Howard kills manufacturing

Foreign debt that is now equal to more than 50 per cent of GDP and, in proportion to the economy, almost twice as big as the foreign debt of the United States. The reason? The foreign debt is the elephant that is now so large that it can't be removed from the room without wrecking the house.

The Government cannot acknowledge the extent to which economic growth over the past decade has been financed by foreign debt, or why the debt has been used to finance a real estate and share price bubble rather than new export and import replacement industries that could repay it.

Recognition of the problem would require the admission that it is the Government's fault that interest rates are rising because foreign lenders are demanding bigger and bigger risk premiums to finance the debt.

There is no understanding of the need for an industry policy to rescue what's left of manufacturing and to try to correct, even at this late stage, the external imbalance. The OECD brief says: "It is important that any policy response to consequential structural adjustment occurs with minimal disruption rather than seeking to prevent adjustment."

This can be taken to mean that the only Australian manufacturing industry left that is of any consequence (vehicles) as a result of the over-valued exchange rate (due to high interest rates and the commodity price boom) will be allowed to go to the wall rather than receive assistance.

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