Australia has reached the point of no return: It’s time to forget about making stuff

THE writing was already on the wall, but a graph in last week’s budget buried this. Australia, it’s time to forget about making stuff.

Australia used to be a nation that made stuff. Lots of stuff. That’s changing.

AUSTRALIA, say goodbye to being a country that makes things.

Our houses are already full of stuff and we don’t want more. The few things we do want are made cheaply in China.

Making things is officially over. We are now a country whose economy is about doing things and helping people.

Goods and services consumption in Australia as a percentage of total consumption. Source: ABS; RBA

Kevin Rudd famously said he wants to live in a country that makes things. If that is true might I suggest he would be happiest living in China? The average wage and GDP per person there are a tiny fraction of ours, but manufacturing is almost a third of the economy.

Australia has a similar share of manufacturing in its economy to Luxembourg and Norway. Meanwhile the three countries that rely most on manufacturing are Puerto Rico, Swaziland and Korea — we are better off than all of them.

Yes, the manufacturing industries of the 1950s and 1960s were great employers of the middle class. But they are never coming back. The world economy is different now. Any residual love for making things belongs to an age where China was a communist backwater. The jobs of the future are in helping and doing, not in making, as this graph very clearly shows.

Source: Budget papers 2016-17.

Services are likely to be insulated from automation for longer. Of course, some kinds of services can be done by robots — think about self check-outs — but we still prefer them done by people. In manufacturing you wouldn’t even know if a person was involved in making your item.

The future of manufacturing is a hot issue this election campaign because Australia’s car industry is closing down. People are losing their minds over the idea that the next generation might have to work in services instead.

There is nothing special about manufacturing. So why does services have such a bad rap?

People talk about Australia becoming “a nation of burger-flippers”

But they are just cherrypicking the lowest status service job. A nation of engineers and scientists doesn’t sound nearly so bad.

Is it really worse to be a helper than a maker? There is no shame in working in services. Heroes come from Australia’s service industry and they always have, throughout history.

Take the Man from Snowy River, who bravely rides his horse through the bush after an escaped colt. The owners of the colt that got away could have simply bought another one; the Man from Snowy River could have stayed at work, perhaps in a cobblers shop making boots. But that wouldn’t be much of a story.

Someone who might these days say he works in equine recovery solutions.

Services are at the heart of our nation, whether it is a fictional story, or a true one. Like the tale of a doctor named Flynn flying round the outback saving lives. His legacy is the Royal Flying Doctor Service.

Services is where we find the people who help: firemen, nurses, doctors, cleaners, truck drivers and teachers. It’s also where we find the people who make a lot of money, like lawyers and financiers. These are all good jobs.

And these days we can more easily base a whole economy on services, because we can provide them across the seas.

In the last few years, services exports have really taken off. A lot of this is tourism, and a lot is education. But we can also sell financial services and business services worldwide now, because of the internet.

Our export of services is keeping up and is only going to get bigger. Source: ABS/RBA

The glory days of the manufacturing industry is over, and while old people will still remember them fondly, you can’t go back in time.

We’re now a nation of doers and helpers. That is something we should be proud of.

Jason Murphy is an economist. He publishes the blog Thomas The Think Engine. Follow him on Twitter @jasemurphy.