Investing in a renewable manufacturing industry is vital for Australia’s living standards (and climate)
Australia’s economy is less an advanced economy than it is a petrostate style simple economy. That needs to change
The announcement that the government would respond to the USA’s Inflation Reduction Act with the “Future Made in Australia” policy was a long time coming but welcome all the same.
But while critics immediately began to decry any sense of the government picking winners, what they failed to acknowledge is that Australia has a desperate need to transform its economy not only to one not reliant upon fossil fuels but also which involves much more complexity than it currently does.
Harvard University tracks the level of economic complexity across all economies in the world. And Australia ranks just 93rd out of 133 nations. Australia has the least complex economy in all of the OECD. Mostly we dig stuff up out of the ground and ship it elsewhere.
Fortunately, this has been very profitable for companies and has meant Australia is a very rich country – with one of the highest level of GDP per capita in the world.
But when you compare economic complexity with GDP per capita a worrying picture emerges. Australia is less an advanced economy than more a petrostate – we have more in common with Qatar than we do Canada or the USA.
The Future Made in Australia plan is designed not only to transfer the economy away from fossil fuels but also to make it more complex – an economy where we add value to products, and in turn add income to those in society.
In essence, we can go two ways – we can remain a simplistic economy which will eventually see our wealth and income fall as fossil fuels become less and less viable, or we can become a more complex economy and ensure the wealth and income we as a society are used to continues.
The Future Made in Australia plan is a necessary long-term response to the Inflation Reduction Act, but it needs to be accompanied by real efforts to reduce emissions through the end of any more new coal or gas mines.
It is vital that Australia’s economy becomes more complex, and also reliant on renewable energy. But if emissions keep rising all the benefits of shirting to renewables will be completely wiped away by the devastation cliamte change will bring.
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