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Back to the 1950s

March 7th, 2005

John Howard’s suggestion that young people should drop out of school in Year 10 and get a trade is both bad advice and an indication that, on this as on many other issues, Howard hasn’t updated his world view since the 1950s[1]. As Tim Dunlop says, it’s unlikely anyone in the government is giving this advice to their own kids.

Howard’s advice is exactly that given by many working class parents to their sons in the 1950s and, at the time it worked pretty well. It is only since the 1980s that the problems have emerged for older workers with limited education and obsolete skills. Parents in the 1950s can scarcely be blamed for failing to foresee this, but Howard has no such excuse.

In today’s world, car mechanics are increasingly required to debug computer programs[2], and virtually everyone with a job[3] has to deal with substantial volumes of (literal or digital) paperwork. This is one reason why the “sitting next to Sally” apprenticeships Howard is so fond of have increasingly been replaced by TAFE courses. For practical purposes, the skills of a Year 10 dropout are not adequate for these courses.

Even if, in the current labour market, it would be possible to get a trade with a Year 10 education, it would still be a bad idea in the long run. Skills become obsolete and replacing them requires the kind of flexibility acquired from education.

These 1950s attitudes have translated into disastrous policies regarding post-secondary education. The number of Australian students starting undergraduate degrees has barely changed since 1996 (I think it may actually have declined in the last few years). And despite a lot of rhetoric, the TAFE system is in a dreadful mess, which can be traced back, in the end, to inadequate funding.

There’s a lot of justified concern about inadequate investment in infrastructure. But an even bigger problem under this government has been declining investment in human capital.

fn1. In saying this, I don’t mean to adopt the Keating sneer about the 1950s. There were a lot of positive features of the 1950s, in particular full employment, and the associated fact that someone with a Year 10 education could leave school and walk into a reasonably well-paid job. But wishing won’t bring these things back.

fn2. Although I was aware of this in theory, I still got a mild surprise when I was talking to a guy at the service desk and he mentioned that some problem with my engine would probably go away by itself when they ran the software upgrade that went with my routine service.

fn3. Admittedly, there are plenty of casual jobs (for example, in the fast-food industries) that are designed not to require this kind of thing. But, with rare exceptions they don’t provide any real route to permanent jobs on decent pay.

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  1. March 7th, 2005 at 08:57 | #1

    The Howard government has followed economic policies that are poor to bad, focusing on economic measures that improve short term dissipation of value (consumption) at the expense of long term accumulation of value (capitalisation). Investment in tradeable goods industries is much lower now than under Keating. And such investment that occurs is in medieval industries, like housing, rather than modern industries, like sci-tech.
    Its fiscal policies, aiming at small surpluses, have been no more than what one would expect given the fiscal drag that occurs during a boom.
    Its financial policies (tax cuts on realty) have been counter-productive.
    The RBA has run a tight ship, but its board was appointed by Keating, I think.
    Howard’s eco policies are laying up a store of ruin for the nation. The bursting of the property bubble will see the chickens come home to roost.

  2. March 7th, 2005 at 09:06 | #2

    It is appalling that the Howard Government can get away with effectively suggesting that Australia’s children should receive less secondary education than previous generations. Perhaps this is Brendan Nelson’s next ingenious idea for reducing the costs of public education: cutting the amount of education that the average Australian child receives!

    As always with this government, there seems to be one rule for the privileged few, and an entirely contrasting rule for the rest of us “heathen savages”.

  3. Katz
    March 7th, 2005 at 09:07 | #3

    Perhaps Howard could attempt to persuade the Indian automotive industry to set up some factories in blue collar areas of Australia’s major cities.

    The kinds of skills Howard wants to develop are perfect for assembling Hindustani Ambassadors, direct copies of early 1950s Morris Oxfords, and still manufactured to this day in India.

    It’s bizarre. Sandy Stone has finally succeeded in invading the mind of our PM.

  4. observa
    March 7th, 2005 at 09:27 | #4

    Teaching our young to think with and through their hands is one of the most important life skills their seniors can pass on to them. Indeed it is an economic imperative that our fittest, strongest and most dexterous are channelled early in life into such necessary physical pursuits. Unfortunately we have neglected this for a generation and we are now beginning to reap its bitter harvest. Unfortunately too, the tertiary education sector has been most complicit in this social tragedy, which has heaped much of this apalling outcome on the shoulders of working class kids. We all are paying the social price of this now. It is high time the tertiary sector recognised that trade and technical education early on in life will not preclude such participants from engaging in higher education later in life. In fact these prospective students will be more motivated and adept for such learning, when they have better life skills to appreciate it.

