Last night I was gobsmacked by a Trump initiative that’s relevant to the question: What’s the price of successive governments that have ignored the importance of fostering businesses to ensure the cutting edge technology and the best productive workers?
Try $4 million per worker, which is the expected cost of the Albanese and SA Governments’ bailout for the Whyalla steelworks.
Grace Lagan at the AFR explains the pickle that Industry Minister Tim Ayres and the SA Premier, Peter Malinauskas find themselves in. “The shuttering of the Whyalla steelworks’ blast furnace has blown out the cost of the plant’s bailout to $4 million per job, prompting calls from economists for clearer and more stringent criteria for government interventions in blue-collar industries,” she explained. “Up to 600 workers at the Whyalla steelworks will be made redundant after administrator KordaMentha and the South Australian government abandoned attempts to restart the blast furnace, which has been beset by technical problems and not operated since April.”
In simple terms, the calibre of this important technology for the steelworks is so hopeless that smart people say that it’s better that the blast furnace, the heart of a business like the one at Whyalla, closes down and waves goodbye to the workers.
How do you get $4 million a worker? Take the cost of the Federal and South Australian’s governments’ $2.4 billion support package for the plant and divide it by 600 workers and you get, you guessed it, $4 million.
This is a real-life example of the old cliché about not throwing good money after bad!
Given all this, let me share with you what Donald J. Trump has come up with to encourage what the Yanks call reshoring, meaning bringing home US producers. Ford, Walmart, Apple and GE, to name a few, are bringing it home. But the new factory builds also includes ‘new shoring’, with companies such as the Taiwan Semiconductor Manufacturing Company setting up in Phoenix, Arizona.
So, why are they doing this? It’s tempting to think Trump has pressured them, with his bombastic ‘name and shame’ tactics, and there could be a bit in that suggestion, as the President does love to take a stick to a public spat or two. However, there’s a much more compelling carrot linked to this expansion of manufacturing in the US, which was explained to me by legendary tech investor and fund manager, Cathie Wood. Wood has been in Sydney to explain her ARK Venture Capital Fund that’s now available for local sophisticated investors who want exposure to companies such as SpaceX, Anthropic and other hi-tech operations that are in her fund.
Addressing a group of investors and financial advisors, she explained if a new manufacturing facility is now created in the US, they receive a 100% depreciation bonus, meaning they can claim the cost of the factory on their tax in the first year rather than claiming it over a number of years. That’s a huge carrot that explains why the US budget deficit is on the rise, so it’s a gamble, but if AI then adds to an already very productive workforce in the USA, then this big government gamble of Trump’s could be a winner.
The USA is no. 7 on the OECD productivity table, with Ireland at the top, which is a country that has used low tax incentives to attract many of the best-of-breed businesses in the world. We’re 16th with countries like France and Britain above us.
Yesterday I argued that the Albanese Government needs to value and help our entrepreneurs and small business owners to cash in on their dreams, to bolster the growth of the economy and potential incomes of employers and the employees they find jobs for.
I’m talking about a virtuous and growing circle of economic expansion, our leaders at both the Federal and State levels could learn something from Donald Trump, when it comes to understanding that creating opportunities for smart business high achievers is better than putting up obstacles to success.
The Whyalla debacle should be used by the Prime Minister to say to his team and the business community that it’s time we changed our game plan, which was exactly the advice he got from former ACTU boss Bill Kelty on the weekend.
Lagan revealed that “Hannah MacLeod, the McKell Institute’s executive director of the South Australia and Northern Territory branch, said the steelworks directly and indirectly employed just under 60 per cent of the town’s workforce.”
The fact that 60% of a town relies on the steelworks underlines how important the business is and that’s why the rescue plans need to be better than one that ends in failure and a cost of $4 million per job!
This is a huge wake-up call for politicians who have been asleep at the wheel for too long.
Well said Peter. I liaise with US investors (my Wall Street gang) and they all say the same thing, the US economy is on the rise and Trump is loved despite what Australians say.
As for the current government, they are a socialist party and its not in their DNA to change this behaviour. I will be very surprised if we see Albanese and his gang of merry men stop their fruitless spending / bloating public service / disastrous immigration policies (which is propping up the GDP) and try to support private business investments back into our country.
And their green dream with all that capital being wasted is not working either. They have butchered our energy grid and it will now not cope with the planned data centres for this country. Just look at the billions wasted on the hydro scheme. What a failure.
And looking into the future, well good luck Australia! We will need it.
As one notable Economist came out this week, we are heading for a disastrous period of higher debt and deficits with a much higher interest burden for Australia’s economy to cope with.
