Tuesday, January 25, 2022

Australia's future demands economic diversity

Below is a perplexingly stupid article. Australia is resource rich and resource extraction is often both low-cost and highly rewarding. So investment in Australia tends to be focused in that direction.

Why is that a problem? It tends to guarantee profitable markets overall so is more a reason for celebration.

And it has long been so in Australia. Before coal and iron mining reached its present eminence in the economy, wheat, wool, beef and mutton were the big primary earners. Australia's vast inland areas are very good for agricultural and pastoral production. Before mining was big, farming was big and often very profitable. In the immediate postwar era Australia was memorably described as "riding on the sheep's back".

And there seems to be no adverse future prospects for Australia's extractive industries. Coal and iron are not alone in profitability. Bauxite (aluminium) mining is now a big earner and it looks like lithium will be a star in the near future. When you have a whole continent at your disposal, you are almost certain to find anything that you want.

So Australia is completely normal and reasonable in deploying capital where it will do most good

Imagine a stock-trading Rip Van Winkle who went to sleep on Wall Street in the mid-1980s and just woke up today. When he looked at the biggest firms on the US market, he would be startled. In the mid-1980s, the largest US firms were IBM, Mobil, Exxon, Ford and General Motors. Today, they are Apple, Microsoft, Amazon, Alphabet and Facebook.

But if he’d gone to sleep on Bridge Street, Sydney, our stock trader might have wondered if he’d slept at all. In the mid-1980s, the largest Australian firms were Westpac, the Commonwealth Bank, NAB, ANZ and BHP. Today, they are Westpac, the Commonwealth Bank, NAB, BHP and CSL.

This isn’t just about firms, it’s about industries. A generation ago, the largest US firms included two oil companies and two car companies. Today, technology rules the roost. Yet in Australia, the same banks and the same mining company persist, with biotechnology firm CSL the only new entrant in the top five. Over the last generation, the biggest US businesses have been dethroned, and replaced by new firms from an entirely new sector. In Australia, it’s business as usual.

It gets worse. One remarkable analysis goes all the way back to 1917, at the end of World War I. Among America’s top 10 companies then, none are top 10 today. But among Australia’s top 10 companies in 1917, five are still top 10 today. In some form or another, Westpac, ANZ, NAB, BHP and Wesfarmers have enjoyed more than a century at the top of the Australian sharemarket.

The average Australian company is considerably older than in other countries. Weighted by market capitalisation, the average listed company in Australia today is 105 years old, compared to 95 in Britain, 82 in the US, and 77 in Japan. Our sharemarket is dominated by large resources firms and big banks. Less than 2½ centuries after European settlement, there is something peculiar about the fact that Australia’s typical listed firm is more than a century old. Australians can be proud of our venerable companies, but the situation is akin to Little Athletics collapsing while the Masters Games booms. It doesn’t bode well for the future.

A similarly troubling picture comes from the Atlas of Economic Complexity. Developed by a team at Harvard’s Centre for International Development, the atlas begins with the idea some products are more complex than others. To make medical imaging devices or jet engines takes plenty of knowledge and extensive networks of people. To make wood logs or coffee beans requires less knowledge and smaller networks.

Lead author Ricardo Hausmann and his team liken the problem to Scrabble. A player with just a few letters can only make a few words. Having a broader mix of letters opens the possibility of making more words. Countries that are more complex are like scrabble players who can make more words.

As a proxy for the complexity of an economy, the experts use the products a nation exports. Products such as medical imaging devices are considered complex since few other countries export them, and those who do tend to export a wide range of other products. By contrast, products such as diamonds are not considered especially complex, since diamond-exporting countries tend to just export diamonds.

From the diversity of a country’s products, it is then possible to work back and calculate a proxy for the diversity of its economy. According to the latest rankings, the world’s most complex economies are Japan, Switzerland and Germany, while the least complex are Liberia, Guinea and Nigeria.

As you might expect, economic complexity correlates pretty highly with a country’s income level – in fact, it explains about four-fifths of the variation across nations. But complexity also turns out to be a good predictor of future economic growth, even given a country’s level of development. Take two countries with similar levels of income, and the growth prospects of the more complex country are better than those for the less complex nation.

How does Australia fare on the Economic Complexity Index? In a word, badly. Out of 133 economies the experts have assessed, we come 86th, below halfway. The three countries ahead of us are Albania, Oman and Paraguay. When it comes to living standards, Olympic prowess or international heft, Australians think of ourselves as being in the league of Germany. But an objective analysis of the complexity of our economy suggests that it looks more like Albania. It isn’t just that we export relatively few products; it’s that the kinds of things we export tend to be exported by pretty undiversified countries.

An easy response would be to say Australia’s lack of complexity is a response to the mining boom. But it turns out that even in 2000, before the mining boom, Australia’s exports weren’t particularly complex. Over the longer run, Hausmann and his colleagues estimate that Australia’s economic complexity ranking stayed pretty constant from the mid-1960s to the late-1970s, then fell markedly over the past generation. On their measures, we have never been an especially complex economy. But we’ve gotten a lot “simpler” in recent years.