  5. Mark Upcher
    March 7th, 2005 at 09:35 | #5

    Jack Strocchi said: “Investment in tradeable goods industries is much lower now than under Keating. And such investment that occurs is in medieval industries, like housing, rather than modern industries, like sci-tech.”

    According to the ABS National Accounts business investment is at record levels as a percentage of GDP, driven primarily by strong investment in new machinery.

  6. Fyodor
    March 7th, 2005 at 09:36 | #6

    The planets must be in alignment, because I agree with everything Jack just said. Very spooky.

  7. Dave Ricardo
    March 7th, 2005 at 09:39 | #7

    Well, yes, Howard is a fool for suggesting that children drop out of school and pursue the career path that was viable when he was at school, 50 years ago.

    But doesn’t mean that the education system we have today can’t be improved. IMO, the German system which streams children off into vocational and general education at age 14 or 15 should be considered. That way, the would-be car mechanics or electricians can learn how a car engine or electrical circuit work as well as more general computer skills. This would have to be better than them doing the one size fits all curriculum, in which they have no interest, that is designed for students who are going to university, but is watered down to cater for the students who are finishing year 12 because nobody can figure out what else to do with them.

  8. observa
    March 7th, 2005 at 10:24 | #8

    I agree with you Dave but with the proviso that up to age 15 or 16 school kids have been drilled well with 3Rs and probably basic civics, along with some basic technical and PE/sport skills. At say 16 we could amalgamate all the current future investment in our young(Austudy, TAFE and Uni funding, private sector training subsidies and grants, First Home Owners Grants, etc)into a life grant voucher for the individual. They could choose to draw that down for any approved future training, or quarantined home purchase.(by quarantined I mean they could not subsequently sell the home without that portion being applied to another home or topping up their life grant credit again)

    You can hear the howls of protest right now, from those who think they know best as to which educational form, the expenditure of such life grants should take. As for spending such money by choosing to put a roof over their poor heads instead, it’s probably a case of wash my mouth out with soap.

  9. observa
    March 7th, 2005 at 10:28 | #9

    I suppose I should qualify my comments by stating the obvious that perhaps you can’t cherrypick bits from the 50s. You might need the whole box and dice as described here at http://www.slattsnews.observationdeck.org/index.php?p=955

  10. observa
    March 7th, 2005 at 10:48 | #10

    Actually on this broad topic readers may be interested in an anecdote from MrsO, who if you don’t know, is an R-1 Junior Primary teacher at a middle income public school in the newish southern suburbs of Adelaide. She bumped into a similar R-1 colleague teaching at a well to do private school, who wanted to know what MrsO’s new chums were like. The usual, a pretty good bunch, with the odd minor behaviour problem. According to her colleague, she and her peers had noticed a decline in the calibre of their new chums of late and in particular, this year’s bunch were noticably the worst bunch by miles. So much so that they want to approach their kindy teachers to find out what the hell is going on.

  11. sophie
    March 7th, 2005 at 11:25 | #11

    Actually, I don’t think this has anything to do with the 1950’s, either positive or negative images. It has to do with what’s happening now. The experiment that’s failed is the Dawkins one–to try and rebadge unis as the be all and end all for everyone–it’s benefited neither kids nor the unis themselves. Vocational education has suffered and so has the more academic one. Industry has become used to milking the Govt and never providing their own money and time to train people. They need to stop whingeing and trying to make it possible for ‘guest workers; to come here–anyone for the return of the servant class, for heaven’s sake?–and to actually play their part in training young people and giving them a go.
    And as far as schools are concerned, there’s a huge amount of children who are bored witless by it. I don’t think it’s a good idea to urge your kids to leave after year 10 if they haven’t got something to go to–but it’s also pointless to try and force them to stay if there’s something else they can do. This goes for tertiary education too.
    Our daughter stayed till Year12 but had no wish at all to go to uni. We did not encourage her to do so, either.After a year travelling and working o’s, and working in restaurants and cafes in Oz, she got a job as a trainee in a literary agency. At 23, she is now a fully fledged literary agent, with her own clients, is a shareholder in the small company, and is very happy with what she does. Several of her friends who went through uni still have to find a job..
    Our first son is in Year 12 and shows no signs of wanting to go on to teriary education either, though he too is very bright and does well. And our youngest, who’s in Year 10 and every bit as bright and capable as his siblings, hates school and finds it utterly tedious. The thought of two and a half more years drives him mad. But he doesn’t have anything in mind for work so it would be irresponsible to let him go. But if he had, we’d let him. It can be worse for someone’s prospects to stay incrusted somewhere they hate than actually take their chances in something quite different.
    Quite a few of the kids’ friends have actually left in Year 10, without waiting for a pollie’s invitation. Some of them have done really well. Others not so well. Those who were focussed, who knew what they wanted, did well, those who left just because they hated it, and were vague about the future, didn’t. But that’s always been the case. What’s the guarantee anyway that leaving it till Year 12 or after uni will actually make things easier? It doesn’t, not necessarily.
    I think that Howard was maybe trying to cut through the mice-on-a-treadmill mantra of education and more education; but what he’s missed out on is that industry must also play its part.

