Professor Ratnatunga says that, “Whilst not making a value judgement on the merits of any of the claimants for these ‘windfall’ funds; it must be remembered that Australia has lost a lot of its manufacturing base, and the expertise that goes with it, and needs Federal government support to be revitalized.”
Professor Ratnatunga observes that Australia’s minerals are exported to other countries, especially China, to manufacture products and sell them back to us.
“Our wool is imported by China, not for its own consumption, but to value-add and export to the world.”
“The list goes on”, he says. “Our supply chains are dominated by a few countries; whose interests may vary from ours. Australia has been subjected to ‘bullying’ by being over-dependent on some countries that import large quantities from its agriculture and mining sectors.”
Professor Ratnatunga says that the COVID-19 pandemic has shown up a major flaw in this foundational principle in the theory of international trade; that of comparative advantage, where countries can mutually benefit from cooperation and voluntary trade. But if trade between countries involuntarily ceases, even temporarily due to global lockdowns, then high manufacturing skill/intensity countries like Australia are left without the basic essentials of living.
These essentials are mostly produced by labour/resource-intensive and low-skill/technology-intensive manufactures. The outcome was that when China closed down, there was a run on toilet rolls in many high manufacturing skill/intensity countries!
Professor Ratnatunga says that whilst Australia needs to regain our manufacturing capabilities in essentials, it does not mean that we have everyone working back on the farm or producing shoes and clothing in factories for 10% of today’s wages. It however means that the government must fund via subsidies, tax incentives and other levers, the manufacturing of essential goods. The Australian government has for years funded essential health services via its Medicare program. “The medical doctors are not paid third-world salaries, as the government funds universal health care in Australia”, he says.
Professor Ratnatunga concludes by saying that “If Australia is contemplating boosting its manufacturing capabilities across all types of skills and technologies, it must go hand-in-hand with professionally qualified management accountants to provide reliable information for decision making. Such information is best provided by those who are professionally trained in strategic cost management.[ends]
For further comment on the above topic, please contact:
Prof Janek Ratnatunga
CEO, ICMA Australia
About the Author
Professor Janek Ratnatunga is the CEO of the Institute of Certified Management Accountants, Australia. He has held senior appointments at the University of South Australia, Monash University, University of Melbourne, and the Australian National University in Australia; and the Universities of Washington, Richmond and Rhode Island in the USA. Prior to his academic career he worked as a chartered accountant with KPMG. He has also been a consultant to many large Australian and international companies and to the World Bank.
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