The fall into administration of Claypave, established as Rylance Colliery and Brickworks in Ipswich in the 1880s, points to the huge problems of maintaining a manufacturing base in Australia with current government policies. Opposition policies will only make it worse, if they are elected.
It's an issue that appears to be missing from this federal election, with the two major parties brawling over issues of pay and tax, but what is the use of either if you're out of a job?
Brick making is a basic building industry, dating back at least 9000 years. After quarrying, it is probably the oldest industry in Australia with the first brick clay discovered one month and 2 days after Captain Phillip raised the Union Jack at Port Jackson.
The ingredients of bricks are universally available, so no country has a significant natural comparative advantage.
It is also capital intensive, so high wage countries like Australia can compensate with high productivity.
For example, the latest annual report of Brickworks Ltd, one of Claypave’s more significant competitors, shows they achieved revenue of around $550,000 per employee, and total shareholder returns of over 20% .
At least one of the forces to blame is the high price of energy in Australia, which is affecting the whole industry to the extent that a very solvent manufacturer such as Brickworks, is looking at moving its operations overseas because of this cost.
Bricks are fired, meaning that not only is electricity a component of the manufacturing process, but gas is required 24/7 to turn the clay into a durable building product.
In fact, gas figures twice because gas-fired power stations are the device of choice when it comes to firming-up intermittent renewable energy from wind and sun. The more renewables there are, the more gas will appear in the energy mix.
Australian gas is expensive, particularly compared to the USA, a country where some of our large building products companies have plants.
The ACCC anticipates that 2019 gas prices will range from a top of $12.51 per GJ in Victoria and South Australia, to a low of $7.63 in Queensland. Contrast that to Texas, where the price, is AUD $4.96 per GJ.
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