  12. gordon
    March 7th, 2005 at 12:00 | #12

    Mark Upcher, I quote from ABS 5625.0, Pvt. New Capital Exp., released 24/2/05 “Trend estimates for equipment, plant and machinery increased by 3.6% in the December quarter 2004. The estimate has been increasing since June quarter 2001 and has grown strongly in the past two quarters. Mining and Other selected industries were responsible for this quarter’s increase, while Manufacturing was flat.”

  13. gavin
    March 7th, 2005 at 12:30 | #13

    This goverment has done nothing but f*!k over students since it came to power, this is no different. The entire system needs a compleate overhaul, it can’t be fixed by increasing fees (like it has done to us uni student) or by encouraging student to give up on their educations (a future happiness) just to fill a skills shortage in the short term. If these HS students shouldn’t be rushed in to a trade, if they still want to do it after year 12 then they will. This is the type of backwards thinking we get for having an over-the-hill PM

  14. March 7th, 2005 at 13:25 | #14

    One thing that needs to be adjusted about apprenticeships is the length of time to complete one. Four years might have been fine in the 1950’s but basic uni degrees only take three years. I know that brick laying requires some knowledge but as to if takes four years to learn it all could be debated.

  15. still working it out
    March 7th, 2005 at 14:01 | #15

    I am also surprised I am saying this but Jack’s comment at the top of the post is spot on. Compared to Asia, the EU and US we are practically going backwards in terms of sci-tech devolpment. We still have our resources base, but I often wonder if in 20 years Australia will not quite be part of the first world anymore. A little bit behind our technologically advanced Asian neighbours. I know its hard to imagine, but we are already noticably behind in the development of our broadband internet infrastructure. It seems unlikely that we can continue to let our technology import/export deficit keep increasing and expect the primary economy to continue to make up the difference.

  16. March 7th, 2005 at 14:39 | #16

    But the only reason that further education is necessary on today’s scales is the Red Queen’s race of it all. Howard’s approach would not only make it impossible to enter the race, it would undercut the need; it is the running to stay in place that is yet another imperfection that should be cured.

    The catches with Howard’s approach are twofold, that there would be transitional problems – people squeezed out of education would still face the race until it stopped – and that with globalisation it would simply let other countries’ racers win, as pointless as unilateral disarmament.

    The fact that we don’t yet have a practical solution does not mean that higher education all round makes sense, any more than protection all round – and both have costs.

  17. Molly Rowan
    March 7th, 2005 at 15:21 | #17

    Fyodor and STWIO, I’m with you, I had to rub my eyes when I read what Jack wrote – and so succinctly too. It’s a real neat explanation though! And, by the way, John Howard is up to his old dog whistling tricks again.

    It does well to remember hundreds of thousands of Australians (mostly male) workers were retrenched when their heavy industry, service (banking and tele-communications), manufacturing, and public sector jobs were downsized, technolgised, closed down, sent offshore or outsourced, during the 90’s fierce neo-liberal economic rationalisation policies of both Keating and Howard. (It’s one of the reasons why there has been such a hump in the numbers of people on the disability pension, as so many of those retrenched were in their fifties, a time when one is most likely to carry a workplace chronic injury or disorder – but that’s another story). If you remember, we were told that industrial tradespersons and middle management et. al. were like the dinosaurs – extinct species.

    As a TAFE vocational educator, I was in the thick of it (even wrote a research paper proposal – which was to include canvasing the short/long term outcomes) as TAFE Institutes here in SA were stripped of Federal and State government funding, and watched as countless (highly qualifed, often at tax-payers expense) teachers of apprentices (mostly middle-aged males), many in despair, took their redundancies and went on to open fast food franchises (Wendy’s was a favourite if I remember rightly) or to play golf, and I marvelled then at the stupidity of it all.

