priced necessity of life; nowhere more so that Australia with its huge land mass.  While Australia has a small share of the current sales market, the growth potential is enormous.  By 2050, car sales will grow to 3 billion with much of that growth, right on our doorstep, as part of the Asian century.  The economic share of this capability alone is staggering.  The automotive industry is a major contributor to our economy.  Holden alone put $32b into the Australian economy over the last 12 years.  It provides nearly $5b of added value to the economy, employs around 5% of the total manufacturing workforce and most importantly over 20% of the R&D investment in manufacturing.  Transport is the future.  In every futuristic movie made, innovative transport is ubiquitous, on auto guided highways or flying between skyscrapers.  Spaceships reach for the stars, shuttles make routine visits to neighbouring planets.  The future is an automated world of alternative energy sources.  The climate change debate shows that we need to start moving towards alternative energy sources and so the hybrid, the electric or other forms of power sources are the future differentiators and these require radical and highly innovative thought about the whole industry.  Other countries have already got this message.  Every month a new book preaches the need for high cost countries like America to lead a manufacturing renaissance.  For real innovative success one only has to look at the Swiss achievement in a manufacturing economy driven by leading edge products.   South Australia has already recognised this with the bold recruitment of leading academic on innovation, Goran Roos, to head their new manufacturing initiative.  Australia’s future must include a thriving manufacturing sector with automotive a major component.  However, it will require a much changed industry.  We need to build a new innovative model for our future automotive industry; the current one is atrophied.

How do we change?

Our current situation is like asking someone in the street for directions only to be told “Oh if you want to go there I would not start from here”.   But this is where we are and so to have a futurist leading automotive industry we need to do three things.  First have an honest assessment on the current state of the industry; secondly create a vision of where we want the industry to be in the future and finally develop a plan to get from where we are to this future vision.  Each of these tasks requires radical thinking by experts from all the aspects of the industry and will require time and an in depth evaluation with honest and realistic admissions.  This analysis must take a radical approach, traditional thinking will not take the industry to where it needs to be.  This is the approach we must take to building a new automotive industry.  Sinecures like increasing government purchases of Australian made cars, waiting for the dollar to fall, iterating design rather than innovating it, are not sufficient.  We need to follow the Tom Peters old management maxim- if it not broke, break it.  

Effectively, no real decisions on the industry can be made until after the election in September.  One of the first steps would hopefully be to appoint an expert taskforce to set out a ten year roadmap for the industry.   In a year we need to have the blueprint action plan.  This would seem to fit with the current horizons establish under the current regime and so existing support financial plans will need to stay in place even with a resignation to further labour losses.  A new innovative model for the automotive industry needs to be conceived on a number of building bricks.  The leading edge types of product being produced and the research technologies required to support this edge; the radical production processes that can produce cars at relatively competitive prices and support the total productive competitive advantage and a totally new industrial climate with a new paradigm in management and worker collaboration instead of the old adversarial industrial relations division.  All of this has to be underpinned by a government that clearly understands such industries need judicious and targeted government support.

What are some of the broad brush strokes that should be considered in this new age?  The vehicles of the future will not be solely oil powered, so research and development into new forms of power has to be a priority.  It would seem that investing in a dedicated Centre for Automotive Power Innovation in accordance with the Labor Manufacturing plan would be and ideal way to start.  It would also seem that identifying a leading university and TAFE institute to develop knowledge and skills for the future industry should be given impetus with appropriate incentives.  As electronics is already a crucial, competitive differentiator in today’s car and all of this technology is outsourced overseas, there is going to have to be major technology partnerships set up with the world’s leading companies.  While this sounds easy, the issues around intellectual rights will be extremely complex and these types of joint venture will new considerations.  Government has to do more that passively make funds available as with the latest funding  for Innovation Centres; the government has to direct funding to specific organisations and technologies.  It has to force collaboration.  This is an area currently that Australia is not good at.  Government has to have the courage to direct spending in collaborative technologies but this requires a level of courage not seen in governments of either persuasion.