Stephen, as someone that has spent several decades living and working in many parts of the globe, including the USA. I decided to settle down in Australia around 16 years ago. My decision was based on some opinions I had formed of Australia after a year working and travelling through all the states, that was around the time the Berlin wall fell. So, a lot of water under the bridge since I first experienced this great land. When I was here in the late 80’s, early 90’s there was still plenty of manufacturing happening and the country had 8 major oil refineries. Look at us today. We are reduced to a mine, with a housing market clipped on the side. We import almost everything and add very little value to what we export.
In 1989 our debt to GDP was 17% and our public sector gross foreign debt sat at around $17B. Today those figures are 34% and $1T ($1000B respectively). We’ve been spending our grandchildren’s inheritance. We need to put out the “open for business” sign, slash government spending and the public sector by at least 33% and get rid of this net zero malarky. If we don’t, we are well and truly cooked.
Well said. My suggestion: An analysis of WHY this country is now on it’s knees would be good to wake up the majority of voters who are ‘asleep’ (for want of a better word) Start with Whitlam & the 1972 Lima agreement. (introduction of Multiculturalism & support of giving 30% of our manufacturing capacity to ‘developing countries). Hawke (I think) selling off our critical infrastructure to private enterprise. Turnbull Snowy Mnt 2 costed at $2 trill but now estimated to be $40 trill. Scomo signing up to the Paris accord etc. What were the first things Trump did when he came to power? Leave the WHO & cancel the Paris accord ………………………………………
We need a business person to govern Australia and run it like a business. We do not need a bunch of halfwits led by someone who has never had a position outside of Politics and cannot recognise the importance of business to an economy.
100% Michael, these pollies are absolutely useless.
Yes, well credentialed, experienced, practical, business hardened individuals are needed. They are the true wealth creators, not people who are proud of being supported by Government handouts!
I’m afraid you’re correct and there is no one wanting to fix the situation. Where are our new Bob Hawks and John Howards . Or even a Paul Keating or Peter Costello. A Peter Walsh would be a great start. What happened to all of them. Our Titans weren’t replaced.
It’s more than disturbing how this current government has taken our country down a dangerous path and created an environment where they have crashed and destroyed the economy, the housing market, small business, the energy market, divided the country promoted the slogan intergenerational fairness to attack the older generation and split families. Killed off investment coming into the country, wasted millions on projects that would never fly. Fatten up the public service and supercharged immigration to buy votes. Reduced productivity to an all-time low. There are too many examples of mismanagement to list here. All the while our politicians are too busy playing politics attacking each other while being paid very well for fiddling while the country is going over the cliff. It’s starting to feel like a third country with pathway forward for the future.
Anne, you sound true-blue, unlike myself who is only a blow-in. However hard it is for me to stomach the decline of this great land, it must be harder for you, who is true-blue. Bloody hell this country is turning to turds eh? I can’t believe it, we are over a barrel with this Iran War, yet, we have immeasurable sources of fuel that we ship offshore instead of guaranteeing our own fuel security. I reckon Labor have Zero percent of holding power at the next election. There’s a chimpanzee troop at Sydney Zoo located in the Primate Boulevard exhibit in Western Sydney that would do a better job of running this place than the Labor party. Good luck.
“This is a huge wake-up call for politicians who have been asleep at the wheel for too long.”
I disagree. It’s obvious that you can’t run a blast furnace on windmills and solar panels. Our naivety is the cause of our self destruction.
Socialism works best when people are impoverished and therefore dependent on government subsidies, handouts and welfare. So rather than ‘asleep at the wheel’, Labor has actively succeeded in creating dependency on socialism with its anti-business agenda.
Peter, so pleased with all the comments herein.
I used to speak out against the current govt when they first came into office because I recall when Albanese first got into politics just to fight the Tories – a 1975 ABC current affairs interview if my memory is correct.
I used to feel like an orphan.
Now I have some new friends with the same view and it starts by speaking up in these platforms to push for change in order to save what was once a great country.
OK…so let’s get realistic. Jim Chalmers is the worst treasurer this country has ever had. He immediately laid blame on the inherited debt by the previous government’s Covid bailouts. (Didn’t Labour lambaste Scott Morrison for not extending the bailouts?).
He then introduces the most radical change to CGT in the May budget along with stifling tax implications for new business start-ups. This also coincided with treasury forecasts National debt would hit the $1 trillion mark by 2030. (Already there Jim !) And alongside all this, we have Albanese with apparently no idea of the immediate and long-term implications – did he actually review the budget before the announcement? He is now left red-faced and scrambling to find any support, without the guts to admit they got it wrong.
The end result is….we are likely to have a red-headed twit, without a chief economist in her party, running this country.
if the US has been the laughing stock of the world for voting in their current moron, Australia will “Trump” that position after the next election.