    To cap it off, when Howard and Co. came into government he stripped 1.8 billion dollars from further education and terminated Labor’s ‘Working Nation’ and the ‘Job Compact’ and slashed labour market training programs. Even staff in my area (Community and Aged Care) lost staff, and we were a recognised growth industry! Then the following year, 1997, Tony Abbott introduced ‘Work for the Dole’ for 18 to 24 years old, which did/does not have a formal vocational/education component requirement.

    Now we are told that year 10’s should drop out – and then what do they do? Perhaps we will soon start opening charity run Boys Homes and Borstals again!!!!!

    Also, because the Coalition are using the States as the new whipping boys on the block, they are going to by-pass TAFE, and fund a token few technical schools and trade colleges (with what and run by whom?). And I can hear the olds saying ‘it worked in my day’.

    I truly believe this man is a disaster for this country, but then again, I’ll probably be told that I would say that wouldn’t I.

  18. ray
    March 7th, 2005 at 15:45 | #18

    You know what is going to happen, soon Australia won’t have enough potential shop assistants. You have to be careful how far you want to take this education policy stuff. I think Government policy should be directed at deepening the pool of surplus labour so that capital can more easily draw out surplus value. We should also couple that with real industrial relation “reform” like paying people less for more work.

    Ray

  19. michael.burgess
    March 7th, 2005 at 16:09 | #19

    Declining investment in human capital is a critical issue. However, at least in relation to arts degrees, it seems to me that a not insignificant proportion of the resources that have gone into the expansion of higher education have basically gone to fund creeping credentialism (i.e. arts or even law degrees are now required to get basic clerical jobs which many relatively unskilled workers could often easily do if given the chance). This expansion for the sake of expansion would not be a problem if students were taught critical thinking. However, like Frank Furudi, I think this is in short supply in our current ‘do not scare the students (sorry customers)’ university environment.

  20. Mark Upcher
    March 7th, 2005 at 17:29 | #20

    Gordon, my point was that contrary to what Jack Strocchi said in his comment, business investment is around historical highs, as can be seen if you compare real investment to GDP from the ABS National Accounts. It may have eased off in the last two quarters bit but is still very high.

    Also, the trouble with the Private New Capital Expenditure data is that it just gives nominal expenditure. Because the exchange rate is high, the price of capital goods is low, so we are getting more “bang for our buck” from a given amount of expenditure.

    My main point is that Jack’s comment is not supported by the data.

  21. Howard’s bastard child
    March 7th, 2005 at 21:28 | #21

    In 1980, despite top shelf school marks, I left high school having only completed year 10. I was a working class suburban boy, and whatever my academic talents, the allotted course of my career was supposedly in the trades, like my brother before me. John Howard was treasurer. To get that all-conquering trades education I joined the Navy. That’s what working class lads did in the 70s, the only way out was rock and roll, sport, or the military.

    Only rich kids aspired to university, I didn’t even realise it was really an option for me, despite my top 1% science marks. Or perhaps I did, and joining the Navy was my escape hatch from the life allotted to me (that or getting some girl knocked up at age 18, and becoming an auto mechanic or a panel beater or something).

    It’s Howard’s vision of the world. The ruling class go to university, the gifted working classes become tradesmen and the not so gifted provide the domestic help. No-one under the age of 30 believed me when I told them this was Howard’s way in 1996. I guess their sorry arses are finding out now.

  22. March 8th, 2005 at 00:53 | #22

    “…the only way out was rock and roll, sport, or the military.”

    Oh please, GMAFB. Who scripted that – Bon Jovi? You left out the tens of thousands who got trades, started businesses of their own (or didn’t) and lived happily ever after.

    Respectfully Professor, your computer reference is hogwash. Most 12 year olds are now familiar with and proficient at basic programmes, as also in printing, text messaging, computer games and much else besides. There’s no reason a 16 year old apprentice couldn’t run a debug programme on a car – equivalent probably to clicking onto a Norton icon and waiting 30 seconds. I’m in my mid 30s but my 8 year old nephew got the DVD working a few weeks ago when I stuffed it up.

    This is just snobbish bourgeois panic from the university-worshipping left.

  23. John Quiggin
    March 8th, 2005 at 05:55 | #23

    Mark, I’ve downloaded the private investment series 5625, and, by my calculation, equipment investment for 2004 was around 4 per cent of GDP which is below the long-term average of 5 per cent, and below the level of recent years. The same is true for total investment.

    As you say, to the extent that we are looking at imports of items from the US, nominal figures may understate the volumes, but how do you reconcile this with your claim at #5?