The second major area of change is in the total automotive process.  Currently manufacturing is driven by scale.  But the new industry will not have scale and so will require a new process concept based on some form of cellular production with tiered suppliers much more integrated into the total process, both by Geographics and status.  Tiered suppliers will share in the total process rather than the current methodologies where hierarchical power, forces pricing pressures down the tiers and futures are only proportional to the length of contract.  There will need to be a new level of integration rarely seen in the current processes.  This extends the concept recently put forward by Manufacturing Focus’s Mark Fusco, based on collaboration projects that already exist in other countries with companies sharing facilities and resources.  Productivity is another key driver in manufacturing and while there it is suggested there has been recent improvement in this area; Australia does not have a good record.  Australia’s industrial relations climate is a major deterrent and while management performance must also be improved as leading economist Saul Eslake recently suggested in the AFR, this is a chicken and egg argument as to which came first?  A new management – worker paradigm cannot wait until we have a new industry as further job losses will just enforce traditional divisions.  A new industrial relations climate needs to start now.  One way would be to scrap the current EBA system and introduce management/worker boards on the lines of what happens in Europe.  These boards work together without third party unions to negotiate across a whole range of productivity issues.  With a more enlightened attitude from all sides Industry, Unions and Government could then work together on the bigger strategic issues.  Finally, what role should government pay in this?  The almost ubiquitous cry from businesses is the need to reduce the regulation of industry and the automotive industry must surely benefit from taking positive action in this regard.  Of course, the folly of the carbon tax with its increased costs for no benefits must be addressed.  The Alternative energy fund should be focused on to the industry in recognition that car pollution is a major issue.  Utilising Australia’s natural energy resources to assist the industry as Dow Chemical’s Andrew Liviris’s suggests would again provide further assistance to a new industry.

 

A brave new world

These are but a few suggestions from a society of passionate manufacturing people who believe that both a manufacturing industry and an automotive industry are crucial to the future prosperity of this country.  One of the Victorian Government’s new principles is collaboration and much of this paper builds on a new regime of collaboration within the industry.  It also relies on a new form of positive and supportive government.  The existing automotive industry is heading to the extinction cliff edge and we will lose much more than an automotive industry, we will lose the bedrock of a manufacturing industry that will never to able to be replaced.  But it requires action not complacency.  As the CEO of the CPA Institution stated at their launch of building a ‘Competitive Australia’ the government’s plan for another innovative and key manufacturing industry, ‘Fast Rail’, took 32 months to produce a plan that will take 65 years to implement while China actually planned and built theirs in just 38 months!  It requires a quantum change of mindset to create this brave new world.

The Labour Government’s  “Plan for Australian Jobs”.

The Prime Minister has announced the promised “Plan for Australian Jobs” that follows the report of the Non – Government Taskforce issued in September of last year.  The PM announced the plans at a visit to the Boeing Facility in Melbourne, one of the few successes of component manufacturing still remaining in Australia.  Said to be a $1b investment in the future of manufacturing jobs in Australia, the heavily repetitive document, seemingly more desiring of volume than articulation, has received a rather muted response in the national press and from the opposition.  This paper outlines the major initiatives in the plan and then critically examines whether these actions are going to achieve the rejuvenation in manufacturing that is still essential to Australia’s future prosperity.

Reminder of the Taskforce findings:

•  Meeting current pressures by helping with investment and industry participation, to reduce the risk of loss of jobs and core manufacturing capabilities.
•  Lifting productivity growth and reducing business costs via economy-wide proposals in transport infrastructure, broadband, energy, regulation and taxation reform.
• Improving the benefits flowing to Australian manufacturing from our research investments including through a new platform for systemic collaboration with innovation hubs and stronger networks.
• Building a cohort of medium sized world competitive firms and improving SME competitiveness through a new SME Strategy that targets SME capability.
• Forging of a shared competitiveness culture through a new national partnership for workplaces, focused on the capabilities of managers and workers.

Plan Details

In line with recent rhetoric from the government, the paper outlines that creating and supporting jobs are the central objectives of the government’s economic policy and through this plan $1b will be invested in productivity, prosperity and jobs.

The three main policy frameworks of the plan are:

1. Backing Australian Firms to win more Business at Home
2. Supporting Australian Industry to win new business abroad
3. Helping Australian Industry SME’s to grow and create  new jobs

It is said that these policies will complement the 5 pillars of productivity identified in the ‘Asian Century’ paper of skills and education, innovation, infrastructure, tax reform and regulatory reform.

1.  ‘Winning more work at home’

The main actions are the introduction of a new ‘Australian Industry Participation Authority’ that will be established to help firms seeking work on large domestic projects and in global supply chains.  In addition, they will legislate through a new Australian Jobs Act to extend Australian Industry Participation (AIP) to give fair chances to Australian firms.  All projects with capital expenditure of $500m plus will be required to implement AIP plans as to how Australian firms are to be given opportunities to win appropriate work.  For projects above $2b that applies for concessions, they will be required to embed AIP Opportunity officers within their procurement teams.  It is believed with these actions of enhanced industry participation, productivity and growth through building scale will increase competitive advantage.  According to the costs summary table, this part of the initiative will cost $98.2m although it appears the current expenditure is already $58m and so additional expenditure will be $40.2m.  (Author’s note:  apologies that sum of these allocations may not be totally correct but the report’s figures are not easy to interpret).

