AUSTRALIAN Treasurer Wayne Swan yesterday said there was no "silver bullet’ to ease pressure on trade-exposed industries hurt by a strong local currency.
Manufacturing output would increase by about 5% until 2020 and be dwarfed by a 77% expansion in resources and 50% growth in construction, Mr Swan said in a weekly economic note . Services will grow 38% over the next nine years, buoyed by demand from the Asian middle class for Australian tourism operators and education providers, he said .
Since 2005, which the central bank marks as the start of the present mining boom, employment in manufacturing has slid about 6%, according to Gary Banks, chairman of Australia’s Productivity Commission.
BlueScope Steel said last Monday it would stop exports, shut a mill and a furnace, as well as shed about 1000 jobs, after reporting a loss in the second half. The country’s largest steel maker attributed the performance to a record-high Australian dollar and high raw-material costs.
"We shouldn’t pretend that there’s some silver bullet and that somehow the massive structural changes occurring can be stopped," Mr Swan said. "Although manufacturers are experiencing tough times, there’s no doubt in my mind that Australia will remain a nation that makes things. Like all sectors, however, it will change."
Demand for Australian commodities including iron ore and coal is driving a boom in mining investment, with projects worth A$430bn ($454bn) in the pipeline, Mr Swan said.
That, along with low government debt and a strong banking sector, helped boost the currency to as high as A$1,1081/$ on July 27, the strongest since it was freely floated in 1983. "The high Australian dollar is putting pressure on certain sections of the economy, particularly on manufacturing," Transport Minister Anthony Albanese said in an interview on Channel Ten yesterday .
Reserve Bank governor Glenn Stevens has said the stronger currency, a decline in consumption and higher savings may be Australia’s new economic reality, and the only way for industries to cope is to reverse a decline in productivity.
Australia’s unemployment rate unexpectedly jumped to an eight- month high in July as hiring stalled, making the 41400 net gain in jobs from January through to last month the worst since 2003. The jobless rate rose to 5,1%, a government report showed on August 11. Consumer confidence deteriorated last month for a fourth successive month to the lowest level in more than two years, a private- sector report showed this month.
Treasurer Swan pointed to an A$3bn skills and training programme as well as infrastructure investments as ways in which the government is hoping to address the varied pace of growth in different parts of the economy. The government also plans a 30% tax on profit from coal and iron ore at companies including BHP Billiton and Rio Tinto .
Yesterday , Mr Swan committed to passing the government’s plan to charge companies for carbon emissions to cut pollution. Bloomberg
We shouldn’t pretend that there’s some silver bullet and somehow the massive structural changes occurring can be stopped
