GFG Alliance executive chairman  Sanjeev Gupta

It’s fair to say Sanjeev Gupta has taken the local media by storm since the announcement that his GFG Alliance would “save” South Australian steelmaker Arrium. That hasn’t quite been paid for yet (sometime next month), but everything uttered by Gupta, who has been on a familiarisation tour of the company’s Australian assets, has been treated as an astonishing insight by journalists.

Speaking yesterday at Rooty Hill in Sydney (where Arrium has a facility), Gupta opined: “Australia has an abundance of natural resources. It should be an industrial nation, its a bit of a tragedy that it’s not … Instead of exporting raw materials like iron ore, like coal, like scrap, we’d like to see that turned into steel here and we would like to see our business here turn into a world class, world-scale, steel producer.”

This sort of thing wouldn’t have gone down well during the brief period in which the Abbott government was actually against protectionism, but otherwise it’s standard stuff that is heard every day of the week for years from those with an interest in taxpayers helping their industries — union, business, Liberal, Labor, whoever.

There’s never any mention of our small population and the difficulty of matching the huge scale of newer, vastly more efficient steel producers offshore, or our remoteness from the rest of the world. It is always cheaper to process raw materials close to major markets where transport costs are low and demand higher — and the maths of that makes it much more difficult for Australia to be an effective large-scale manufacturer. It has been tried by BlueScope, Arrium, Rio Tinto (and BHP), Ford, Toyota, Holden, Mitsubishi, Alcoa, Tomago Aluminium and more. And it has been found to be inefficient and a waste of resources. All these companies have asked for, and got, government aid (tariffs, anti-dumping), subsidies, wage cuts, tax holidays (such as BlueScope) — all of which hurt taxpayers, other businesses and consumers. 

It ignores that Australia is a commodity-based economy (and efficient at it — the big miners’ Pilbara operations are remarkable feats of technology and engineering), with a rapidly growing service sector in tech, healthcare, education, tourism, financial services. And all that has produced the longest run of trade surpluses for nearly a decade. If we’re all interventionists now, maybe governments should think about helping our success stories, not the failures.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey