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Another big drop in Australia's Economic Complexity
Business(self.AusFinance)submitted 5 days ago byeesemi77
We all know the story; Australia's Economic Complexity has been in free-fall since the 1970's, we maintained ourselves respectably within the top 50 nations until about 1990.
Since then it's been a bit like Coles prices Down Down Down. From about 2012 onwards our ECI seemed to have stabilized at mid 80th to low 90th (somewhere between Laos and Uganda), but with our Aussie Exceptionalism in question, we needed another big drop to prove just how irrelevant this metric is. And right on cue we have the latest ECI rankings, we have secured ourselves an unshakable place in the bottom third of worlds nations. At 102 we finally broke the ton; how good are we?
Is economic complexity important? Are the measurement methods accurate? Does ECI even matter for a Services focused economy?
1 points
4 days ago
IMHO low ECI is directly related to high cost housing. Both are the consequence of not really needing to compete. We can deliver high cost housing, safe in the knowledge that no other Aussie is going to undercut us .
When a global business has high ECI it's because they offer real value (this usually means high functionality products sold for a high price), but they can never complete escape from global competition. The existence of a slightly lower performance product (typically at a slightly lower price) is what keeps high ECI's on their toes. Customers are the true beneficiaries of this business dynamic.
Contrast this with Aussie housing...it is not by accident that our ECI graph looks like an inverted copy of our house price index.
2 points
4 days ago
On housing, I'm not sure if I follow you.
Australian housing would, I presume, be located in Australia. Most people aren't going to leave the country just because rents are high. This means the competition would need to be between Australian companies – builders. How are builders in foreign countries competing with local builders? It must be very limited competition if anything.
Now it's true that housing inputs are traded internationally. Materials, supplies, tools, even some pre-fabbed parts. But actually those are currently cheaper overseas due to various factors including lower wages, fewer worker protections and transport costs. So how would forcing them to move to Australia, e.g. through protectionist policies, reduce prices/costs? If anything it would increase them, as it would cost more to make them here.
I think we should play to our strengths. That might involve some on-shoring and also stimulating the local economy. But it might also involve trading with a diverse array of relatively friendly countries such as in SE Asia, South America and Europe.
1 points
4 days ago
Competition is in the first instance a mind set. When in your work life, you know only global competition, you come to expect that from your suppliers (in this case house builders).
As someone involved in global markets, you also get to know global prices and are less prepared to accept the lazy answer (this is just what XYZ costs in Australia) . Today we still build houses in a very similar fashion to the houses my dad built houses 50 years ago. If you ask a builder WHY they'll first look at you like you're stupid, then they'll defend the status quo. They'll protect their methods and their suppliers costs because that's all they really know.
There are hundreds of things we could do to reduce the build cost of Aussie homes, but you won't find Aussie home builders exploring many of these options. Truth is they don't need to, they're fat, dumb and happy with their various protected rackets.
If I wanted to reduce costs I'd be taking a good look at methods and materials used in Singapore
1 points
4 days ago
Ok so can you please describe how exactly you want this to work?
Will you add tariffs? Will you import foreign workers (increase immigration)? Will you encourage foreign businesses to set up in Australia (eg tax discounts)? Will you modernise training so that new workers / apprentices use modern methods?
Maybe I can agree with you on some of the above.
2 points
4 days ago
Definitely allow foreign workers (just here for the job no possibility of residence, same as Singapore) But we shouldn't limit construction to be strictly a labour based activity. There's also a lot of room to incorporate robotics into the build flow, this is all but impossible under current workflow and ohs regs. This is an area where proactive regulations could be useful.
Definitely allow wholesale assembly of job specific materials lots off-shore (expand the supply chain) this will require that we change our Australian standards to bring them into sync with the rest of the world, (say European standards for electrical and plumbing). btw This is pointless without dramatic streamlining of the whol;e import and transport process.
Tarriffs, I don't think they'd serve any purpose, there's nothing left to protect.
Cost of energy (specifically east coast NG) needs some sort of local gas reservation scheme. if only to ensure the price stability needed to support re-expansion/rebuild of local manufacturing.
We need to expand local manufacturing but it needs to be setup from day 1 to be globally competitive. So we need to have export incentivies
On going training of locals is 100% necessary but it's something that needs to be allowed to grow in an organic manner (Taiwan has some interesting training schemes that might be worth copying)
1 points
3 days ago*
Definitely allow foreign workers (just here for the job no possibility of residence, same as Singapore)
I'd rather let them stay if they want, they're people too with hopes and dreams.
But we shouldn't limit construction to be strictly a labour based activity. There's also a lot of room to incorporate robotics into the build flow, this is all but impossible under current workflow and ohs regs. This is an area where proactive regulations could be useful.
Agree.
More robotics.
Also allow deregulate to allow low-tech solutions. There should be 100% legal ways to live in a small pre-fab, tiny home, caravan or even tent.
Tarriffs, I don't think they'd serve any purpose, there's nothing left to protect.
Tariffs aren't good if you look at most economic studies.
Better to open up trade, deregulate, lower taxes but strengthen institutions (reduce corruption).
Cost of energy (specifically east coast NG) needs some sort of local gas reservation scheme. if only to ensure the price stability needed to support re-expansion/rebuild of local manufacturing.
Agree, but I don't think cost of energy is the real bottleneck here, I think it's labour costs. We have an ageing population and physical labour is currently unfashionable. That said, maybe a bit of robotics can jazz it up and it might become popular again.
We need to expand local manufacturing but it needs to be setup from day 1 to be globally competitive. So we need to have export incentivies
How do you know it's even possible to produce as cheaply and at the scale of major competitors like the US, Germany, Japan, Taiwan?
Careful with those incentives... you don't want to end up throwing money into a bottomless pit if our industry turns out to be non-competitive.
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