Strengthening Australia’s Anti- dumping laws – $27.7m will be invested in a new system for investigating and applying remedies where dumping is injuring local producers.

Improve management and workplace skills with a $12m investment over 4 years to establish the ‘Centre for Workplace Leadership’.  This not for profit entity will demonstrate how effective leadership is critical to workplace productivity.

2.  ‘Supporting Australian Industry to win new business abroad’

The three main initiatives in this framework area are:

‘Industry Innovation Precincts’

Creating up to 10 ‘Industry Innovation Precincts’ to drive collaboration and innovation in areas where Australian firms can globally compete.  The precincts will be business led and focus on areas of scale competitive advantage and emerging opportunities and networked nationally through a new ‘Industry Innovation Network’.

The precincts will be governed by industry led boards with representatives from business, the research sector and others including service providers who can provide advice and assistance in certain areas.  The precincts will have flexibility in the projects and services they deliver.  A competitive ‘Industry Collaboration Fund’ (with funding building to $50m/year) will be administered by a new ‘National Precincts Board’ which will have at its power additional funding options.  Firms located nationally will benefit from the precincts activities through a national technology platform, ‘Industry Innovation Network’ and through ‘innovation Brokers’ who will link industry with researchers and business services.  The first precinct announced is the ‘Australian manufacturing and Materials Precinct’ at Clayton, Victoria (AMMP) which embraces the Synchrotron.  The second one is the private Kraft lead food precinct headquartered in Melbourne.  The total expenditure announced on Precincts is $504.4m with $238.4m allocated to the precincts and $236.3m allocated to ‘Industrial Transformation Research Programs’ (ITRP), which are research grants administered under the Australian Research Council (ARC)

Providing new support for SME’s with high-growth potential in such precincts through ‘Growth and Leadership Development’ (GOLD) initiative where potential high growth firms will be offered advanced integrated services as a ‘one-stop shop’.  The service will be delivered by Enterprise Connect, AusIndustry, Commercialization Australia and other service providers.  GOLD will offer access to a range of capabilities including:  skills and technical expertise through the existing ‘Researchers in Business Scheme; Design through a new Design Solutions initiative, Management Skills Improvement through extending leadership capabilities and marketing through associated government bodies.

Improving efficiency and streamlining costs to position Australia as a world leader in clinical research and the commercialisation of new medical technologies with $9.9m allocated to specific clinical trials.

3.  ‘Helping SME’s to grow and create jobs’

The main initiatives are:

Creation of ‘Venture Australia’ to facilitate the growth of new knowledge based and innovation driven businesses in Australia, to increase industry competitiveness and to attract new investment to Australia based on our areas of strength.  This will have an allocation of $350m.  The government will match $ for $ investment taking only a return on the long term bond rate.

Government will be a customer to innovative firms through their purchasing power for requiring delivery public services.  The ‘Enterprise Solutions Program’ will fund innovation to develop solutions for future government requirements through improved practices, products and services.  The government will spend $27.7m over 5 years on this program.

Enhancing ‘Enterprise Connect’ services to a wider range of SME’s.  Eligibility will be extended to professional services, information & communication technologies and transport & logistics sectors.

R&D tax incentives will be restructured into a new tiered structure with the third tier of very large companies with an annual Australian turnover of $20b under the non-refundable 40% R&D tax offset.

Press Response

Immediately following the announcement, the AFR ran an article that gave the reactions of the major players.  At a speech to the AWU Conference, Prime Minister Gillard defended the R&D cuts to large corporations as financially responsible and in line with “Labour Values” arguing that the big companies have the financial and market incentives to innovate without government support.  The Australian Industry Group welcomed the changes but expressed reservations on the R&D cuts to large businesses.   The Minerals Council of Australia expressed concern on the plans to embed public servants in companies as “unnecessary, unwarranted and inefficient”.  The CEO also expressed concern on the reduction of incentives affecting overseas views of Australian tax arrangements.  The Greens described the changes as toothless and demanded mandated use of Australian goods and services.  The Australian Chamber of Commerce & Industry  CEO appeared to be in general agreement but questioned value for money and whether it would offset damages done to industry by other policies.  The supportive AWU described the package as a “game changer”.

