Mirabella Misunderstands Manufacturing

Shadow Industry Minister, Sophie Mirabella, has come out and bagged the Government for its policies on manufacturing.

According to Ms Mirabella:

“If Ms Gillard had a genuine interest in the car industry, in manufacturing or in innovation, then she would never have:


• broken her promise not to introduce a carbon tax – a $460 million burden on the industry; 
 
• broken $1.4 billion of car industry promises;

• dumped manufacturing from Cabinet; 

• crippled government support for business research and development; or

• shown complete ineptitude in failing to stem the worst rate of manufacturing job losses in Australia’s history. “

With those comments in mind, it is interesting to have a look at how manufacturing has performed over the past 35 or so years under each side of politics:

Let’s start with the Fraser years from 1975 to 1983. In those 7 years, manufacturing output fell at an average annual rate of 0.1%. As a share of GDP, manufacturing crashed from 16.0% to 13.3%, an average loss of 0.4 percentage points of GDP per annum over 7 years.

Under the 13 years of the Hawke and Keating Government’s from 1983 to 1996, manufacturing output grew at an annual average rate of 2.7%. Not too bad, but it still fell as a share of GDP to 11.5%. that’s an average loss of just over 0.1 percentage point of GDP per annum over those 13 years.

In the 11 ½ years of the Howard government to 2007, manufacturing grew at an average annual rate of 1.5%, roughly half that recorded by manufacturing under the Hawke and Keating years. As a share of GDP, manufacturing slumped to 9.0% of GDP, losing 0.2 percentage points of GDP on average per annum under Howard.

With the Rudd and Gillard Governments since the end of 2007, manufacturing output has fallen at an annual rate of 0.3% - and as a share of GDP is has dropped to just 8.2%. That’s an average loss per annum of around 0.2 percentage points. This is effectively the same relative performance as was achieved over a longer time frame of the Howard government, a vastly superior to the record of the Fraser Government, but lagging well behind the quite impressive results under the Hawke and Keating Governments.

And guess what?

The best performing years were when tariffs, protection and largesse were slashed. A bit of tough love goes a long way.

But whatever the policy shortcomings relating to manufacturing right now, Ms Mirabella is barking up the wrong tree.