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As a consequence of the progressive deregulation of foreign trade that began in 1973,
Australians now mostly buy from others that which we used to produce for ourselves.
As a result, our transactions of goods and services with the rest of the world are in chronic deficit.
The last time that Australia achieved a current account surplus was in 1976 and in 2007 our deficit,
measured as a percentage of GDP, was among the worst in the OECD.

A country that runs a current account deficit is like a company that runs at a loss.
Loans or new investments are needed to balance the ledger and, given that Australia has a good balance sheet,
these have been forthcoming in the past. But thirty years of running at a loss has meant that Australians now owe foreigners more than $600 billion, a growing debt that is increasingly problematic
in view of the global financial crisis.

The stream of deficits and the foreign debt that has followed from them are an obvious failure of economic reform.
Of course economic reform has delivered benefits, through productivity gains, improved choice and lower
prices on manufactures,
but these have been at the cost of the destruction of the greater part of Australia’s manufacturing industry,
together with the skills and employment that were once attached to it.

As with many other policy experiments attempted since the 1970s, and now deemed to be failures,
so the effects of economic reform need to be appraised from a critical perspective.

The SAIE believes that Australian political and bureaucratic elites should look again to policies that foster
our broad industrial development; policies they once took to be their duty to pursue.
The reconstitution of Australian manufacturing should be central to this consideration.

Fifty years ago, with a population half of what it is today,
Australia possessed a capable and technologically advanced manufacturing economy,
able to produce a wide range of complex industrial products, in many cases equivalent to those of the
most highly developed nations.

Despite a few worthy exceptions, this capability and capacity has been all but lost.
Domestic manufacturing has inevitably succumbed to competition from countries with labour costs a tiny fraction of Australian levels.
The destruction of manufacturing has caused Australia to have:

• Interest rates 2-2.5% higher than would otherwise be the case were
Australia not dependent on attracting a large annual capital inflow to offset its current account deficit.

• A high level of disguised unemployment, evidenced by the growth of a large cohort of
able-bodied working age men and women dependent on welfare support.

• An increase in the size of government, needed to fund increased welfare and the make-work schemes required
to compensate for jobs lost from manufacturing

• A steady decline into technological incompetence as our manufacturing industries,
essential to develop and practice
productive skills, underpin innovation and secure a place among the developed nations, have disappeared.

The SAIE believes that a change in policy direction is needed.
We commend the efforts of our society to your attention and request your support for our endeavours.

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