Peter Roberts in a comment column in the AFR described the initiative as a ‘flawed innovation plan’.  He questions the local content rules, quite rightly stating that at the end of the day no one is forced to buy Australian.  He praised the $350m of venture capital to be made available as a market based model where previously the direct investment model through “Commercialization Australia” had bureaucrats picking winners and so moving to a market based approach is more desirable.  Roberts also praises the new industry innovation precincts that are modelled on the successful German ‘Fraunhofer Institutes’.  Again it is a move towards private incentives for the precincts as demonstrated by the first centre set up by Kraft Foods at Ringwood opened earlier this month driven by the private sector rather than government initiative.  Roberts does criticize the removal of the R&D concessions as ‘punishing success’ and also asks the important question of whether there is a need for two more government bodies, an industry innovation Network and an Australian Participation Authority to administer all this?

Vernier Comment

This plan cannot be found wanting in all areas and some moves, particularly the Venture Capital Fund should be applauded but there is much in the structure that feeds the Labour model.  Julia Gillard consistently argues that all their policies are based on ‘labour values’ and are focused on creating jobs.  But yet again the jobs created here in the first instance are bureaucratic, with the two new authorities in an area that is already overburdened with numerous government bodies.  The administrative challenge to avoid duplication must be real with so many similar authorities and support units.  The labour ideology of centralized government is still under writing this plan where as the Liberal principle of the need for smaller government from a cost and an effectiveness perspective has more appeal.  The idea of embedded AIP Opportunity officers is just another level of cost to an organisation.  Companies are only going to buy local content if the value proposition is correct for them and this package does nothing to correct many of the structural costs incurred by business and the economy in Australia.  Ensuring that both the company managing the project and the Australian companies capable of delivering goods are aware of each other’s plans and capabilities is essential but at the end of the day such decisions are quite rightly made on product performance, price and delivery and installing bureaucratic checks does nothing to ensure Australian firms compete against these key criteria.

The innovation Precinct Concept is not new with Silicon Valley of the 1970’s as an early successful example.  In addition, the UK government have just announced a similar program called ‘Catapult’ and the US’s ‘National Network for Manufacturing’ while Victoria’s previous example at Port Melbourne did not succeed.  The idea of focusing innovation into specific areas is certainly a good idea, although what is important is to make sure the industry area is progressive and well niched.  The first Precinct at Clayton, the AMMP, is already up and running but its website would suggest that they are focused on research areas rather than a specific industry.  It is again unfortunate that this initiative creates yet another top heavy bureaucracy with tiers of boards.  In addition, the complexity of ways of obtaining funding through the myriad of options must be very confusing and limiting to start up organisations.  The other question is whether with today’s technology, a cheaper and better solution would be to create ‘virtual precincts’.  The Kraft food precinct in Ringwood is good but to extend the concept to a ‘food’ niche would surely involve companies geographical separated and raises the question of would not using ‘virtual precincts’ utilizing the potential of the NBN not be nearly as effective solution at a much more effective price?  Of course, the infrastructure investment of $200m plus will be more attractive to construction unions support than a virtual solution.

The plan to remove the R&D grants from large companies is a short-sighted and bad idea.  Highly successful British entrepreneur Sir James Dyson said in Sydney recently that “it is just crazy to steal or take money from big companies”.  It seems that the government just wants to penalize large companies, not only with this but with the focus on the mining companies with the MRRT and the ubiquitous Carbon Tax.  There seems to be a belief that big companies are just easy pickings.  It may be that the government is playing ‘Robin Hood’ taking from the large to feed the Small SME’s but there is a danger that this myopia will affect global strategies and turn once large companies in Australia, into large international companies with small companies in Australia .

The consistent message of late that innovation is the key to a resurgent manufacturing sector seems to be partly addressed by these initiatives.  The need for industry and academia based R&D to become more closely linked is laudable but it is difficult to see whether academic organisations have really understood that they need to be strongly commercially focused.  One of the other key messages in this plan is that while creating a better environment for SME’s to flourish, the government believes that new entrepreneurial managers need a new level of training to maximize their potential;  hence the proposal for “Centres for Workplace Leadership”.  Submissions for the provision of this Centre closed at the end of January and is to be in operation by the end of March 2013.  With such a short reaction time I really struggle to understand how and where the visionary thinking has occurred to identify and develop the transferable knowledge and skills the manager of tomorrow needs in his ‘toolbox’.   I cannot help thinking this was a loaded solution just waiting for an engineered question?  The other question is whether organisations like ‘Enterprise Connect’ are going to have the skills to expand to deliver to a wider audience.  Does the organisation have the consultants with the depth of global experience to turn small SME’s into potentially large and successful companies remains to be seen.  My personal experience is they help small inefficient companies become more efficient small companies.

