We need to build our sovereign industry capabilities and future, not destroy them further
The proposed removal of Capital Gains Tax (CGT) will not deliver the expected results today, as it did not in the Paul Keating era when he was the Australian Labour Treasurer in 1987, and it will not deliver the needed cost-of-living or sovereign capability improvements.
Then-Treasurer Paul Keating made his infamous “recession we had to have” statement on November 29, 1990, while announcing that the Australian economy had officially entered a recession following two consecutive quarters of negative GDP growth. – Wikipedia
The Labour Promise 1987
“Tonight’s decision restores the symmetry between investment in property and other assets such as shares or farms. It will enhance the attractiveness of investment in both commercial and residential rental property and have a beneficial effect on the supply of residential accommodation in particular.” (Source: Paul Keating as Treasurer, 1987 Budget Speech, House of Representatives, 15 September 1987)
The Response
“Investors [are] leaving the residential rental investment market because of a decreasing return on investment. The falling return is partly due to the introduction of a capital gains tax and removal of negative gearing.” (Source: “Sydney Rents Hit the Roof”, Sydney Morning Herald, 14 March 1987)
Labour’s legislation today to halve the CGT discount and other measures will not help lower the cost of living or rents, or increase the number of promised new houses available to first home buyers, whilst punishing Aussie businesses that employ Australians and undermining our ability to build our sovereign capabilities.
The same applies to the impact that announced, but not legislated, CGT changes will have on Australian Businesses, at a time when we are trying to rebuild our sovereign capability, amid the additional risk of a breakdown in globalisation and the need to be more self-sufficient.
The big story is the decline in manufacturing’s share of the Australian economy.
Manufacturing’s share of GDP:
- ~25–30% in the 1960s
- ~14–15% in the late 1970s
- ~5% today
Posted in Linkin this week by Steve Sarmatino – Futurist
· Not all capital gains are created equal -Some have positive economic multiplier effects, and some cause speculation & asset price bubbles.
· As a residential property investor, I’m a loser in yesterday’s budget, but I totally get it. It’s a hard pill to swallow, but it needed to be done. Housing should be a right for all residents, and speculating on a largely unproductive asset hasn’t helped our economy. But the gains people make in Startups and Small Businesses should not be treated the same way as investing in a residential property should.
· Firstly, they take years of toil, hard work and innovation — and still more than 80% fail. At Macro3D, we currently employ 20 people and are yet to put any money in our pockets. And now, if we ever have a large exit, almost half goes to the government. Of course, we are now thinking about setting up our technology and software arm overseas before our next capital raise, even though we’d rather do it here.
· Businesses have a real multiplier effect. They inject money, create jobs, increase the skill base, and provide export potential — esp. with tech like ours. Buying an existing house doesn’t do that. Startups also involve massive financial risk — unlike housing. Business risk needs to be rewarded.
· This budget has had a significant negative impact on entrepreneurs and innovators. It’s soul-crushing. Yet, somehow, a new house still gets a CGT discount, but a startup doesn’t? What? Insane policy. I’m hoping wiser heads prevail and our country’s leaders have the wisdom to understand different asset classes ought to be treated differently…
The top 10 Sovereign industry losses that would be good to have today
1. Automotive Manufacturing (Cars)
Australia once had a large domestic car industry with Holden, Ford, Toyota, Mitsubishi, Nissan, and Chrysler manufacturing locally.
By the 1970s:
- Australia produced nearly 500,000 vehicles annually.
- The industry employed tens of thousands directly and many more indirectly.
What happened:
- Trade liberalisation and lower tariffs exposed local makers to cheaper imports.
- Australia’s relatively small market and high labour costs reduced competitiveness.
- Consumers shifted toward imported smaller cars.
Key closures:
- Mitsubishi: 2008
- Ford manufacturing: 2016
- Toyota manufacturing: 2017
- Holden manufacturing: 2017
By 2017, Australia became one of the few advanced economies without a mass-market car manufacturing industry.
2. Textile, Clothing & Footwear (TCF)
This may be the clearest example of deindustrialisation.
In the mid-20th century:
- Australia had large domestic textile mills.
- Clothing brands like Bonds, KingGee, Fletcher Jones, and Holeproof manufactured locally.
- The industry employed hundreds of thousands.
What happened:
- Production shifted to China, Bangladesh, Vietnam, and other lower-cost countries.
- Tariff cuts accelerated factory closures.
- Fast fashion crushed domestic production economics.
Today:
- Roughly 97% of clothing sold in Australia is imported.
- The local manufacturing workforce has collapsed to a fraction of its former size.
3. Steelmaking & Heavy Industry
Australia still produces steel, but the industry is much smaller and less dominant than in the postwar era.
Historic industrial centres included:
- Newcastle steelworks (BHP)
- Whyalla
- Port Kembla
The Newcastle steelworks closure in 1999 became symbolic of Australian deindustrialisation. At its peak it employed about 11,000 workers.
What happened:
- Global competition from Asia
- Cheaper imported steel
- Higher domestic energy and labour costs
- Shift toward a services economy
Australia retained mining of iron ore but lost much of the higher-value downstream manufacturing.
4. Shipbuilding (Commercial)
Australia once had a meaningful commercial shipbuilding industry:
- cargo ships
- ferries
- industrial vessels
Most commercial shipbuilding migrated to:
- South Korea
- Japan
- China
Australia still has defence shipbuilding capability, but large-scale civilian ship manufacturing has largely disappeared.
5. Oil Refining
Australia historically refined much of its own fuel domestically.
Over recent decades:
- Multiple refineries closed due to global competition and scale disadvantages.
- Australia became heavily reliant on imported refined fuel.
Major refinery closures include:
- Clyde
- Kurnell
- Bulwer Island
- Geelong conversion pressures
Only a small number remain today.
This has become a national-security concern because Australia imports much of its diesel, petrol, and jet fuel.
6. Whitegoods & Appliance Manufacturing
Australia once produced:
- refrigerators
- washing machines
- ovens
- electronics
- televisions
Brands included:
- Simpson
- Kelvinator
- AWA
Most manufacturing shifted offshore due to:
- lower Asian production costs
- economies of scale
- import competition
Many brands survived only as imported labels.
7. Consumer Electronics
Australia once had domestic electronics assembly:
- televisions
- radios
- telecommunications equipment
The industry declined sharply from the 1980s onward as East Asian manufacturing dominance emerged.
8. Paper & Pulp Manufacturing
Australia had a stronger forestry-processing sector and paper manufacturing base in previous decades.
Recent closures include:
- Maryvale white paper operations
- various regional mills
Digitalisation also reduced paper demand dramatically.
9. Plastics & Petrochemicals
Australia formerly had broader petrochemical capability:
- plastics
- industrial chemicals
- synthetic materials
Several facilities have closed or downsized due to:
- energy costs
- international competition
- scale disadvantages
Examples include Qenos and other industrial chemical producers.
10. Footwear Manufacturing
Australia once made substantial volumes of:
- work boots
- leather shoes
- fashion footwear
Most production moved offshore after the 1980s.
Only niche premium manufacturing remains today.