  24. John Quiggin
    March 8th, 2005 at 06:17 | #24

    CL, I’ve never been impressed by arguments about computer skills that begin with the observation that 8-year olds can operate videos. In my experience, this does not translate into useful workplace skills. Econometric studies showing that the introduction of personal computers has been associated with more wage inequality, not less, support anecdotal observation on this point.

  25. John Quiggin
    March 8th, 2005 at 06:21 | #25

    Mark, I’m still having a bit of trouble reconciling the private investment numbers with the National Accounts, but obviously the crucial factor is the big decline in the price index for capital equipment items, which means that investment volumes are growing strongly while investment expenditure is flat. The converse is true for dwellings.

  26. Mark Upcher
    March 8th, 2005 at 06:46 | #26

    John, yes, that is my understanding on capital equipment investment. The long-term decline in computer prices and the more recent high exchange rate mean that while nominal expenditure looks weak, volumes are very strong. I will try and e-mail you a chart later today.

  27. still working it out
    March 8th, 2005 at 08:00 | #27

    I do not think that people should be staying on until year 12 for the sake of getting a university education. They should be staying on for sake of the communications and critical thinking skills they will gain. I know that the first thing many people will say is that those skills are no longer taught in school (reading emails from customer at work I can see where they are coming from) but that is not completely true. People who have finished year 12 are at least going to have been exposed to these concepts and will certainly have much more confidence when faced with work environments where these are necessary to do your job, let alone to do well.

    An entreprenearial spirit is expected in today’s workers, especially from Howard’s side of the political spectrum and the skills gained in the last two years of High School are certainly going to help that

  28. March 8th, 2005 at 09:42 | #28

    The Howard government has followed economic policies that are poor to bad, focusing on economic measures that improve short term dissipation of value (consumption) at the expense of long term accumulation of value (capitalisation). Investment in tradeable goods industries is much lower now than under Keating. And such investment that occurs is in medieval industries, like housing, rather than modern industries, like sci-tech…
    …Howard’s eco policies are laying up a store of ruin for the nation. The bursting of the property bubble will see the chickens come home to roost.

    I just agreed wholeheartedly with an entire post by Jack Strocchi… I think I’ll go and have a little lie down now, the shock to my system is too great.

  29. gordon
    March 8th, 2005 at 12:22 | #29

    Mark Upcher and Prof. Quiggin, it is necessary to disaggregate total capital expenditure to see what is going to manufacturing (J. Strocchi’s ref. to “tradeable goods”, which I take to mean high value added manufactures (“sci-tech”)). Investment in mining or construction (“medieval industries”) doesn’t count in these terms. We also need to separately identify manufacturing of mining equipment. My ref. to the 24/2/05 release of Cat. No.5625.0 (PVte. New Capital Expenditure) arose from irritation with all the nonsense about an investment boom which the Govt. was going on with over the succeeding few days, obviously anxious to divert attention from the apparently flat or faltering housing investment numbers. Sheer political opportunism based on unanalysed total investment numbers. J. Strocchi is right to draw attention to the tradeable ETM sector.

  30. March 8th, 2005 at 16:32 | #30

    JQ, it is true that ordinary PC exposure has little to do with needed levels of IT expertise. However, that is irrelevant since HR departments don’t know that and won’t be told. In the employment process, there is a market breakdown like schoolcatering: purchase decisions are made by others than the end consumers.

  31. Mark Upcher
    March 8th, 2005 at 17:06 | #31

    Gordon at #29, why and where do you draw the line between “bad investment (medieval)” and “good investment (sci tech)”? Why is very profitable mining investment a bad tradable investment and similarly profitable manufacturing investment a good tradable? I just don’t understand your logic.

    Helen at #28, you could have saved yourself the shock because Jack’s comments are not supported by any data that I have seen.

  32. ED
    March 8th, 2005 at 18:55 | #32

    It seems to me that all the focus of skill shortages has been on the trades, but it has somehow been forgotten that skill shortages exist among the professions as well.
    http://www.workplace.gov.au/Workplace/WPDisplay/0,1280,a3%253D6438%2526a0%253D0%2526a1%253D517%2526a2%253D533,00.html

    (And this is by no means a comprehensive list).

    Is there perhaps too much blame heaped on the fed govt for trades shortages? The apprenticeship system is essentially industry demand driven and if employers won’t indenture and train apprentices, how is this the govt’s fault? The fact that the govt has to provide incentives to encourage industry investment in training, and yet it still does not happen, suggests that businesses believe the returns from investment in human capital are not sufficient to justify the cost.

