I’ve enjoyed owning and driving 5 different Holdens in my time. Good workmanlike, middle-of-the-road cars, all of them. It will be kind of a pity to see Australian made Holdens eventually disappear from the market.

My current VW is great. So, at one level I could, like most Australians I guess, just shrug, get over it, and move on.

For Australia, that feeling would probably be okay if we were talking about simple things like kettles, or barbeques, or office chairs … but we’re not.

With Holden, we’re talking about sophisticated complex manufacturing with its attendant research, product development and engineering expertise; large scale fixed investment; exports earnings; a substantial local supply chain; and, a large loyal, highly trained and experienced labour force. The fact that a business with these characteristics has a cost structure that is not globally competitive any more, is a national problem of the highest order.

This is not just about Holden. In the last couple of months Ford has said it is going. So has Electrolux. So has Rio at the Gove alumina refinery. They join many others that are going or have gone in recent years: BHP’s Newcastle steelworks: IBM; Pacific Brands; R M Williams: Sidchrome; SPC, Simplot, and other food processors. You can make your own list. And you can make guesses about who will be next: Toyota? BlueScope Steel?

50 years ago manufacturing like this was 25% of the Australian economy. Now it is about 9% and still falling quickly.

Over many years there have been two classes of rationalisation for why this huge change in the structure of our economy should not concern us.

1. Businesses close because they are uneconomic. For the economy as a whole that is a good thing. New businesses and industries will come along that are competitive, and they will absorb the employees that lose out in the closure of these unprofitable businesses. (Look at what cheap jet travel has done to grow tourism in Australia in the last few decades.)
2. The substitute imported products, and greater competition mean consumers have more choice and lower prices. Consumers are the winners. (Look at how cheap TVs are now. Look at how much more value for money there is in imported cars.)

These hackneyed old arguments have been used by many a commentator in the last few days. But they are taking a politically convenient and short term view, in my opinion.

The problem is that these two arguments work … until they don’t. Tourism, in-bound Asian students, housing and its related consumerism, the mining boom, and ever growing public sector services (health, aged care and education) have all taken up the slack in workforce diverted from manufacturing so far. But is that sustainable?

Where is the next huge labour absorbing industry like tourism?

It won’t be education because in that field we are falling backwards, as recent reports and league tables have clearly shown. It won’t, or shouldn’t be health care. Its unlikely to be professional services: Asian universities are turning out smart graduates and high powered knowledge workers by the million. For example, what can we teach the Chinese about engineering? … Nothing, I suspect!

Might the NBN deliver us the capacity to be a creative hub, a leader in digital technology? Hmmm … on the latest indications, there’s no certainty we’ll even get a decent NBN. But without it, we’ve got zero hope of being properly competitive in the so called smart services economy.

So what has me pondering is the sustainability of the first of the above two arguments. In this modern, globalised, and slower growing world, and with our dollar in the stratosphere, I think this argument is failing. And if it does fail, jobs get lost, without a job people can’t consume. Consumers without a job are not winners, and the second argument also fails.

So what’s to be done? A good start would be some solid thinking and policy development by our political “leaders”.