What is not in the plan?  Well for the unions to describe it as a ‘game changer’ would automatically to suggest to this sceptical author that they see no pressure for collaborative change in the plan.  While the Gillard Taskforce proposed a new level of cooperation and collaboration between employers, workers and unions; the recent changes to Fair Work Law just increase the gap between management and unions by increasing the already wide influence of union officers.  The Industrial Relations arena still seems to be so emotively dangerous for the Coalition for potentially losing votes that one can only hope they are just playing safe and will start to make sweeping changes after their expected and almost demanded victory.  The other issue is the reduction in bureaucracy that is required and this plan seems to move in the wrong direction.  Cutting government red tape, a more appealing tax regime and a realization by the unions and the populace that our industries operate in an increasingly challenging world environment and so all ‘enshrined rights’ should be up for review, is sorely missing in any Labour plan.  But let’s see the Coalition plan please.

ISSUE 9 – FEBRUARY 2013

MANUFACTURING IMPORTANCE TO AUSTRALIA

EDITORIAL

This month’s main speaker is Dexter Clarke from Futuris.  The timing is opportune as the company, maker of car seats and trims, has announced recently that it has doubled, over the last 18 months, its output from its plant in the port city of Hemaraj in Thailand.  The plant is located in an industrial estate sometimes known as the “Detroit of the East”.  So this month it will be pleasingly to hear a success story in the Australian Automotive industry.

The ”Initiative” presentation this month will give an overview of the New Gillard “Jobs plan for Australian Manufacturing”, which is said to be a $1b investment in our manufacturing future.  While some of the ideas are interesting, it is hard to believe that this is the panacea to all our issues.  The focus is on jobs – but what jobs and where will the money come from?  This question will become increasingly predictable in this election year as both parties make promises filled with financial funding uncertainties.

The other big issue that has dominated the last week is the push from the PM to “Put foreign workers last”.  Then there was the claim from militant Maritime Union that they are insisting on unprecedented guarantees that companies servicing the offshore oil and gas sector will only employ local workers under new four year workplace agreement (AFR 26/2).  One could not help smile at the coalition’s point that the PM’s major advisor is himself on a 457 visa. Union leader Paul Howes, when probed on their enforcement of this point on ABC TV recently, repeatedly cited incidents of rorting of the visa system by unscrupulous bosses and claimed that the government’s, for want of a phrase “Give us a job” site for people wanting jobs in WA, had over 37,000 names yet new 457’s were being employed.  The ‘Lateline’ reporter pointed out that it was fine to want a job but how many Australians had the skills that were required against the jobs available?  Howes repeatedly ducked the question, with the suggested aplomb of a man who has his own name on a jobs wanted list.  It has been pointed out that many of the 457 jobs are in our hospitals and care service and were well paid roles and skilled roles, necessary to support a system that would otherwise collapse.  While 457 jobs in manufacturing are in a minority, one factor that seems to be overlooked or too explosive to mention is, and I speak from firsthand experience, that the productivity of overseas workers is higher than the Australian worker.   While some workers may not have the level of skills required initially, this is compensated for by industriousness, a willingness to learn and perhaps no sign of the Australian ‘mentality’ that is seen in some local workers.  Of course, these overseas workers will work hard and may not know or get their full entitlements because job security is so vital to them but the nationality of the worker is not and should not be the only choice an employer is mandated to make!

The Jobs Situation

Mining Job losses

Even the mining industry is not immune from job losses with the Queensland mining company CQMS Razer announcing it will cut another 60 jobs next week following the 20 people that were removed at the end of last year. (MM Feb)

Telstra cuts 700 jobs

Telstra confirmed on 21/2 that it was cutting nearly 700 jobs from Sensis as part of a restructuring that aims to accelerate the transition of the faltering directories unit to a fully digital media business which will create another 50 positions.  These losses occur as Telstra posts record half year profits of $1.6b. (AFR 22/2)

Boral further restructure

Following Boral’s 700 employee redundancies announced in January, the company today announced it was amalgamating its construction materials and cement into a single division with the loss of one senior executive (MM Feb)

SA dependent on manufacturing (MM Feb)

A leading economist has stated that the SA economy with 70% of its exports coming from the manufacturing sector is heavily dependent on the allocation of the forthcoming federal defence contracts.

Half defence jobs go overseas via bid process

The AFR reported (25/2) that the federal government was outsourcing defence jobs to overseas manufacturers while imposing new requirements on mining companies to use local content.  The article states that local content has fallen from 80c to 53c and the average contract value was lower in value than contracts awarded to Britain, US and European based companies.  The DMO manages 170 defence projects worth of $100b.  However the Australian Strategic Policy institute said “given the globalisation of defence industry, it’s inevitable that work will increasingly go offshore”.

