Keating had all the fun, Abbott cops all the pain

When veteran journalist Kerry O’Brien asked former prime minister Paul Keating what happened to all the workers who lost their jobs as import tariffs were slashed in the early 1990s, Keating claimed they “found a better job a week later”.

While that’s factually wrong, the spirit of the statement is right – by removing Australia’s decades-old scaffolding of protectionism, the scene was set for new jobs to emerge in more profitable areas.

It was only a few years after Keating lost power that education exports began to boom and mining boom mark I began to take off. The dotcom bubble created thousands of jobs and then, pop, they were gone.

And an army of tradies watched their incomes rise through a decade of home renovation fever that tapped into rapidly rising house prices – in turn spawning thousands of jobs for mortgage brokers and other finance industry jobs.

The factories of the Hawke era were swept away and a more vibrant, dynamic economy emerged. Services, construction and engineering, education, high-tech, biotech, health. Jobs for everyone!

Or so we thought.

Now that Holden is teetering on the brink of oblivion, that old Keating formula of “they’ll find better jobs a week later” is looking strained (Abbott is manufacturing a jobs disaster, December 11). While there is no good rationale for going back to the ‘good old days’ of protectionism, there are few signs that South Australian and Victorian auto workers will find a job in a week, a month or perhaps even a year.

The structural transformation of the Australian economy that was delayed by mining boom mark II is now upon us. Keating and Hawke opened up the economy, and the Howard years saw old industries dying off and new ones being born.

However, the fear that haunts Abbott government ministers in the small hours is that jobs are not being created to replace those being lost. As Alan Kohler pointed out last week, GDP is growing but the number of jobs is heading the other way (Terminating jobs: the rise of the machines, December 4).

But what to do? When a similar condition afflicted France in the 1990s they came up with the 35-hour week. And they gave ‘bursaries’ to ‘artists’ – which to a cynic might look like a repackaging of the long-term unemployed.

While it’s unlikely that Prime Minister Abbott will take the Gallic road, he does have a plan to recruit a 15,000-strong ‘green army’ to pull up weeds and plant trees. Could we rebrand them ‘landscape artists’ and charge French bureaucrats hefty fees for ‘study tours’ to observe their work? Just an idea.

Seriously though, Abbott came to power on a promise to reinvigorate and expand five pillars of the economy. The magic formula was to take the giant weight of the carbon tax off the economy and let it rise up like a prisoner freed of its shackles.

Well that always was a false promise. Across the board, businesses spend an average of between 2 and 3 per cent of their outgoings on electricity, the price of which has gone up 14 per cent for industrial users and 10 per cent for domestic users.

That is, there is a tiny weight on the nation’s shoulders that, once removed, will make no difference at all. Labor’s high-price ‘carbon tax’ provided 95 per cent of permits free to heavy energy users, 66 per cent to a tranche of medium-level users, and industries that fell through the gaps – such as food processing – were given special support packages. There is no weight to lift off.

It was not an elegant package – this columnist called it a “Frankenstein policy” when it was launched – but it certainly has reduced electricity emissions, despite copious propaganda to the contrary. A useful analysis of its effects was published this week by Mike Sandiford, director of the Melbourne Energy Institute at the University of Melbourne.

The package ain’t pretty, but it achieves its policy objectives. That Australia has drowned in anti-carbon-pricing hysteria for two years is to our shame (particularly to the shame of my industry, the news media). We can do better.

But I am being sidetracked by politics. What’s more pressing is policy.

Abbott’s five pillars look too weak, at present, to see the rapid creation of jobs to achieve Keating’s mythical transition ‘within a week’.

Abbott promised to unlock our potential in: manufacturing innovation, advanced services, agriculture exports, education and research, mining exports.

Looking for homes – quite literally – for displaced workers if Holden’s Elizabeth plant closes is difficult amongst that list in the short term.

The inward-investment-fuelled construction phase of the mining boom is winding down, releasing hi-vis-wearing workers from the north and north west to return to the cities and compete for jobs. The mining export industry that remains should be given due respect – we’ll continue to rely on it, and the corporate tax revenue and royalties it produces, for some time to come. But the sector is not producing new jobs.

Advanced services – a pretty giant, catch-all phrase – will contain pockets of growth (real estate and finance jobs will continue as long as the current property fever remains) but innovative exports of services in legal, financial and consulting services won’t help assembly line workers.

Agricultural exports are probably the brightest opportunity, particularly if we can remain an attractive destination for the $600 billion or so of inward investment that would be needed to maximise high-quality food production in this country. Sorry, did I say ‘remain’? ‘Starting’ to be an attractive destination in this area is what’s needed – the blocking of the GrainCorp buyout by America’s Archer Daniels Midland has set that agenda back five years at least.

Education and research are growth sectors, but only if we can avoid the mis-selling scandals that ruined education exports in the late 2000s. Sadly, my sources in academia are warning of universities itching to get back into that game in response to the capping of student places and funding by education minister Christopher Pyne. And again, they ain't jobs for auto workers.

Overall, this is a bad time to lose the auto industry. Like many, I’ve read the textbooks, and know, in theory, the comparative advantage arguments for letting Holden and then Toyota collapse (Time to put the brakes on auto industry handouts, December 10).

Textbooks aren’t all that useful sometimes. We need to see brighter prospects in at least some of those five pillar areas before becoming cavalier and ideological about car industry retrenchments.

Remember, too, that those auto workers will become a burden on the federal budget if they claim social welfare. That is not a long-term argument for propping up the industry, but was the argument for helping it limp through an extended period of a high Australian dollar.

We’ve waited a long time for the dollar to come down – and so has Detroit. They might, after a long, high-dollar winter, still decide to cut and run. But usually, in the spring, it’s a good time for growth.

Given the politics of the situation, Abbott must surely be thinking of rolling the economic dries who are hell-bent on cutting the car industry umbilical. The Victorian Coalition government, like Labor in South Australia, is pressuring Abbott not to remove $500 million of Labor’s auto-industry package.

But more importantly, the collapse of national icon Holden just before a half-Senate election re-run in Western Australia looks unwise.

This is a time for pragmatism. Keating had all the fun of playing with theoretically pure economics. Tony Abbott must make his decisions in a very different world.