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February 21, 2022

Macro view: Covid reveals Australia low manufacturing self-sufficiency

Some economists believe that if Australia had rebuilt its manufacturing sector broadly proportionate to the country’s needs, the sector would grow by almost 50% and would create benefits in exports, incomes, innovation, and jobs.

Jim Stanford

Jim Stanford, economist and director of the Centre for Future Work, based at the Australia Institute, retweeted an article on a new research from the early days of the Covid-19 pandemic revealing Australia to rank last among all the Organisation for Economic Co-operation and Development (OECD) countries for manufacturing self-sufficiency.

The Covid-19 pandemic, as result, had reminded Australians about the importance of manufacturing essential equipment and others supplies, while the Covid-19 recession created a huge economic void that could have been filled by a more revitalised manufacturing sector, experts believe.

The new report called A Fair Share for Australian Manufacturing highlights how the coronavirus pandemic has exposed the strategic importance of Australia’s domestic manufacturing, while documenting its decline in recent years. It also reveals the benefits that could have been reaped with a thriftier manufacturing sector, including $180bn in new sales, $50bn in additional GDP, and over 400,000 new jobs.

Shane Oliver

Shane Oliver, head of investment strategy and chief economist at AMP Capital, shared an analysis on the G3 economies, including US, Japan, and the Euro area, and Australia’s composite business conditions Purchasing Managers’ Index (PMI). The analysis found that with the fading of the Omicron wave, business conditions PMIs rebounded in Australia in February 2022 with the composite PMI up nine points to a strong 55.9 driven primarily by services but also with increased manufacturing.

Oliver further tweeted that the prevailing direction of economic trends in the manufacturing and service sectors were consistent with the Omicron impact having been low and short, while the GDP continued to recover in the first quarter of the year.

Paul Krugman

Paul Krugman, economist and a distinguished professor of economics at the Graduate Centre of the City University of New York, shared an article by Adam Tooze, a historian and professor at Columbia University, on Canada finally acting against the low-intensity insurrection, which did not actually reflect a working-class truckers uprising against the Covid-19 vaccine mandate imposed by the US to enter its borders, but about transport links as pressure points.

Tooze pointed out that whereas the protests in Ottawa posed a political challenge to the Trudeau government and his Covid policy, the obstruction of the Ambassador bridge between Detroit and Windsor caused significant economic damage and was more suggestive of a classic labour protest.

However, Tooze also explained that these protests have been disowned by the Canadian labour movement and the blockades are being considered a rogue movement. Additionally, experts state that nearly 90% of the Canadian truckers are vaccinated against Covid, and comparatively few of those protesting are professional truck drivers.

The Ottawa protests are not only embarrassing for the government, Tooze writes, but the bridge protests in Windsor could pose as a real economic threat. Canada is America’s largest trading partner, outranking both China and Mexico. In 2021, about $664bn worth of goods moved between the two countries during a waning but persistent pandemic. The state of Michigan estimated that 30% of the total goods moved over the Ambassador Bridge linking Detroit and Windsor, in Ontario.

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