Australia’s manufacturing future is not its past

In capitalising on this opportunity, no one could claim our past experience has been an unalloyed success. While Australia has enjoyed almost 30 years of continuous economic growth, this record has been marred in more recent times by a productivity slowdown, wage stagnation and increasing social inequality. And now we must face the prospect of a deep recession.
Moreover, Australia – and much of the world – has had to endure a decade-long debate over climate change where evidence mattered less than ideology. We have become bystanders to the existential impact of global warming, species destruction and environmental degradation, including the recent catastrophic bushfires and coral bleaching on the Great Barrier Reef.
If there is a single factor linking the constituent parts of this experience, it is Australia’s overwhelming reliance on the export of unprocessed raw materials to drive growth and prosperity. However, sophisticated the method of resource extraction, the truth is we sustain a first-world lifestyle with a third-world industrial structure.
This was the message of the Harvard Atlas of Economic Complexity, which ranked Australia at the bottom of the Organisation for Economic Co-operation and Development (OECD) for ‘complexity’, as measured by the diversity and research intensity of its exports. It is also the logical endpoint of the theory of ‘comparative advantage’, which asserts that we maximise gains from international trade by exploiting our abundant natural endowments in return for imported consumer goods from places that produce them more cheaply.
Even if this theory was true in the past, it no longer holds in a world where manufacturing is undergoing massive transformation in a ‘fourth industrial revolution’, encompassing robotics and automation, artificial intelligence, data analytics and machine learning.

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