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Naoise McDonagh says Australia is playing catch-up with the Future Made in Australia Act. Will it be enough?

Business / opinion
Naoise McDonagh says Australia is playing catch-up with the Future Made in Australia Act. Will it be enough?
IM Imagery/Shutterstock.

By Naoise McDonagh*

Australia is a trading nation. Its economy relies on a strong and open global trade environment.

Australian governments have historically rejected protectionist industrial policies that undermine fair competition, and Canberra has long been a staunch advocate of the World Trade Organization, whose rules help “promote and protect the open global trading system”.

Yet Labor has just announced a major new industrial policy – the Future Made in Australia Act – that will break with Canberra’s historical aversion to large-scale economic intervention. It will also cost taxpayers billions to fund.

Prime Minister Anthony Albanese’s rationale for doing so is as succinct as it is paradoxical:

This is not old-fashioned protectionism or isolationism – it is the new competition … we must recognise that the partners we seek are moving to the beat of a new economic reality.

What is this “new reality”, and what does it mean for Australia’s economic future?

Australia joins the “geoeconomic game”

With this announcement, Australia has joined the great “geoeconomic game” currently transforming the world economy.

In a geoeconomic world economy, nations use economic relations as tools to achieve their strategic goals.

This could include coercing a country to change its policies by blocking their imports, as China has done to Australia. Or using export controls to prevent advanced technology reaching a strategic geopolitical rival, as the United States has applied to China to limit the flow of advanced semiconductors.

Under these conditions, relations between countries shift from win-win to zero-sum. The resulting risks and vulnerabilities can be leveraged by geopolitical foes. Growing concern over this shift is driving economic “ghettoisation” – countries that were already on friendly terms are trading more between themselves, and with those on less friendly terms, trading less.

Australia has already been participating in “friend-shoring” – the relocation of crucial supply chains to diplomatically friendlier countries.

New policies for a new business reality

Some countries have already established policies in recognition of the new realities of international business, speeding up the formation of these blocs.

Two major recent policies by the US – the Inflation Reduction Act and the CHIPS Act – aim to boost US electric vehicle and semiconductor manufacturing, respectively, with hundreds of billions of dollars in new government spending.

Both the US and Japan are looking to boost domestic manufacturing of advanced semiconductors. Patrick Semansky/AAP.

Japan is also spending big to bring more semiconductor production onshore.

These policies have also attracted vast sums of new private investment in relevant “strategic sectors” – totalling more than half a trillion dollars in the US alone.

Levelling the playing field or distorting the market?

This new economic approach by Washington and Tokyo almost certainly breaches the World Trade Organization’s rules, because it discriminates in determining who can access funds and where things have to be made.

China has already launched a dispute against the US Inflation Reduction Act on these very grounds. But China itself is also the biggest user of industrial policy by far.

On one hand, the new US and Japanese industrial policies will distort global markets, but – returning to Albanese’s “new competition” paradox – level the playing field on the other.

Consider Indonesia’s rise to become a nickel exporting powerhouse.

Jakarta applied an export ban – illegal under World Trade Organization rules – on unprocessed nickel in 2020, while attracting investment from China, where state-owned enterprises can access subsidised financing.

Combined with poor environmental and labour standards during production, the effect was extremely low-cost Indonesian nickel, which undercut global prices. As a result, some Australian mines could face closure.

This situation was not the product of free markets, but rather of state intervention. Canberra needs its own plan to counter such policies.

How should business leaders respond?

We still don’t know the full details of Labor’s strategy. But if the act is anything like Washington’s policies, it will aim to boost Australian firms with protectionist and discriminatory provisions. Awkwardly, this could well be in breach of the international trade rules Canberra has staunchly defended for so long.

Levelling the playing field implies sweeping changes in the dynamics of international commerce, with implications for Australian businesses, consumers and government.

In formulating strategy, Australian business leaders will increasingly need to think geopolitically. The world is no longer one big open economy.

Australian industries will certainly get a shot in the arm from Labor’s new policy.

There will be more downstream value-add processing in areas of existing strength, such as critical minerals.

More value-add processing of minerals such as nickel could take place in Australia. Kim Christian/AAP.

Major investments in solar manufacturing will benefit regional Australia. These and other strategic sectors will enjoy higher levels of government support. But many non-strategic sectors could be left behind, facing new geoeconomic costs without extra funding.

A new, smaller world

For consumers, the era of getting the most competitively priced goods on the global market is coming to a close.

As the global economy fragments, Australians will have to pay more for the duplication of global supply chains, and additional costs of subsidised production.

However, they may also see better supply chain security, and a domestic jobs boom in advanced manufacturing. Governments and businesses can work to reduce the risk of any economic coercion effects.

Much like the Old Testament principle of an “eye for an eye”, the principle of a “tariff for a tariff” is foundational in international trade. As Australia joins the geoeconomic game, pressure will mount on countries not yet playing to join in, simply to stay competitive. Trade and industry measures will continue to proliferate globally, reinforcing the new dynamics of geoeconomic competition.

The Albanese government faces great risks in implementing its new industrial strategy. Yet in taking action, it may have avoided a much greater risk – doing nothing at all in the face of a historic global economic change.The Conversation

*Naoise McDonagh, Senior Lecturer, School of Business and Law, Edith Cowan University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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This could include coercing a country to change its policies by blocking their imports, as China has done to Australia.

China didn't do it because China wanted to do it, China did it because Australia blocked Chinese Huawei etc in name of National Security. 

You cannot selectively close your market then blame other country closed theirs. 



Potentially this means Aussie's Labour leaders might be smarter than our own leadership. Especially if they emphasise efficient sustainable industry. This would be what the beginning of a national resilience policy would look like. There are a lot of hooks in the implementation but it is a way forward.


