Tony Abbott proves liberal economic credentials with SPC decision

PRIME Minister Tony Abbott understands that job in an unprofitable company is a job already lost, writes Jessica Irvine.

I WAS there the day Tony Abbott insulted a marquee-full of economists.

It was two and a half years ago and Tony Abbott was speaking at a lunch organised by the Melbourne Institute attended by some of the country's top public and private sector economists, including his now boss of Treasury Martin Parkinson.

Asked why most economists believed in a market-based solution to climate change, rather than his own Direct Action scheme, Abbott replied: "Maybe that's a comment on the quality of our economists rather than on the merits of argument."

Ouch.

It wasn't the first time Abbott had expressed disdain for economists

"I have never been as excited about economics as some of my colleagues. I find economics is not for nothing known as the dismal science," he said in an interview in 2003.

But it should not be forgot that Australia's Prime Minister does, in fact, have a degree in economics from the University of Sydney.

And it seems like he has finally decided to use it.

Abbott pinned his free-market colours to the mast at an important speech at Davos earlier this month - the premier annual gathering of the world's economic and business elite.

TONY ABBOTT: NO TAXPAYERS MONEY TO HELP RESCUE SPC

FUTURE OF SPC ARDOMA LEAVES SHEPPERTON IN LIMBO

LAURIE OAKES: ABBOTT TREADING A VERY FINE LINE

The former Roman Catholic seminarian urged attendees to become "missionaries for freer trade" and fight protectionism whenever and wherever it may raise its ugly head.

Free trade was a well-trodden path to wealth creation, he explained. "Over time, everyone benefits because, in a global economy, countries end up focusing on what they do best. A more global economy with stronger cross-border investment eventually helps everyone because it generates more wealth and ultimately creates more jobs."

And, as it turns out, Australia is not very good at canning fruit.

Putting his words into action, Abbott last week successfully stared down a three hour bid in cabinet by Nationals colleagues to secure a $25 million taxpayer handout for the embattled fruit cannery, SPC Ardmona.

Free trade and the rigours of globalisation are perhaps the primary reason why SPC's factory - which must pay far higher wages than in competitor countries - is unprofitable. That, and it seems Australians don't much fancy tinned fruit any more.

SPC's cannery in Shepparton employs about 3,000 workers, but it has been operating at a loss of more than $400 million in recent years, according to local Liberal member Sharman Stone.

It's only natural to worry about the loss of Australian jobs.

But a job in an unprofitable company is a job already lost.

News_Rich_Media: The premier will hold crisis talks with S.P. C Ardmona. after the federal government rejected the fruit processing giant's bid for a bailout

The only way to create jobs is through the efforts of profitable companies.

As Abbott told Davos attendees: "You can't have strong communities without strong economies to sustain them and you can't have strong economies without profitable private businesses."

"After all, government doesn't create wealth; people do, when they run profitable businesses."

Has Abbott finally revealed himself as a true economic Liberal, willing and able to hold the line against the Nationalist impulses of his own party to protect failing businesses?

I hope so. His government's rejection of a foreign investment take over of Graincorp by a US food conglomerate was not a promising start.

But last week's decision, combined with the previous decision to stop handouts to Holden, marks an important line in the sand.

Abbott has signalled clearly that the era of rent-seeking businesses going cap in hand to government to plaster over the weaknesses in their business case is over.

Of course, Abbott's admission that we are not very good at tinned fruit raises an obvious question: what are we good at?

It's a question we need to ask ourselves again and again.

Turns out, we're good at plenty of things, not least being blessed with significant mineral wealth and a climate suited to cultivating a range of agricultural pursuits.

Our highly skilled and educated workforce is also great at delivering professional services, like accounting, banking and legal services.

And we're not too shabby at making some things too.

About 200 kilometres down the Hume Highway from Shepparton, a Melbourne based firm is manufactures high tech parts that are exported to Boeing for use in its aeroplane wings.

As Reserve Bank governor, Glenn Stevens, said recently: "I don't think we're in that space because we're cheap labour - they're good at it. They have excellent innovation and technology, and I can't see why there isn't a future for various kinds of manufacturing like that."

Abbott has declared Australia is "open for business" and this week's decision adds an important caveat. Australia is only open for one type of business: the profitable kind.

Economists would approve.

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