Time to become a discerning buyer, page-42

  1. 7,664 Posts.
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    To repeat a previous post:

    For higher valued commodities, like car making and aluminium for example - refer Wyalla, the biggest cost component is energy (not labour) and yet through again government incompetence a Nation rich in energy cannot provide cheap, secure and reliable power to these industries because we believe in rubbish laisser faire economics which ironically is the basis of Laffer curve too and no surprise why it doesn't work when the world ain't a level playing field. Yet we can export LNG to China and the electricity cost input in China is less than here - what a joke and that is why high level manufacturing in Australia has dwindled/collpased in Oz (called energy costs).

    For textile, where labour costs are a key cost we won't compete, but for high valued commodities we should be miles ahead of where we are. We have the resources but are too stupid to maximise development of them and the economic benefits available from them. The other cost is our approval process that give time delays, meaning look elsewhere to value add, because politics say we don't want you here but then complain at lack of processing here LOL.

    Germany and Japan rely on high valued manufacturing commodities for growth and I suspect their economic policies going forward will also be about self sufficiency where more of the value chain is produced in own country.

    I suspect the pure laisser faire economic policies of various worldwide governments, especially Australia, that many have been implementing the last 30 years, will give way to pragmatism around becoming more self sufficient in your own economies. Look at COVID-19: Relying on other countries to give you face masks, ventilators, medicines, the list goes on etc etc is an issue. Relying on China to give you component parts to your manufacturing facilities, say those located in Japan, is a problem etc, and what might drive changes is not a reliance on costs per se, whilst costs maintenance remain critical to project viability, but costs may be overlayed with risk strategies through reducing reliance on 'self sufficiency' in managing risks of disruptions in your value chains where you can etc etc. I suspect a number of world wide governments would be re-evaluating their viewpoints on globalisation too IMO.

    For Australia, whilst I expect us to continue to be a resource exporting Nation, I suspect we might end up rebuilding some of our manufacturing capability too. Rare earth access in the 2010s impacted Japan, but I think this latest episode will probably drive Japanese industry and government to strive for self-sufficiency where they can (i.e. through directly access resources rather than buying finished products from China that they need to input into their own processes). Its why Japan didn't let LYC die as an entity btw
    https://www.reuters.com/article/us-usa-trade-china-rareearth/china-ready-to-hit-back-at-u-s-with-rare-earths-ruling-party-newspaper-idUSKCN1SZ07V

    First stop, Australia was too utterly stupid to reserve gas, with the exception of WA, hence China pays less for gas exported from Australia than what people pay for gas overeast. Gas is used in electricity generation. As for labour costs, high end value adding labour is not the principal cost, electricity is. See the stupidity of Australian policy. Gas resrvation policy Australia wide a must.

    Second stop, some infrastructure spending to get Australian competitiveness back on teh road. And as I said, high value added industries are not labour intensive - refer back to the economic base of Japan and Germany.

    Short term pain, yes. But I suspect there will be a lot of bluster as Australian governments haven't the political will to make hard decisions these days.

    All IMO
 
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