Government insider reckons Ford's local ops are gone in 2016

[BroadyFord]

What do people make of this?

What do we do if Ford goes?


http://www.theage.com.au/opinion/pol...224-2ezgl.html

What should Victoria do when Ford closes its local manufacturing operations in 2016? What will drive the Australian economy beyond the mining boom? If these questions concern you, then you are probably interested in the federal government's new Plan for Australian Jobs.

The Australian media's unique obsession with opinion polls means most people probably missed it. That's a pity because the future of the Australian economy and the Victorian economy in particular rests in no small part on the success of the $1 billion industry and innovation plan, released last week.

The Reserve Bank estimates the mining boom has generated 500,000 jobs over the past seven years - the economic equivalent of being hit by a rainbow. But many economists believe that boom is now over and unemployment is set to rise. The RBA and the commonwealth Treasury agree that resource investment will have peaked by the middle of this decade.

The mining boom has driven profound structural change in the economy, with the high Australian dollar placing many businesses under great pressure.

Which helps explain why Victoria could be just four years away from one of the biggest economic challenges it has ever faced.

Most industry analysts expect Ford to close its manufacturing operations in Australia at the end of 2016. If that happens, tens of thousands of jobs will be lost, especially in Geelong and Melbourne's northern and western suburbs. Industrial machinery and infrastructure worth billions of dollars will fall idle.

So does the federal government's jobs plan have the answers to these challenges? As usual, it depends who you ask.

Probably the standout initiative in the plan is the proposal for 10 world-class ''innovation precincts''. The first will be a manufacturing precinct based in south-east Melbourne and Adelaide, and the second a food precinct based in Melbourne.

International research has shown competitive advantage can be generated for companies through geographically concentrated clusters of expertise and the linking of businesses, researchers and support agencies. Clusters such as Silicon Valley are well known. Australia has also had some successes in this area - the bio-medical industry cluster around the Melbourne and Monash universities is one example. We have also had our failures, such as the ICT cluster, known as Comtechport at Docklands in the 1990s, proving that good execution and an existing or emerging industry base are critical to success.

The jobs plan also has a range of common-sense measures, including expanding opportunities for Australian-based companies to win work on major projects, improving management skills for small and medium businesses, and enhancing small business access to public sector work.

To stimulate venture capital investment and support innovative start-up businesses, the plan contains a $350 million boost to the well-designed Innovation Investment Fund that combines private investment with public funding. The changes to venture capital tax arrangements are also welcome.

Unfortunately, Australian policymakers remain far too timid in supporting innovative start-up businesses. The INSEAD Global Innovation Index for 2012 ranked Australia a lowly 23rd - we rank well on innovation inputs, including research and skills, but weak on innovation outputs, such as new products and entrepreneurship.

World leaders in innovation, such as the Nordics, Israel and Singapore, show that one of the keys to success is a generous system of tax or financial support for start-ups. Finland has a quarter of the population of Australia and invests about $200 million a year in young growth companies. In Australia, the latest investment of $350 million is over 14 years. With these sorts of policies, Nordic countries have been responsible for the emergence of new global businesses such as Skype, Spotify and Rovio Entertainment, the makers of Angry Birds. And Finland's economy has performed solidly despite economic meltdown in Europe and it being king-hit by the decline of its biggest company, Nokia.

The federal government's jobs plan has been criticised for creating too much new bureaucracy and more significantly for funding new initiatives through cuts to R&D tax credits available to some of Australia's largest but also most innovative companies. The government argues it is operating in a very tight fiscal environment and these big companies will invest in R&D even without the tax break.

So will any of this save Ford manufacturing in Australia? Probably not. Government policy is not Ford's problem. Ford's problems are that it makes big cars that not enough people want to buy, it does not make a small or medium car like other local manufacturers, it has not developed export markets, and its investment decisions are made by Ford HQ in Shanghai and Detroit and priority is given to locations other than Australia.

For Melbourne and Geelong, the experience of the US city of Seattle is salutary. Seattle lost tens of thousands of jobs in the 1970s when Boeing hit hard times. Today it is home to global companies including Microsoft, Amazon, Starbucks and Costco. It also has a booming clean-tech sector, driven in part by its ambition to be North America's first carbon neutral city by 2030.

As for a prosperous Australia beyond the mining boom, the jobs plan is helpful but much more will be needed to build our next wave of economic growth.

This must include a relentless pursuit of innovation and productivity by business, and an entrepreneurial culture that recognises failure is often a step on the pathway to success.

Nicholas Reece is a public policy fellow at Melbourne University's Centre for Public Policy and a former senior adviser to Prime Minister Julia Gillard and premiers Steve Bracks and John Brumby.