A poor PMI result for November is only one part of a much bigger question!
by: Jack Parr Vernier Society Member
Those eccentrics who, while driving, listen to the Senate would have caught this week a debate following the release of the latest PMI manufacturing figures for November. It soon predictably became a polarised argument with the opposition manufacturing spokesperson seizing on the result to lampoon the government for having no policy for the economy; no plan to lift wages, productivity, employment. Apparently, it also demonstrated a government led by a heartless PM who does not care for the millions who will go without this Christmas – all on the back of one negative PMI. The Government response was equally perverse; this is a strong economy with 1.4m jobs created, a budget back in balance, the low personal tax rates increasing disposable incomes to their highest level. Just ignore all the other economic signals!
Above all this political rhetoric though there is a much bigger macro picture about the reality of manufacturing, which was well articulated by Adam Creighton in his article “Manufacturing Further Decline” (Australian 3/12). These are some of the points he makes:
- The number of manufacturing jobs collapsed by 30% across the decade to 2016 and has now shrivelled to 7% of the workforce far below comparable nations.
- Manufacturing makes up 16% of the workforce in Germany, Japan, Switzerland; Canada with similar economy has 1.7m workers compared to ours at 0.7m. In Sweden and Israel with far smaller populations, advanced manufacturing is thriving.
- Quoting Economist Bob Burrell, we are now dependent on commodities and immigration to pay our way and generate growth
- Last year our trade deficit in advanced manufacturing was $185b, while our surplus in commodities was $187b. The only way we can afford these advance.
- Manufacturing and farming have traditionally been the drivers of productivity and hence high living standards; higher productivity means higher wages both in manufacturing and across the economy
- Today, wages will be determined more by the price of minerals
- All countries have seen a steady fall in manufacturing employment but most have fostered new hi-tech sectors.
- The government pins its hopes on population growth and a weaker exchange rate to bolster growth as the last gasp of the resources boom plays out.
Creighton and others clearly realises, as all in the Vernier Society do, that a vibrant manufacturing sector is vital for the prosperity of the nation. The question is how are we to develop the direction and policies that will sustain and regenerate this sector?. It seems that neither side of politics can or even wants to answer this question! The question of ‘how’ should be the question for the imminent, next decade. Vernier, along with all who understand the real productive value of manufacturing must keep this question front of mind!