600 Jobs on line at Electrolux – (AFR 8/2)

One of the two remaining large whitegoods manufacturing plants in Australia is under threat.  Electrolux Home Products with 600 staff at its refrigeration plant at Orange NSW is seeking a $50m plus investment from its Swedish partner .  A request that has sparked a company review .  The CEO said this is not a review based on lack of profitability or productivity but by the Australian board looking for new investment.  The challenge is that Orange will compete for investment with 30 Electrolux plants worldwide including lower cost locations like China.  While the Orange plant is under question, the Adelaide Oven factory cannot cope with the backlog of orders for the new and first 90 cm wide oven.  Electrolux have up to 40% of the Australian market – The CEO said “we should stop apologising for Australian made – if you are doing it today you must be doing a bloody good job”.

Industry No to apprentice wage rises

The ACTU along with manufacturing unions are arguing before Fair Work Australia (FWA) that a first year apprentices wage should rise to 60% of an adult’s wage.  The article did not make clear what the current comparative rate is but the case is being watched by business and unions for wage claims of almost 500,000 trainees and apprentices across the country.  The ACTO argue that the increase would stop the high dropout rate and provide an adequate living wage, while the employer associations argue that it would lead to a substantial decrease in apprenticeships being created and so increase the skills shortage.

Other News this month

Coalition rules out changes to industrial Relations

Joe Hockey announced in Queensland recently that the coalition have ruled out both major industrial relations changes and intervention to lower the dollar.  Hockey said productivity is more important than cutting wages.  “We can compete with higher wages provided our output per work is globally competitive” the AFR reported from his speech. “Australia’s standard of living must not go backwards.  There is no national benefit in cutting wages”.  With regard to the high $ Hockey argued that a forced reduction would create higher prices for consumers at a time with many households are under extreme financial pressure.

Academic offers solution for new global companies and praises ANCA

In a recent interview with “Smart Company, UTS Professor and recent advisor to the government, Roy Green has said there has been a recent growth in what he calls “micro-multinationals” who are well suited to Australia’s current challenges.  Some companies will die off, Green claimed, but others with niche offerings and an international focus could adapt.  Either those who produce very bulky items difficult to import or those that are agile and specialised to producing products that operate in niche markets both locally and internationally.  “Micro-multinationals “are those that have a global mindset and are not limited to the domestic market. Examples of such companies were given as ANCA, fabric maker Textor and electrical accessories brand Clipsal.  Vernier’s recent speaker and ANCA co-founder Pat Boland stated that ANCA’s plant in Thailand is able to sell into China under a free trade agreement between the two countries.  This means that there must not be such an agreement Australia and China (apparently such agreements with China are rare) so machines will be more expensive when shipped from Australia.

Government tells manufacturing the solution to current pressures

Gillard in a radio interview, as reported by Manufacturers Monthly says that manufacturers can still survive even with the high $ by making changes to make their businesses in order to stay profitable.  “The competitive disadvantage of the high Aussie dollar is obvious but we can still manufacture things, provided we’re at the forefront of innovation and quality,” she said.  “We can still be a country that manufactures things. But we’re going to have to do it differently.”  The PM’s comments echo Industry and Innovation Minister Greg Combet as reported in the Australian that while the government was committed to supporting manufacturing jobs, business models have to change to become more competitive.  “Industries and businesses that succeed are going to be those that develop new technologies, new processes, that innovate, that apply technology to their manufacturing processes, for example,” he said.  “the manufacturing sector also need to take a leadership role in finding new technology … Industries and businesses that succeed are going to be those that develop new technologies, new processes, that innovate, that apply technology to their manufacturing processes,” Combet said.

Successful UK Entrepreneur questions Australian tax incentives (MM Feb)

Inventor Sir James Dyson (of vacuum cleaner fame) was in Sydney last week as part of a promotional tour for the company’s new Airblade product stated that Australian tax laws do not encourage entrepreneurship through limiting tax breaks for inventive organisations.  The AFR report Dyson as saying “You have very inventive people and very good universities … but if they [government] think 45% tax relief for start ups in Australia is going to help – it won’t.  It’s too small.  We [Britain] are getting more than double that, the French gives more than that.  It just isn’t enough”. Dyson also questioned funding effectiveness. Having to apply for funding where some civil servant ultimately makes the decision is wrong because they are not equipped for the right decisions.  “You should back people who have ideas and want to do them and the way to do that is through the tax system”.  As reported by the Australian newspaper the Airblade was a result of 3 years research by 125 engineers and through 3,300 plus prototypes.

