POST 23: PREMIER MCGOWAN SHOULD GRASP THE OPPORTUNITY TO PROMOTE THE STATE’S MANUFACTURING SECTOR

Overview.

Communist China’s low public health standards make the viability of trade routes, migration and tourism between West Australian and China unpredictable. It also presents West Australia with an opportunity to broaden their economic horizons.

Introduction.

Consecutive Western Australia government’s have adopted a China first economic policy. They have chosen to put the Western Australian population under greater dependence on a hardline Communist regime to grow the State’s economy. Merchandise exports to China grew rapidly from a little over $20 billion in 2008 to $68.4 billion in 2018.[1] While State governments have taken satisfaction in the growing economic relationship with Communist China. It appears they have not been aware of the major disparities in public health standards and the potential for this to provide an unwanted shock to the State’s economy?

In a short space of time the outbreak of the deadly coronavirus from China is beginning to seriously concern the Department of Treasury. Iron ore dropped by more than $US 10 per tonne, WA budget reports suggest that for every $US1/t reduction, State government revenues drop by around $81 million.[2] Depending on how long the deadly coronavirus exists this may prove a critical moment for the McGowan government to begin to re-orientate WA’s economic policy.

Iron Ore royalties’ are a major part of State Government Revenue.

The enormity of this economic challenge however cannot be underestimated. It is understandable the State government are not making any statements about their economic policies or reliance on Chinese exports. If the impacts of the deadly virus spread rapidly however, it is a hugely serious issue for the State economy and workforce. For example, the iron ore industry directly employed 53 221 people in 2017, accounting for 48 per cent of mining industry jobs by commodity.[3]

Western Australia is the world’s largest iron ore producer, generating 33 per cent of global production in 2017.[4] Iron ore is by far the most valuable commodity for the State. Accounting for 74% of merchandise exports to China in 2018 with a value of $50.7 billion.[5] China buys nearly 50% of all West Australia’s merchandise exports. The royalties’ from this is a critical component of the State’s budget. The Department of Mines collected $6.1 billion in royalties from mineral and petroleum producers in WA, of which 79.7 per cent, or $4832.8 million, was from iron ore sales.[6]

A good time to re-energise West Australia’s dwindling manufacturing industry.

One-way to reshape the economy is to reinvigorate the State’s manufacturing industries and promote it too the rest of the world. There are several reasons why the Labour government should refocus on energising WA’s manufacturing sector. China was WA’s largest merchandise import market in 2018 to the value of $4.7 billion. Manufactured products accounted for 14% of imports.[7] With the coronavirus getting worse, how long will West Australian businesses be able to rely on these imports?

The last ABS census, 2011 – 2016 showed WA’s manufacture sector took a big hit under the watch of the previous Barnett Liberal government with the loss of 25,831 jobs (See Table 1 below).[8] During this period manufacturing dropped from 8.2% of WA’s total Industries by employment to 5.6%. [9] Not much has been done to improve local manufacturing under the McGowan government’s term in office.

Table 1: Industry sector of employment Western Australia, ABS census 2011 and 2016.
[table id=32 /]
(Source: id the Population Experts.[10])

Manufacturing uses a variety of technologies; with the potential to provide more high skilled well-paid technical jobs for West Australia’s population. There is a abundance (over 80,000) West Australian’s languishing on the State’s unemployment list that could be trained up, gain an apprenticeship, new skills and employment.[11]

Turnaround the decline of manufacturing and provide more local jobs.

Premier McGowan was elected on his commitments to tightly control overseas migration so the State’s unemployed would be first in line for new jobs. The Labor government back flipped on their migration policy by opening up the State to over 700 plus occupations for overseas migrants.[12]The have also failed miserably with the State’s chronic unemployment numbers. Latest unemployment data demonstrates zero gains made on unemployment figures since the Labor government took office in 2017. By December 2019 over 80,000 West Australians remained unemployed.[13] The same as it was when Labor won the election in March 2017. Promoting the expansion of the State’s highly skilled manufacturing industry would be a good initiative by the McGowan government after 3 years of inaction on the unemployment figures.

Conclusion.

The uncertainty about the economic relationship with China is beginning to take hold. West Australia imports nearly $5 billion worth of merchandise from China.[14] What are the guarantees for local business that the import of base metals, equipment and machinery will be consistent and reliable if the deadly coronavirus gets worse? The State Premier should grasp this opportunity by promoting the State’s ailing manufacturing sector to expand, hire local people and produce locally made high quality products.

References.

[1] Government of West Australia, Department of Jobs, Tourism, Science and Innovation, ‘Western Australia China Trade Profile April 2019’, 2019 <https://www.jtsi.wa.gov.au/> [accessed 26 August 2019].

[2] Jordan Murray, ‘Iron Ore Price Tumbles as Coronavirus Spreads’, Business News, 2020 <https://www.businessnews.com.au/article/Iron-ore-price-tumbles-as-coronavirus-spreads> [accessed 9 February 2020].

[3] D J Flint, N L Wyche, T J Beardsmore and R W Coope, ‘The Importance of Iron Ore to Western Australia’s Economy’, 2018 <https://www.ausimmbulletin.com/feature/importance-iron-ore-western-australias-economy/> [accessed 13 February 2020].

[4] D J Flint, N L Wyche, T J Beardsmore and R W Coope.

[5] Government of West Australia, Department of Jobs, Tourism, Science and Innovation.

[6] D J Flint, N L Wyche, T J Beardsmore and R W Coope.

[7] Government of West Australia, Department of Jobs, Tourism, Science and Innovation.

[8] .id The population experts, ‘Western Australia Industry Sector of Employment’, 2019 <https://profile.id.com.au/australia/industries?WebID=140> [accessed 2 September 2019].

[9] .id The population experts.

[10] .id The population experts.

[11] Australian Bureau of Statistics, ‘6202.0 – Labour Force, Australia, Dec 2019’, 2020 <https://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6202.0Media%20Release1Dec%202019?opendocument&tabname=Summary&prodno=6202.0&issue=Dec%202019&num=&view=> [accessed 10 February 2020].

[12] Government of West Australia, ‘Migration WA – Occupation Lists’, 2020 <https://www.migration.wa.gov.au/Pages/Skilled%20Migration%20WA/Occupation%20lists.aspx> [accessed 11 February 2020].

[13] Australian Bureau of Statistics.

[14] Government of West Australia, Department of Jobs, Tourism, Science and Innovation.

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