Government must boost productivity as economy changes

SURELY Australia is on the cusp of dramatic change.

The Reserve Bank has the monetary policy levers to control inflation. But it is the fiscal policy levers in the hands of government that control the wider economy.

Much has been said about the loss to Australia of Chrysler, Mitsubishi, Ford, Holden and now Toyota.

Much of the blame has been sheeted home to the "now" issues of wage costs and the strong dollar.

I, however, have been fascinated by the failure of commentators to track the problems of our "family" car manufacturers to tariff policies going back a couple of decades or more.

It was then that importers could bring in Toorak Tractors under the concessional import duties applying to trucks.

Add a bull bar and these huge boxes on wheels gave yummy mummies the opportunity to sit high and feel invincible as they delivered their sprogs to school and did battle in shopping centre car parks. Goodbye Falcon and Commodore!

Ford did see the trend and created the Territory out of Volvo running gear, but after an initial burst of promotional energy, they basically let the thing die on the vine, allowing the technology offered with Thai and Korean-built SUVs to crucify them.

That little bit of history said, the future for Ford, Holden and Toyota was buggered anyway.

The tariff protection that has made the cars we buy 50% dearer than similar vehicles in the US and Great Britain is gradually going the way of the dodo.

Thailand and Korea have already signed free trade agreements with us and it's only a matter of time before Japan joins.

The sticking point there is the embargoes Japan imposes on beef and rice imports to protect market share for its inefficient farmers.

But efforts to modernise and revive its economy, which has been in recession for more than a decade, will see the Japanese come to the table sooner rather than later.

With the automotive industry cactus and the resources sector entering into a mature phase after the frenetic bullish boom days, the challenge to do something about the economy falls squarely on those with hands on the levers of monetary policy.

Government must provide the platform for Australia to move forward, and that means stopping the rot in our decade-long ailing productivity.

The key? Get our women back working for one.