ISSUE 7 – N0VEMBER 2012

Editorial

this month’s newsletter updates members with the latest manufacturing news and also includes three new sections; a book review of Andrew Liviris’s book on how to regenerate America’s manufacturing industry; a new feature identifying Australian companies that are succeeding in this tough global market and a letters’ section that invites readers to ask questions or give feedback.

The latest automotive job losses further support last month’s analysis of the industry, endorsing the message that the companies and the government’s current policies will not prevent the slow death of the industry in Australia without a radical and transparent rethink.  Australia’s need to dramatically change its productivity performance is endorsed by the Productivity Commission’s outgoing boss’s public statements, solidly supported by many industry bosses and analysis experts.  Industrial relation changes is still not even considered by the current government as demonstrated by the latest tweaking of the Fair Work rules and Shorten’s proposal to stack the board.  Cochlear, this month’s featured company clearly demonstrates the adversarial nature of IR in this country.  They have been involved in a 5 year battle with the AMWU over their EBA leading Cochlear CEO to comment that “They [unions] don’t have relevance without conflict”.

It seems a clear message to everyone, except perhaps the government, is that the mining boom has peaked and Australia needs to assertively restructure its economy, expand its industrial base and as Liviris clearly states put manufacturing – leading edge manufacturing – at the forefront of its policies.  The recent figures that show Australia as one of the most costly countries in the world seems to fall on deaf ears as this very left leaning, social democratic government continue to increase social spending without appropriate revenue.  A recent presentation by financial analyst Bridgette Leckie stated that while America appears to be coming out of recession and Europe stabilising but still uncertain; Australia, with its current policies, has only possibly two more years of performance before the economy reaches a massive cliff!

Australian Dollar is the dearest of top economies according to a study produced in the ‘AGE’ October 23^rd.  We have the third most expensive currency in the world and the most expensive of the world’s 20 largest economies, with only Norway and Switzerland more expensive to do business in based on Purchasing Power Parity (PPP).  This makes us ($161) much more expensive than USA ($100) and Germany ($105) in terms of productivity value and when compared with China ($67) and India ($41) the size of the global predicament can be clearly appreciated.

Car News – since last month’s article, Holden have cut 170 jobs and Ford affected their 220 forced redundancies from the 440 people loss announced in July.  While Autodom are back at work, their future in the hands of the receiver is still very uncertain.  In light of the anti-Japanese sentiment in China, Koita a Toyota parts supply in China has suspended plans to triple production leaving their new factory half built.  In addition, Sumitomo Electric and Toyo Type companies are rethinking plans to expand and refocusing their expansion plans on Thailand, Vietnam, Myanmar, Indonesia and Cambodia (AFR 13/11).

The government has rejected calls to reconsider buying overseas built nuclear submarines so as to support the manufacture of conventional subs in SA where manufacturer ASC employs 2500 people on three sites in Adelaide and Perth and is the leading builder for the air warfare destroyer and maintains the aging Collins class sub fleet.

Qantas axed 500 aircraft maintenance jobs in Sydney and Avalon as the next phase of restructuring that is seeking to save $110m annually (AFR).  The company has said that before these current efforts, its number of engineers per aircraft was about 40 compared to about 20 per aircraft at British Airways.

Outgoing Productivity Commission chairman Gary Banks has criticised Labor’s reform agenda by calling for an overhaul of the Fair Work Act, GST increases and a winding back of industry handouts including the car companies.  His extensive proposals, which included deregulation of doctors and lawyers, changes to teachers’ recruitment and pay but mainly focuses on issues directly associated with productivity and was roundly supported by Reserve Bank Chairman Glenn Stevens (AFR 2/11).

Good Australian Companies – With the gloom and doom about Australian manufacturing, the newsletter will each month try to identify Australian companies that are succeeding in this tough globalised market.  One such company is Cochlear the hearing specialists, whose CEO Chris Roberts was featured in this month’s ‘AFR/Boss’ magazine.  Streamlining manufacturing Systems have underpinned Cochlear’s ability to keep its cost of goods sold at about 25% despite the appreciating dollar.  Also instrumental to the company’s success has been its relationship with its 800 manufacturing staff and crucial to this is their employee consultative committee that includes workers from each of the company’s main functions, but no one directly representing the AMWU.  Wage rates are 50% above award rates and wage rises occur when staff learn new skills set out in a skills matrix, which has assisted 96% of staff to be paid at the top level of the matrix.  At the same time, Cochlear have been involved in a 5 year EBA fight with the unions.  The company is still continuing to negotiate in good faith with the unions but this is not stopping the company and its workers drive for productivity improvements.

Book Review – Andrew Liviris “Make it in America: The Case for Reinventing the Economy” published by John Wiley and Sons, New Jersey USA.