    One solution is to scrap the apprenticeship system altogether, take it out of the hands of industry, and provide off-the-job training at VET institutions followed up at graduation by a period of on-the-job training (cadetship?). There are precedents for this (e.g. electronics ‘trades’). Many of today’s degree qualified professions (e.g. doctors and nurses) were once apprenticeships.

  33. March 8th, 2005 at 22:41 | #33

    Comment #5 by Mark Upcher — 7/3/2005 @ 9:35 am corrects a factual error on my part:

    According to the ABS National Accounts business investment is at record levels as a percentage of GDP, driven primarily by strong investment in new machinery.

    …………..
    I may have been wrong in pooh-poohing the recent booom. My assumption had been that most of the economic drive behind the recent boom had been debt-fuelled consumption, largely off the back of property liquidators spending realised capital gains. MU’s statement that there had been a post-2000 boom in business investment has caught me out in a fact-free statement.
    I checked the ABS data Private New Capital Expenditure (PNCE) and Expected Expenditure and was a little shocked to discover that there has been a boom in a post-Olympic boom in real investment in tradeable goods, not just housing. This graph shows that PNCE increased by about 40% in the post-Olympic period, from about $10.5 bill. p.q. in FY 2000-01 to $14.5 bill p.q. in FY 2004-05.
    The market observers concur. This commment by Haver Analytics makes the point that AUS, since 1987, has shifted the pattern of fixed investment away from structures towards equipment.

    Structures had ratcheted lower as a portion of the total from the mid-1987 inception of these data to mid-2002. … This doesn’t necessarily mean that construction activity was “weak” in an absolute sense, but that equipment and machinery tended to grow more rapidly.

    ……….
    This graph shows that AUS’s PNCE has tripled in real value in the last 12 years, going from $5 bill p.q. in 1993 to $15 bill p.q. in 2005. This article also confirms that business investment is driving the boom:

    New figures out on Thursday showed capital expenditure by businesses jumped 5.7 per cent to $14.951 billion in the December quarter – the strongest rise in two years. The main driver was a 6.5 per cent leap in how much businesses spent on equipment, plant and machinery.
    In their first estimate of spending for 2005/06, they believe they will invest about $45.074 billion – about eight per cent higher than what they expected to spend in 2004/05.

    ……….
    It is of course possible that both domestic consumption spending and capital investment have fuelled the boom. I would be interested in general comments, esp Pr Q’s, on the level, composition and rate of growth of AUS capital expenditure over the past decade.

  34. March 8th, 2005 at 22:58 | #34

    Comment by Mark Upcher — 8/3/2005 @ 6:46 am partially weakens the inherent bullishness in his comment #5:

    John, yes, that is my understanding on capital equipment investment. The long-term decline in computer prices and the more recent high exchange rate mean that while nominal expenditure looks weak, volumes are very strong.

    ……..
    I could salvage something from my comment #1 by pointing out that AUS’s post-Olympic high rate of New Private Capital Investment has been jollied along by the secular boost in the terms of trade in favour of minerals and against manafactures. This means that advantageous price movements have inflated the boom in quantities of capital expenditure. This good fortune has been complemented by the recent recovery in the AUD.
    Howard’s boom has therefore been aided and abetted by external factors, particularly:
    – info-tech boom (Moores Law reducing manafacturing costs)
    – PRC industrial boom (Deng’s laws increasing mineral prices)
    Also, much of the efficient reorganisation and effective globalisation of AUS finance and industry occurred under Keating’s watch. And the long post-Cold War relaxation in security problems (ie Peace Dividend) also did its bit.
    So external, rather than internal, factors have been propping up Howard’s boom.
    It stands to reason that these things go in cycles so we can expect the external props of the boom to be kicked away soon enough.
    In any case, Costello is vastly overrated as a Treasurer. I dont like his smirk and he is an ardent republican.

  35. March 8th, 2005 at 23:08 | #35

    And another thing. Howard has let investment in sci-tech R& D languish whilst subsidising investment in realty. This is the philosophy of the rentier, not entrepreneur.
    FASTS, the Sci-Techies peak council, has repeatedly blasted the government for its slack efforts in supporting R&D. The nations senior nerd, Professor Snow Barlow, gave Costello, the nations senior lawyer, an almighty serve the other day for rewarding paper-shufflers rather than gadget-makers:


    The President of FASTS, Professor Snow Barlow said Australia cannot expect to maintain GDP growth of 4% per annum while national investment in science and R&D lags the developed world. Australia’s strong GDP growth is not sustainable while Australia’s national investment in R&D continues to decline as a percentage of GDP.
    “Government’s cannot simply rely on record consumer spending to underpin GDP growth�.
    “Government investment in R&D is projected to fall to 0.62% of GDP in 2004/05 – down from 0.66% in 2002-03.

