Government

A rare case of using comparative advantage to benefit the locals is the "Western Australia Domestic Gas Policy"- this policy seeks to make gas equivalent to 15% of exports available for WA consumers resulting in the lowest gas prices in the OECD. This policy should be adopted Australia wide for all commodities that gives a comparative advantage (ie. produce cheaper and in volume).

 

Mining Commodities- The Western Australia government generates a Mineral & Petroleum Royalties of 5% of its $252 billion exports which is imposed upon material extracted from the ground. While the Federal Government imposes a resource tax based on profits, companies use accounting tricks to avoid paying this tax, the worse culprits are international companies that use structures to avoid profits and so pay no/little tax. If a policy like the "WA Domestic Gas Policy" was adopted Australia wide and a cost price negotiated, then Australians would drive on cheap gas and have cheap electricity generation. If cheap energy was Australia's comparative advantage it could build energy intensive industries and have a strong manufacturing industry. The $2000-$4000 fuel savings per year for each vehicle would significantly raise people's standard of living and the additional $billions in spending would have a positive multiplier effect upon the economy. Although Australia is the 8th largest gas and 4th largest coal producer in the world does it have cheap energy? NO it does not.

 

Agricultural & Fishing Products- those countries that produce food tend to pay higher prices and have access to lower quality produce as locals compete for the same product as overseas buyers. The best cuts of meat, the larger prawns, lobsters etc go directly overseas to buyers willing to pay more. If a percentage% of these foodstuffs were secured for the local market and sold at cost then this could substantially improve people's health standards as quality food costs would compete with highly processed foods and takeaways. Hospital costs would fall, people’s quality of life would improve and be more productive over a longer period of time. Although Australia has the 7th largest agriculture land and 3rd largest territorial waters in the world does it have cheap quality food? NO it does not.

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No Comparative Advantages BUT Smart:

Japan has no natural resources of note relative to Australia, however it has the 3rd largest steel production globally which sustains a profitable car/motor industry (Toyota, Honda, Daihatsu, Nissan, Suzuki, Mazda, Mitsubishi, Subaru, Isuzu, Hino, Kawasaki, Yamaha). It sustains this industry by importing the materials it needs- Japan imports from Australia 32% gas, 74% iron, 61% coal.

 

At this time Australia has plenty of natural resources but no car industry- importing 1million cars every year at a cost of at least $19 billion. Would it not be better for this $19 billion+ to be retained in Australia?

 

Stupid Government Leaders- Short term goals:

Australian exports are composed of Resources- 61.5%, Services- 17.6%, Rural- 11.1%, Manufactured- 7.4%. Although a first world country Australia is still a primary producer and is considered as such by the investment world, with interest rates and valuations adjusted accordingly. If commodity prices fall, of which the government has NO control, then the Australian economy will fall also.

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Australia Government Policies do not consider long term implications-

1. Record migration levels (600,000 per year)- although this bolsters the economic figures for future elections there is little incentive to train and upskill local labour, house prices and rents keep rising as demand for housing increases, entry level and low skilled jobs become unavailable for locals

2. Subsidise Primary industries- subsidies given to the primary industry as the government recognises the importance of job creation, generating foreign income and maintaining food security, but as the population grows the share of a nation’s fixed wealth gets smaller. If value added industries were built using these primary products then salaries and collected tax revenue would increase, improving everyone’s standard of living.

3. Supporting Old Car Manufacturing- foreign companies took taxpayers money to build second rate cars and then closed shop instead of upgrading the ageing factories. Buying a car is the 2nd largest purchase in one’s lifetime- 1,100,000 cars are imported per year at a cost of $19 billion. Australia exports iron ore to car manufacturing countries (China, Japan, Korea, Taiwan) which have no iron or of a substandard grade- they are 1st, 3rd, 6th, 12th respectively in steel manufacturing. Maybe we should have a new technological car manufacturer to prevent $19 billion leaving our shores each year?

4. Best education & Research- Australia has 800,000 international students each year which obviously has a cost of places not going to local students, and the majority of these students take their skills back overseas when they graduate (short-term gain for a long-term loss).

 

Great ideas and Intellectual Property sold to overseas companies, no new industries developed nor improvement of existing industries. Examples of this below;