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.