    ……
    And dont tell me that AUS can take a free ride off other nations R&D investment through reverse engineering, cheap imports and copy right piracy. Eventually all that will be policed – look at FTAs – or the revenue flow from commercial licensing will be diverted back to Head Office in some Northern Oceanic metropole. That is where our Brain Drain heads for whilst the rest of AUS languishes as a Branch Economy.

  36. March 8th, 2005 at 23:12 | #36

    At no. 32 ED asks “Is there perhaps too much blame heaped on the fed govt for trades shortages? The apprenticeship system is essentially industry demand driven and if employers won?t indenture and train apprentices, how is this the govt?s fault?”

    The answer is that there is an externality, since firms that don’t train have more budget to poach the newly trained. This used to be cured by restricting where apprentices could go as they neared the end of their training. This was abolished by governments who had their own ideas of right or wrong and went ahead without considering whether the old system had any public purpose or if anything effective should replace it (instead incorrectly supposing that government training schemes were a proper substitute).

    The result is a defective system of governmental creation. That is why it is “the” government’s (more precisely, all governments’) fault.

  37. March 9th, 2005 at 09:51 | #37

    Alright shorter version of Comments #33, #34 & #35: what has been driving AUS’s higher than average(>3% pa) domestic growth rates in the past four years?
    The AUS econonmy has been booming since FY 2000-01 through FY 2004-05. This is despite the fact that the productivity growth has slackened off from its hectic “New Economy” (1993-2000) growth rate of ~2.5% pa and returned to its historic norm of ~1.5% growth pa. (Thanks to Pr Q for throwing a wet blanket over that glad confident morning.)
    Has the current phase of growth been driven by the property booms’s massive infusion of foreign debt, leading to dissaving and an orgy of consumption?
    Or has it been a surge in business investment as private industry re-tools in preparation for the mineral boom?
    Or both?
    I would like to know, and I am hoping that the theoreticians and statisticians on this thread can provide an answer.

  38. John Quiggin
    March 9th, 2005 at 10:44 | #38

    When prices of capital goods decline, and expenditures are unchanged, two results automatically follow
    (i) An increase in the measured volume of investment
    (ii) More rapid depreciation of the existing capital stock

    The net effects are rather tricky, and depend on the elasticity of the relationship between marginal costs of equipment (especially computers) and marginal productivity.

  39. 2dogs
    March 9th, 2005 at 11:42 | #39

    What would be the problem with this:

    1. All TAFEs get renamed as/linked to universities, similar to what happened to CAEs in the early 90s. They offer courses with names like “Bachelor of Plumbing”, but with content much like they have now.

    2. Places at universities of all kinds are determined with regard to the demand for graduates in each field.

    My point is that 90% of this issue involves language and status, and it has little of substance to it.

  40. March 9th, 2005 at 16:00 | #40

    John Quiggin — 9/3/2005 @ 10:44 am seems rather evasive when asked to put up about the nature & destiny of the boom:

    The net effects are rather tricky,…

    ……..
    Pr Q has been warning of the impending bust to the AUS economy for a solid half decade. And yet the the gloom clouds still fail to materialise. For sure there has been wasteful overinvestment in realty and underinvestment in knowledgeability (both mechanical and mental).
    But the AUS economy seems to resist all popular and political attempts at derailing it (Asian crises, tech bubbles, property bubbles etc.).
    Until just now I thought that fantastic-plastic consumer spending, rather than capital investment, was tiding us over. However it seems that capital investment has also been pretty robust, which bodes well for future industrial earnings. And this would explain how the All Ordinaries/ASX share market has rocketed up by about 50% over the past seven fat years, from ~2800 in 1998 to ~4200 in 2005.
    Productivity, real wages and growth rates have gone up, Unemployment, inflation & interest rates have gone down.
    So like, when is the music going to stop?

  41. E.D.
    March 9th, 2005 at 19:16 | #41

    To PM:
    There are two types of poaching, (a) the poaching of apprentices and (b) the poaching of qualified tradespersons.

    Since the govt has never (to my knowledge) enacted laws forbidding (b), I think we can assume it is blameless there.

    In the case of (a) I don’t see how forcing apprentices to remain with their employer for four years will fix the skill shortage problem.
    Firstly, the greatest demand is for skilled and productive tradespersons, not for trainees.
    Secondly, I can’t see how poaching apprentices is a commercially sensible proposition. If a firm was serious about poaching a 2nd year apprentice plumber, how could it do so without offering higher wages or better conditions, and without assisting that apprentice complete their contracted training? In other words, they would end up providing the same level of training as the initial firm, but at a higher cost.

