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Local manufacturing struggling -

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(generated from captions) longest-lasting dictator?

It's called Dutch disease.

When a country has so much

mineral wealth that a boom in

its resource sector squeezes

the rest of the economy. Here

in Australia, we look like a textbook case and it's

textbook case and it's local

being smashed. BlueScope local manufacturing that's

Steel's announcement today that

it's quitting the export

business will put 1,000 Australians out of prevent more job losses across the manufacturing sector,

unions want the government to

force big resource companies to use more Australian products in their projects.

their projects. They've been

forging steel at Port Kembla

since 1928. The blast furnaces

lighting up the night sky. An

emblem for the region. A beacon for Australian manufacturing. But the fires are dwindling.

BlueScope will cease exporting

steel from Port Kembla in two

months with the loss of 800 jobs. In Victoria the company's Western Port mill is also shutting

shutting down. And 200 more

jobs will go. At Port Kembla there'd been rumours for months

that didn't dim the pain. It's that the cuts were coming but

in really going to be hard to go

in and face the guys and try to pump 'em up to say it's not all pump 'em

over. When I think it is. That's the problem. I don't see

any light at the end of the tunnel at this stage. I hope I'm

I'm wrong. I really hope I'm wrong. But it's - just really

hard and devastating. It's a

different story in the mining districts. Where men, women and

mammoth machines are operating

around the clock, digging out

iron ore and coal at rates

never seen before. A billion tonnes of minerals a year, enough to fill up 3,000 uj bulk

cargo ships. But the fates of

the two industries are

linked. What these job losses

really show it's a classic case

of Australia going through the

resource considers also known

as Dutch disease and this is

when you have a mineral boom,

it drives your currency sky

high and that crunches rest of

your economy. All those other export sectors, tourism, education and manufacturing,

all these industries will be

built up in the post-tariff era

are built up in the post-tariff era because of this essentially

unhinged degree of mining

development we've got under

way. The long-time economics

journalist and author Paul Cleary mass just written a back

criticising Australia for

mismanaging the resources boom.

By squandering the hundreds of

billions of dollars in windfall

revenue and allowing a resources rush that's

plunderingth nation's natural endowment. I think

endowment. I think there's way

too much and it simply reflects

regime the fact we don't have the tax

v in place. We don't have a

proper resource rebt tax. If we

had the sort of resource rent tax that Mr Rudd has

one that's much more robust, we'd rake in the revenue,

companies wouldn't be losing their heads trying to sink

hundreds of dollars into new

capacity and really causing

these imbalances in our capacity and really causing

economy. 10 years ago,

BlueScope Steel was making huge

profits. 10 years ago BlueScope

Steel was one of the highest

shares. But that was back in payers of dividends on

2001 when the Aussie dollar hit

a low of 48 US cents. And the

general rule was two for one

against the greenback. After

falling during the GFC, the currency's climbed

currency's climbed to parity

and beyond. It hit a high this

year just shy of $1.11 US

cents. Iron ore prices have

also soared to new highs and

the price of coking coal has skyrocketed. For industry, skyrocketed. For the steel Record prices for the basic

ingredients of steel-making and

a high currency that's killing export competitiveness.

export competitiveness. It's

not just steel or just

manufacturing. The high dollar

means fewer tourists, fewer

overseas students and a hit to

a host of industries that

export or compete with imports

made cheaper by the high

currency. And the consequence

of this will high wage, high productivity

resource sector, there will be

a hollowing out of the middle

of and we will be left with a rump

of low productivity, low wage

industries. Those feeling the

pain are now calling on

government to demand more of

the miners. The steel union boss Paul Howes argued today

that mining companies should be

made to source steel and other

components locally. The big

miners are the greedy big

miners. These are the same

miners who bitch and time they have to pay a different tax, have a different regulation, complain about the

anything to reinvest back in unions but they can't do

their community. Graham Kraehe

is the Chairman of BlueScope Steel and a member of the

Reserve Bank board. He says

that's a step too far. I think it would contravene WTO

requirements. I'm not proposing

to go that far. But he's deeply

unhappy that resources projects and even government jobs

using European or and even government jobs are

local manufacturers. There specifications that exclude

should be a requirement that

the specifications and the specifications and the

tendering should be in a way companies to participate and if that enables Australian

they're competitive, they've

got a chance of winning a share

countries around the world, of the business. Other

Norway, Chile, even tiny East Timor have been much sporter in

Timor have been much sporter in

the way they've managed their

resource revenue. A well

designed well communicated

mining tax mining tax would've got community support, resource

company support, the use of it

then though I think is about

ensuring the transition, not so much from slowing down resource

itself and the investment in

resources, but making sure that

the government had some funds

to utilise in assisting other

to utilise in assisting other industries such as

manufacturing and tourism to

transition into the new

economy. As Asia industrialises, there's talk of the mining boom

on. A resources rush that never

ends. But we will hit the

bottom of the quarry. And what

kind of economy will be left

then? Decisions made now will

determine whether the gains are

squandered or whether the

windfall becomes a lasting legacy. The Federal Government

responded today with the $100 million injection into