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A value-added economy

By Dong-ke Zhang - posted Tuesday, 20 November 2007

In its brief history, Australia has enjoyed several major resource booms, in particular the post-war booms, the Japanese led boom of the 1980s and now the current boom.  However, unlike any of the previous booms, the current boom, fuelled by the rising Asian economies, especially China and, to a lesser degree, India, is unprecedented and widely predicted to last for decades. This boom is dominating the Australian economy and generating enormous business activity and profits, primarily centred around and derived from our rich mineral and energy resources. Unemployment is at a record low and the government surplus is at a historical high.

Australia’s economy and industrial structure is primarily characterised by raw material production and supply. Due to geographical and historical reasons, manufacturing and value-added processing industries have not been strong here. We have relied on and excelled at excavating and extracting the country’s abundant natural resources and selling these for a quick profit, allowing others to add value and enjoy the benefit.

Australia exports iron ore but imports steel, paying a high price. We export yellow cake but have not taken the opportunity to enrich the uranium for our own use as a viable option in our energy mix. We export coal and liquefied natural gas but rely on imported petroleum at an increasingly higher cost. We export wool but buy fabric and cloth. We excel at innovation but import many of the technologies that were originally developed in our backyard. We export education by flooding our class rooms and focusing on this “smokeless” industry, but we overlook the quality of education for future generations. Australia’s prosperity has largely been dependent on an economic boom in other countries. During a boom, we import geologists and mining engineers, but when we are hit by doom, we end up with taxi drivers with PhD degrees on the roads.


If such historical phenomena in Australia’s economy were attributed to our geographical isolation from the mass markets in the Northern Hemisphere and our relatively small economy and domestic consumption capacity, the opportunity for change is now at hand with the current resource boom.

It is time for Australia to rethink and reform its economic and industrial structure that has placed too much emphasis on its "front-end". Australia must build a robust economy and to do so, it needs to increase the number of "downstream" processing industries that add value to our natural resources.

Australia should be exporting iron and steel, instead of just iron ore. We should be enjoying clean nuclear power and providing a service for profit to the rest of the world by storing and safeguarding the nuclear waste in our giant outback, instead of merely exporting yellow cake. We should be supplying the world with plastics and chemicals produced from coal, instead of just exporting coal. We should be exporting coal-to-liquid and gas-to-liquid products, instead of importing crude oil. We should trade our knowledge and technologies as a commodity with the rest of the world, rather than importing devices made elsewhere, with some of them based on our own technological innovations.

As the world has shrunk through major advances in modern communication and transportation, geographical isolation and the lack of a large domestic market are no longer reasons for us not to create our own manufacturing and value-added processing industries. Australia has the intellectual capability (symbolised by our “fence wire and a pair of pliers” innovative spirit) to make these changes happen. Through the current boom, Australia is also securing the enormous financial capability to effect these much needed changes. Above and beyond, Australia has the minerals and energy to create many value-added products that can be exported around the world, consuming much less energy in shipping than transporting the raw materials.

For Australia to create a knowledge-based and value-added downstream processing focused economy, we also need a strong scientifically-educated population and skilled work force to make the best of this current "once-in-a-generation" resource boom. With the enormous profits derived from the current boom, Australia needs to re-invest in education, science and technological innovation of high quality. We need to re-invest in both physical and social infrastructure. We need to reward innovation and entrepreneurship, especially scientific and technological entrepreneurship at all levels of business and industry. We need to re-invest in improving the energy efficiency of our economy. We need all of these, but very importantly, not at the expense of our future generations.

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About the Author

Professor Dong-ke Zhang is Professor of Chemical Engineering at Curtin University of Technology and the Director of the Centre for Fuels and Energy. Professor Zhang is also Chairman of the Australian Academy of Technological Sciences and Engineering’s 30th Annual Symposium "Resources Boom: Opportunities and Consequences", Perth November 19-20.

Related Links
Resources Boom: Opportunities and Consequences

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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