by a Modest Member of Parliament, The Australian Financial Review, February 8, 1974, p. 3.
Eccles says that the recently published Tariff Board report on Domestic Appliances (fridges, washing machines, dish washers) discloses an almost classic example of what happens when an industry is over-protected for too long.
High protection has operated in the industry since 1939 and encouraged too many manufacturers to start operations. Overseas, they estimate that a company has to produce about 500,000 white goods (the generic term for refrigerators, clothes and dishwashing machines) to get economic production.
Because of the fragmentation of the Australian industry encouraged by high protection, the biggest manufacturer in Australia has a throughput of 160,000 units a year.
The Australian market is big enough at 1.1 million units to support at least two factories making 500,000 units each.
If the industry was structured in this way it would be possible to economically introduce more labour-saving methods.
And the high protection has stayed on for too long without being reviewed. Too many industries were given high protection in the 1930s. Naturally, they did not ask for their case to be reviewed lest their protection be reduced.
The Tariff Board used to ask for these to be referred to them because it was obvious that the high and apparently permanent protection was lulling some industries into complacency and easy living.
Eventually in 1971 the Government accepted the need for automatic review of long standing high protection and this report is a result of this review.
Eccles and I hope there will be many more.
Another reason the industry is in its present mess is the activities of State governments. Our State Premier goes overseas fairly regularly, seeking to induce overseas capitalists to invest in our State.
We usually get a pang by pang description of his valiant efforts on our behalf in London, Tokyo and New York. When he comes down the aircraft steps on his return, he proudly proclaims that by his eloquence and dedication he has induced yet another industry to set up in our State.
He doesn’t mention that sometimes this is done by selling it water at below cost or reducing land tax or giving it some other concession for which the rest of the community has to pay.
And in due course, after a proper gestation period, there is an opening ceremony at the new factory. And the Premier makes an eloquent address, taking all the credit for everything and the result is that we are frequently lumbered with yet another factory to produce goods which can be sold only if sheltered by a high tariff wall, and for which the consumer will have to pay extra for years and years.
We are only now becoming aware of the extra costs which these procedures have imposed. The subsidy available to this industry works out at about $90 million a year, and to every person employed in the industry we would be asked to pay a subsidy of about $3,000 a year. It is estimated that the new duties will reduce the consumer subsidy by about $55 million.
We farmers remember the scathing comments that are heard when are subsidies are ventilated but here is a public exposure of yet another consumer subsidy paid for by exporters in the end.
But, thank heavens, now it is becoming accepted that these lavish and uneconomic subsidies are a serious burden for the economy to bear and will have to be scaled down.
It is often claimed that high protection is needed in Australia because our wages are higher than in overseas countries. But in the USA, which is an important competitor, wages are higher than ours and the wages plus fringe benefits in Japan are close to ours.
The Tariff Board comments: “However, the real disability of Australian manufacturers in regard to labour is not the cost per hour but the extravagant use of labour — by comparison with their overseas competitors — which results from fragmented and dispersed production.”
So I hope the industry won’t sit around licking its wounds but will face up to the restructuring to which the Tariff Board refers. We certainly couldn’t afford to go on as we were.
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