    If this is right, then again, the govt is blameless.

  42. March 10th, 2005 at 02:46 | #42

    ED, you are wrong in thinking that governments didn’t create the situation. Over the centuries (literally) indentured apprentices went from seriously binding things to practically unenforceable.

    You see, originally apprentices paid back by having indentures that far outweighed the length of actual training, e.g. seven years of which the last few were pure payback and not training. And those that weren’t like that had high premiums.

    Even in recent decades there were more constraints than there are now. Even in less restrictive circumstances, a firm that trains has less left over to hire the freshly trained – it is poaching in that sense.

  43. grace pettigrew
    March 10th, 2005 at 07:22 | #43

    The massive privatising, down-sizing and outsourcing of the public sector over the past two decades has destroyed the major trades apprentice “nurseries” in the rail, roads, water, power etc industries. Instead of the private sector picking up the job of training the young (which might have been seen as a social responsibility in return for the massive profits that came with privatisation of the country’s wealth) the pool of older qualified workers was drained until they dropped or retired, and now Howard wants to bring in slave labour from developed countries to pick up the slack and force down wages. Brilliant, we are now back in the nineteenth century again.

  44. Tony Healy
    March 10th, 2005 at 08:06 | #44

    Grace is correct. All the clever little privatisations and rationalisations of large utilities such as gas, telephones and electricity has ripped away the training grounds for trades apprentices. Unions and labour market researchers have been warning of this effect for years. This is yet another externality of half-smart MBA’s.

  45. March 10th, 2005 at 13:03 | #45

    Hey, not all of us MBAs are half smart. It’s just that we had to kie low and give the correct answers to pass, and we were smart enough to realise that.

    Me, I was disappointed that the MBA focussed on only the financial and marketing legs of business and didn’t try to bring out any general or particular aspects of operations. That, I and presumably others had to fill in from life experience.

  46. gordon
    March 11th, 2005 at 11:11 | #46

    Still trying to find a 4-digit ANZSIC breakdown of manufacturing investment, preferably with a long-term timeline…

  47. Alex
    March 11th, 2005 at 11:42 | #47

    Re comment #37 by Jack Strocchi. You might find it worthwhile reading this Treasury paper on the reasons for the boom in imports. http://www.treasury.gov.au/documents/958/HTML/docshell.asp?URL=04_Imports_of_goods.asp
    (The paper is also available in PDF and Word formats if you want to download it).

  48. Arjay
    March 11th, 2005 at 21:35 | #48

    Here we have a clack of academics pontificating about trades?It takes years to get really skilled at a trade.In tool making,it takes 15yrs after the apprenticiceship to be really skilled.The reasons why the trades are diminished are,lack of social status,dirty and difficult,small business on low margins can’t afford to train,too much Govt intervention,work cover regulation,workers comp whereby the the employer now pays the the premium and the claim,unfair dismissal,smaller margins due to imports from 3rd world countries,poor attitudes to work from pupils of left wing teachers,who think that the world owes them a living.Why would you bother?Just get a labotomy and go work for the public service.”But then no one can fix my tap or change my light globe.”Perhaps our army of social workers will fix all our woes.
    There’s a lot more thinking and problem solving than ever imagined by a bunch of hypothetical ego centric academics sucking of the public purse.The mentality is Govt can fix everything.Well,who provides the efficiecy in private enterprise for taxes to raised in the first place?Can we elimate private enterprise and Govt will provide all?Perhaps we can just print more money.The socialists think it is a bottomless pit anyway.

  49. March 12th, 2005 at 17:18 | #49

    Marx knew it wasn’t a bottomless pit, and he suggested printing more money as a technique of ringbarking for precisely that reason.

  50. March 13th, 2005 at 09:12 | #50

    John, that was a really cheap shot. For a more fair and reasonable interpretation of the PM’s comments on training and the relevance of university education try http://badanalysis.com/catallaxy/index.php?p=715

  51. August 23rd, 2005 at 13:07 | #51

    John Howard thinks we live in a pre McDonald’s,Subway,Wendy’s,KFC and Burger King kind of Australia and the ONLY way to a good life in those teen-early twenty something years is the traditional trades.Not all of us are cut out to be trades people but still want to work.I was born in the late 70’s so I have no idea of what life was like minus the fast food giants era,There is nothing wrong in working in fast food or a clothing store or in retail before going onto the one kind of boss if there is such a thing left today and boss for life.

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