Creating a more dynamic and complex economy isn’t an easy task. But if we get it right, it’ll ensure more jobs and better wages for Australians. Like a person with a variety of skills, an economy with a diversity of strengths is more adaptable when shocks come, and more likely to prosper in an uncertain world.


Another pseudo-Aborigine

image from https://i.dailymail.co.uk/1s/2022/01/24/04/53291453-10433825-image-a-2_1643000335673.jpg

No sign of any Aboriginal ancestry in her. She is for all intents and purposes a white Australian

An Aboriginal model has urged Aussies to refrain from posting photos of Australia Day celebrations on social media as it is 'insensitive' to the plight of First Nations people.

Millions of Australians flock to beaches, backyard BBQs, and pubs on January 26 with flags draped over their sun-soaked shoulders to mark the national public holiday.

But for the country's first inhabitants, the date represents the beginning of the painful and devastating impact of colonisation on their culture since the first British fleet sailed into Sydney Cove in 1788.

Fallon Gregory, a proud Kija/Bardi and Nyul-Nyul woman from Western Australia, says that if people partake in prideful, open Australia Day celebrations, they should not post photos on social media.

'It shows support and lack of sensitivity,' she told news.com.au.

The mother-of-two said Aussies could show their support for Aboriginal people by instead sharing information on social media about why people shouldn't celebrate Australia Day on that date, and by attending invasion day rallies.


Omicron vaccine on the way

The emphasis on vaccines is wrong headed. Medicines to cure it are the way of the future. Several are now available

In November last year, Australians began to feel a wave of optimism that COVID would no longer define their everyday existence.

Soaring vaccination rates provided some measure of confidence the threat from COVID was beginning to recede.

But by mid-December, this wave of hope had been swept away by a surge of Omicron infections.

Emerging research showed there was only around 20 per cent protection from Omicron infection four months after two doses of AstraZeneca, Pfizer or Moderna vaccines (though protection against hospitalisation and death remains much higher, and a booster dose increases protection against infection, but possibly only short-term).

The race is on to find a variant-proof vaccine
In a state-of-the-art science lab, nestled into the genteel slopes of the NSW Southern Highlands, a group of genetically engineered mice have become frontline soldiers in the fight against COVID-19.

Since the emergence of Omicron, both Pfizer and Moderna have announced they're working on vaccines to specifically target the variant, with production promised as early as March of this year.

So, are variant-specific vaccines the way we regain control of COVID?

A vaccine targeting Omicron will increase immunity to the variant on both an individual and population level.

However, variant-specific vaccines are ultimately a reactive measure that could always leave us behind the eight ball. By the time we roll out any variant-specific vaccine, a wave of infections driven by that variant may already have peaked, and a new variant will likely be on the way.

The solution to this problem may be "variant-proof" vaccines, also known as "universal" COVID vaccines. These are vaccines that work across different variants, rather than being targeted to a specific variant. These are in development and could be a proactive way to prevent new variants from taking hold.

Variant-specific vaccines could take too long to roll out
Scientists have little doubt vaccination with an Omicron-specific vaccine will provide enhanced immunity to Omicron.

Approvals of these new vaccines should be comparatively rapid because they're similar to previously approved vaccines, though some additional data on safety and efficacy will be required.

However, the question remains as to whether the rollout of these new vaccines would necessarily be useful to Australian society.

Following the approval of COVID vaccines in Australia, it took nine months to vaccinate 70 per cent of the adult population. In contrast, Omicron cases in Australia peaked in less than two months.

Although there are plans to develop local manufacturing facilities by 2024, Australia doesn't yet have the capacity to mass-produce mRNA vaccines (like Pfizer's and Moderna's). So, we can expect the rollout of these vaccines to begin significantly later here than in other countries.

Reactively relying on developing variant-specific vaccines, even under idealised production and distribution systems, would always leave Australia vulnerable to disruptive waves of infection and pose ongoing challenges to health strategies.

Waves of new variants would engulf the population faster than variant-specific vaccines could ever be deployed.

Mass infection isn't likely to protect against future variants
Health officials predict almost all Australians will soon be exposed to Omicron.

This has left many wondering if mass exposure could finally provide Australians with the antibody protection required for the fabled "herd immunity", making the need for future variant-specific vaccines unnecessary.

A small-scale pre-print study, yet to be reviewed by other scientists, suggests infection with Omicron did produce some antibodies that could neutralise Delta, but only around a quarter the magnitude of those produced against the infecting variant.

Whether these antibodies would be sufficient to protect against the infection from the Delta or other variants, remains to be established.

Most antibodies induced by vaccination and natural infection predominantly target regions of the virus that can easily mutate.