The Australian born Liviris is the President, Chairman and CEO of Dow Chemical Company, a $60billion global specialty chemical, advanced materials, agro sciences and plastics company, based in Michigan USA.  He was also recently appointed to the Co-Chair of President Obama’s Advanced Manufacturing Partnership in the US because of his strong advocacy for the criticality of Manufacturing to the long term health of a nation’s economy.

The book focuses heavily on the manufacturing issues in the US and some of the policies Dow have employed to continue their global expansion, explaining how a manufacturing sector creates economic value at a scale unmatched by other sectors and how central manufacturing is vital in creating jobs, both inside and outside the factory.

In his concluding chapters, Liviris lays out a policy framework for economic growth:

1. Make it easier for businesses to keep or locate their operations in the United States.
2. Remake the manufacturing sector with a focus on advanced, high value products.
3. Create an economy that can sustain itself and can, in turn, produce long-term job creation and economic growth.
4. Prepare the next generation’s workforce for the changing economy.
5. Improve America’s global competitiveness in both the short and the long term.

He then expands on his short term measures under the banner of ‘Immediate Impact Agenda’

• Changing the way the US taxes – An area highly pertinent for Australia, he explains how America is still stuck at a 40% corporate tax rate compared to the European norm of 24%.
• National Incentive Strategy – He points out that many countries are offering further financial incentives to relocate such as free land, low interest loans and even up to 80% start up salary support.  While this could be considered as corporate welfare, Liviris asks America to recognise this is the competitive nature of globalised manufacturing.
• Regulatory Policy – again with messages for Australia, Liviris points out the need to simplify and harmonise rules; design performance standards to assist creativity not stifle it, increase collaboration between government and business, and benchmark regulations against other developed countries.
• Continue to expand trade policies.

In his longer term policies he identifies:

• A new look at education to first increase the number of ‘Science, Technology, Engineering and Math (STEM) graduates.  He expands on this through actions to improve teacher quality, lift national standards and improve skills training.  He proposes a number of positive incentives including tax credits to employers to encourage continuing education for existing workers and scholarships for STEM courses.
• Change the immigration rules for graduates and other valued skilled people and increase the opportunities for entrepreneurs to set up in America.
• Increase the innovation capacity and increase global competitiveness by using energy as a underpinning resource.  America is currently making great strides in self reliance through shale oil resources but on top of this Liviris wants America to put a price on carbon and aggressively pursue renewable energy expansion by supporting energy innovation.  Linked with this Liviris proposes that energy costs to America industries should be reduced to increase their competitiveness.  This is also a policy that Liviris endorsed strongly for Australia in his recent speech at the Australian Press Club.
• Liviris recognises, again as Australia has, that America’s infrastructure is a limitation to productivity improvements and providing incentives for private- public partnerships and the creation of a national infrastructure bank.

While the book is heavily focused on the analysis of American issues, it has many parallels for Australia.  The good news for America is that some of these considerations are already being adopted into a national strategy that is seeing, as an example, companies like Brook Brothers, Adidas and Ford, moving their operations back to America.  The issue for Australia is that we are still waiting for positive and affirmative action.

Letters to the Editor:

One of our readers, Wayne, has written to the newsletter asking for advice;

“I am again planning the family festivities this Christmas.  In the past we have always been able to afford a lavish Christmas, thanks to some money my uncle John left us in his will and then of course the old credit card but things are getting tougher with the cost of living.  My eldest son is away working in the WA mines but he sent a very generous sum for us to spend this Christmas.  My middle child is disabled so I want to get her a good wheelchair and my other son has just been made redundant from a manufacturing apprenticeship and so I want to get him one of those little foreign cars so he can attend the job centre.  My youngest daughter is still at school and last year we built her a basketball court in the back garden to help her studies, so this year we thought we might actually get her some study books.  We are always able to put on a good spread as my wife Julia’s job means she gets lots of gifts at Christmas and this year we are inviting the immigrant family from across the road to have dinner with us so there is more to feed.  But my question is – we always have lots of lights on the house to make the neighbourhood happy and appear prosperous but is this what we should do this year? Will it add to global warming or should I get some solar panels to provide the energy?  I can buy these with some money I put aside for a holiday next year.  My next door neighbour, Joe is quite miserly, just has a battery driven three wise men scene and says we shouldn’t waste our money but I see the lights, not for us but for the entire street to enjoy.  Should I keep spending the money?

Editor’s response; – Wayne, keep spending; the economy is strong and the government gave you money for the carbon tax to keep on spending!  Don’t you get a great feeling when your house is the envy of the street?  So you can be good ‘King Waynelas’ looking out for all on the feast of Stephen!