'The world is no longer one big open economy.'

Statement of the century. 

Global war(s) over 'what's left'; here we come. 

Bit hard when the chips in you fighter-jet come from the enemy. Or the fuel in your vehicles. Or, or, or...


Cool - we can all go back to buying Pye tv sets and poorly built Hillman Hunters. The only winners last time we did this were the businessmen who held the licences to manufacture

or we could take advantage of subsidised production and buy goods made offshore while we spend more getting smarter and providing better services. I know its been difficult so far but it is the future 


Agreed, rolling back supply side reform has costs, big costs. We are all wealthier because leaders in the past had the forsight to abandon protectionism. We bring it back at the expense of our standard of living. I get the resilience factor but I also don't buy a lot of the "China bad" propaganda. Far better to continue to work through diplomatic chanels.


Wrong. both.

Grattaway because he confuses the past with the future.

Bother to see it right through. Then realise that he - for all his intellect - is avoiding the LTG physics. He gets the geopolitics right, though. 

TK - wealth is having the access to real goods and services. Which in turn, require real energy and real resources. I think you're getting a little confused with a form of keystroke-issued proxy - but that isn't wealth, nor even a store of same. It is a proxy, and if there's no, or lesser, real wealth, it's worth nothing or less-headed-for-nothing. 

You are accounting in the wrong medium. 


I think if you ever agree with me I'll be genuinely concerned  ;)


I think you have a distorted perspective TK. NZ has a strong socialist history of which one of the pillars seemed to be keeping wages low. There was no will, political or otherwise to develop efficiency so most if not all business', and perhaps government owned ones were pretty poor on that scale, and private ones marginal for profits. Meanwhile places like Japan were learning how to do things efficiently, developing technology to push boundaries and feed growth. But the "we are too small, and too far from everywhere" mantra held us back. While places like Japan, with few if any natural resources other than people, simply said how do we solve these problems and do it anyway?

As a nation we could have been, should have been much wealthier than we are, especially if we could have had the GSF to support that development.


Maybe it's about having a certain level of self sufficiency.....rather than going back to the Pye tv stone age.

With the profound geopolitical tensions , kinda makes sense to inquire a little into the idea of self sufficiency.

Interestingly, China has long term policies to do with becoming self sufficient..... 



yes China has long term policies to become self sufficient, especially in the Mao period. But China became wealthier and more powerful after it opened up and started to learn utilize external sources from 1980s. 

the modern definition of self sufficient is never 'closed doors and never use external sources' but maintaining key economic ability so that it can compete globally.  In short, one has to be needed more, or equal, than needing others. 


No, it isn't. Self-sufficiency (I've pursued it relentlessly for a main lifetime) is not instant, it is always. The word for always self-sufficiency is sustainability. To draw down stocks of resource - be it piles of wheat or underground aquifer levels - is to be unsustainable. 

The definition of sustainability, is being able to be maintained over a long time - virtually indefinitely. 

That means not drawing-down stocks, it means not filling 'sinks', 

Almost no aspect of our current societal construct, qualifies, as it's all based on fossil fuel stocks, being used to draw down other stocks, and to fill sinks. . 

I think your thinking is clouded by econo-speak. 


not sure what you are actually saying.


Free markets v State intervention eh?

pure rhetoric 

All government intervenes to ensure their industry and private sector benefits. There are no “free” markets. Everything acts against that, esp monopolistic things like tech 7 etc

When will economists stop parroting theory and see and refer to historical and current reality


That's not what this is about, or at least, not what it's a reaction to. It's a pretty good appraisal of the situation, if not of the driving forces. 

Governments are pretty hog-tied - partly ideological, partly the banking structure, partly the story we like to hear... but realities tend to be real; Hitler's mob didn't lose in WW2 because they were silly; they were out-muscled. Nothing to do with democracy blah blah blah...



Correct they were out muscled. Aussie moving towards a bigger wider industrial, manufacturing base could be a good thing. The hooks, and there are some big ones will be around your constrained resources and EROEI limits. There needs to be some care in considering what might look like growth, but should really just be a reallocation of resources. Done well though individual wealth could and should grow as this develops.


Per capita, Australia must have vast levels of resources by means of coal, iron, oil etc that they can utilise if the western world goes under. Hence why they usually are less impacted by external factors such as in the GFC, they simply pull resources out of the ground that the world needs and wants, and in low times, they leave the rest there.


Time NZ had its own national resilience policy

Energy Fuel petrol diesel resilience which feeds into

Food resilience

Also Pharmac and meds they seem to have limited understanding of supply chain and are constantly getting caught out in peace times.

We collectively need decent BCP/DR plans around supply chain events, natural or man made.



Australia has been doing this for a while.  Unlike NZ who just shuts everything down because it suits the Leftist ideologies whilst ignoring the economic damage it does.…

Australia has agreed to pay its last two oil refineries up to A$2.3 billion ($1.8 billion) through 2030 to keep the struggling plants open and protect the country's fuel security.


Interesting choice of photo. About 20 years ago, when Australia still made solar panels, they merged the two main manufacturers,  with the idea of buying a robot to place the cells in the panel.

The robot failed, and the reason was the panels were out of square. Us installers had been kicking ourselves, never dreaming such a high tech expensive product could be out of square, and it was our own eyes/ alignment problems. Such a problem would be spotted straight away in today's bigger arrays, in those days of a few panels it wasn't so obvious,  especially when 1/2 the roofs you were putting them in were wonky for a start.



It's reassuring to see countries with political parties who are competent and capable of addressing the needs of their nation in their governance. Particularly important for "the lucky country", and I use that expression in the spirit it was originally written.