It's plausible the next variants that emerge could be even more different in this region than Delta or Omicron. This means it could evade current antibody responses induced by infection, or by vaccines specific for either the original virus or the Omicron variant.

So it's likely mass infection with Omicron won't protect us from catching future variants.

Here's where a variant-proof vaccine comes in
Several teams around Australia and the world are currently working on efforts to produce "universal" COVID vaccines, including our own research team at the Garvan Institute.

These are vaccines which generate antibodies to regions of the virus that cannot be easily mutated.

The goal of using such vaccines across the population is to protect us not just against current variants of the virus, but also against future variants.

Unlike the current reactive strategy of generating variant-specific vaccines following the emergence of a new invasive threat, a universal vaccine could be used to prevent a new variant from ever taking hold.

Australia should aim to produce such vaccines locally, so we could avoid the current supply and distribution delays.

As Australia continues to "ride the Omicron wave", we can only wonder what challenges the next variant will pose for us.


AdBlue shortage appears to be nearing end as millions of litres of diesel fluid produced locally

Locally produced supplies of a crucial diesel exhaust fluid have ramped up significantly, with 3 million litres of AdBlue produced in Australia over the past week, but a long-term supply plan is yet to be finalised.

A shortage of the product sent the federal government scrambling to find new sources in December, and a deal was reached with local fertiliser manufacturer Incitec Pivot Limited (IPL) to increase production in Queensland.

Supplies in Australia had been running dangerously low and there were concerns trucks would be brought to a halt, but Energy Minister Angus Taylor said stocks were now being replenished.

"Incitec Pivot last week achieved a significant milestone producing over three million litres of AdBlue in the week, representing around 75 per cent of Australia's AdBlue needs," he said in a statement.

"This locally produced AdBlue is already flowing through the domestic supply chain to wholesalers and service stations across the country."

IPL managing director Jeanne Johns said the 3 million figure was an 800 per cent increase on what it produced in early December, and the company's Gibson Island plant in Brisbane was now working 24 hours, seven days a week.

"The hard work will continue as we aim to further increase production of AdBlue at Gibson Island in the coming weeks and months to meet Australia's needs," Ms Johns said in a statement.

AdBlue is a trademark brand of urea-based diesel exhaust fluid that acts as an anti-pollutant in diesel engines and is vital to the freight and logistics sectors.

The additional supplies of AdBlue have been welcomed by Heavy Vehicle Industry Australia.

The organisation's CEO Todd Hacking said while it was good news, he warned there was still more work to be done.

"That 3 million litres a week is really helping to stabilise the current shortage and we are seeing the day-by-day improvement of AdBlue nationwide," he said.

"It's still a day-by-day proposition, but we are certainly in a much more stable position with supply than we were pre-Christmas.

"We are still not out of the woods. It's certainly something the government and industry are monitoring every day but we are much more confident than we were six weeks ago."

The government will not outline exactly how much fluid is available for use, but Mr Taylor insisted there was no need for panic anymore.

Mr Taylor acknowledged that while there were now more supplies, there were still issues. "Although AdBlue users may continue to see a few sites occasionally stocked-out, they can be reassured that with the new AdBlue supply coming into the market, these sites are now being progressively replenished," he said.

Mr Hacking said he was "cautiously optimistic" about future supplies, but that without the IPL deal, Australia would have been in "a great deal of strife" in the short term.

Future supply remains uncertain

IPL will continue to produce 3 million litres per week for now, but Mr Hacking has questioned how long term supplies will be secured.

"The ongoing challenge is what happens in the medium and long term when this IPL deals comes to an end," he said.

It is something that government and industry are still trying to work through, with the government looking at whether supplies can be secured from the Middle East.

Until now, the majority of Australia's supplies came from China. Mr Hacking said diversification was essential.

"The lesson out of this is that for such a critical good we can't just rely on one country to supply it," he said.

"We need to diversify as much as possible, and as much as possible onshore."

Australia struck a deal with Indonesia late last year to provide 5,000 tonnes of refined urea in January, but it is yet to arrive.

It is understood the fluid will be split across several shipments, with some set to arrive in the coming days and others to come in February.

IPL is also expected to begin a trial of producing technical-grade urea from the middle of next month. If successful, IPL would also still manufacture AdBlue.

National Farmers Federation CEO Tony Mahar said the government should focus on local options.

"The collaboration with Incitec Pivot to manufacture AdBlue onshore is commended and should be viewed as a blueprint for the development of further domestic manufacturing, in particular, of essential inputs," he said


Also see my other blogs. Main ones below:

http://dissectleft.blogspot.com (DISSECTING LEFTISM -- daily)

http://antigreen.blogspot.com (GREENIE WATCH)

http://pcwatch.blogspot.com (POLITICAL CORRECTNESS WATCH)

http://edwatch.blogspot.com (EDUCATION WATCH)

http://snorphty.blogspot.com/ (TONGUE-TIED)


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