29/05/2013 - 07:05

Good policy can help all industries

29/05/2013 - 07:05


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Car manufacturers and LNG producers have a lot more in common that may first appear to be the case.

This week’s Australian Petroleum Production and Exploration Association conference has triggered the release of a flurry of reports on the growth potential of the liquefied natural gas industry.

The overall theme is that the sector’s growth prospects are being stifled by high costs, poor productivity and excess regulation.

It’s a familiar refrain and one that usually puts the onus squarely on government to come up with a solution.

In the days leading up to the APPEA event, there was plenty of commentary on Ford’s decision to close its vehicle assembly plants in Australia, with the direct loss of 1,200 jobs and the prospect of many more jobs being lost from the indirect flow-on.

In this case, the commentators were fairly unanimous in agreeing that vehicle assembly has no future in Australia, and that governments have been foolish in agreeing to tip so much money into the industry.

Between these two extremes – the modern, resources-based LNG manufacturing plant and the traditional, labour-intensive car manufacturing plant – there is a lot of common ground.

And it’s a common ground that is shared by every industry, of all shapes and sizes.

From gold miners that have been forced to put their projects on ‘care and maintenance’ or cancel planned expansions due to high-costs, through to high-tech manufacturing businesses that have found successful niches in global markets.

From bricks-and-mortar retailers battling to compete against online shopping sites, through to cafes and bars that would like to trade seven-days-a-week but can’t always cope with the high costs.

These examples illustrate the diversity of the Australian economy, and the futility of trying to craft policies tailored to suit each sector.

The diversity of the local economy was highlighted, somewhat ironically, by a report out this week from Austmine, which found that the mining services sector generates $90 billion of annual sales and $27 billion of export sales.

That’s a great achievement, but importantly it has come from the diversity of this sector.

Examples include companies such as Ausdrill, which has high-tech manufacturing plants in Perth using advanced robotics, software developers such as Micromine, mining engineers such as Lycopodium and Southern Cross Electrical that have built gold mines in Africa, and truly unique businesses like Immersive Technologies, which has developed world-beating training simulators that are sold to mining companies across the globe.

What’s good for these businesses, for the most part, are the same policies that are good for LNG producers, car manufacturers, land developers, retailers and so on.

Specifically, its policies like a “stable, predictable and competitive taxation regime that encourages investment”.

That is something the federal government has clearly failed to deliver.

It’s “regulation based on sound scientific principles and transparent assessment”.

It’s “resolving the duplication of green tape and red tape across jurisdictions”.

This issue came to the fore at a COAG meeting a couple of years ago, but state and federal governments have failed to achieve meaningful progress; primarily, it must be said, because Canberra wants to impose its preferred standards and practices on every state.

And it’s “addressing the need for providing a skilled workforce … through training and continuing access to overseas labour markets”.

The policies listed above are among the major reforms APPEA is pushing to bolster the petroleum industry’s growth. The quotes are taken directly from an APPEA statement.

They also show the common ground that applies across all industries. What industry would not support these policy strategies?

A McKinsey & Co report released this week at APPEA pursued similar themes.

It talked about increasing labour and capital productivity, through enhanced skills and practices, along with more efficient regulation (eg an Australian environmental impact statement takes three months longer than a Canadian equivalent), and technology advances that have the potential to drive productivity gains.



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