EDITOR’S OPINION: Baird government stabs local manufacturers in the back

Image: NSW government

Yesterday’s shocking announcement by the NSW Coalition government that a $2.3 billion contract for 500 intercity train carriages has been awarded to a multinational (mainly South Korean) consortium including UGL, Hyundai Rotem and Mitsubishi Electric Australia was met with a wave of outrage and derision across the state and Internet.

What is clear by the many comments is that the Baird government – the ideological soulmates of Prime Minister Malcolm Turnbull, who continually espouses the ‘jobs and growth’ mantra – has basically kicked its own party and the people of NSW in the guts with this odious and short-sighted announcement.

Trying to minimise the political damage, Andrew Constance, the state transport minister, claimed the winning bid offered a 25 per cent cost advantage.

“If I didn’t go with this winning bid you’d be criticising me the other way,” said Constance.

“Of course everyone is pro-Australian manufacturing and jobs but at the same time you’ve got to weigh it up, in terms of cost and in terms of technology.”

Really, minister?  What about the overall and long term benefits to the NSW economy? Is that not worth anything? What about areas with a proud history of heavy rail infrastructure manufacturing such as the Hunter Valley and the Illawarra, areas that up until very recently have been literally begging for these type of contracts?

As one of our readers, Les, pointed out overnight on the Manufacturers’ Monthly website: “Have they (Govt) not heard of the Local Multiplier Effect (LME). The term refers to how many times dollars are recirculated within a local economy before leaving through the purchase of an import. Famed economist John Maynard Keynes first coined the term “Local Multiplier Effect” in his 1936 book The General Theory of Employment, Interest and Money. Spending the extra 25 per cent on $2.3b would have delivered multiples of that to the NSW economy.”

Another one of our readers, Mick noted: “That 25 per cent saving you are talking about Mr. Minister could have easily return back to government in the form of income tax paid by the people employed to produce those carriages. One does not have to be a genius to understand basic economics.”

Exactly. It’s not just about the cost of the actual manufacture of the trains, it’s the overall benefits that work has to the entire NSW economy over an extended period of time. This kind of economic activity value adds to the whole state and, as such, is not to be judged as just a number on a Profit & Loss balance sheet.

According to the Australian Manufacturing Workers Union secretary, Tim Ayres, this decision is “a betrayal.”

Speaking to the Newcastle Herald yesterday, Ayres said that: “This is money that should have been invested in Australian workers and Australian communities,” he said.

“Mike Baird does not understand what these jobs mean to regional communities. Decision after decision shows that he is out of touch with the lives of the people of this state.”

“The Hunter Valley has the highest youth unemployment rate in the state, but instead of investing in apprenticeships for young people he is sending taxpayer money overseas.”

Going further, Newcastle MP Tim Crakanthorp said: “They [the government] are just turning their backs on manufacturing jobs in Newcastle and Hunter.

“We are losing the skills. Where are the apprentices, where will the skill uptake come from?”

For me this announcement also has a personal sting to it. Right after my family migrated to this country, my father’s first job was working as a fitter and turner for ComEng, helping to build the silver double-decker suburban trains that are still in service today. That job helped put food on our table and allowed us to buy a car, a house and helped us live a good life. That is precisely what local jobs equates to, a fact seemingly lost on the likes of Andrew Constance and his ilk in Macquarie Street.

Making this announcement even worse are recent reports from the US state of Pennsylvania, where a third of the 360 carriages built by Hyundai Rotem were temporarily removed from service due to a range of issues.

The reasoning behind the Baird government’s decision seems to be (if I’m reading between Andrew Constance’s lines correctly) that ‘jobs and growth’ is a great throwaway slogan but in reality, ‘what we only care about is saving money, that in effect really doesn’t belong to us and should be pumped back into the NSW economy instead of going overseas, but we’ll just ignore that small fact.’

In other words, for the hapless Andrew Constance and the rest of the economic neophytes in the NSW Baird Coalition government, ‘jobs and growth’ seems to actually infer jobs and growth in South Korea but not in NSW.

I hope that people of NSW and especially those that are in the manufacturing sector and in regional areas remember that at the next state election.

As another of our readers, Robert Day asked: “How will local manufacturing in Australia ever survive when the State and Federal Governments have no vision or commitment for secondary industry?”

Yes, how indeed!