Friday 23 Feb 2018 | 17:55 | SYDNEY
Friday 23 Feb 2018 | 17:55 | SYDNEY

It's not always good to make things



5 June 2009 11:32

A fairly frequent moan about services-dominated economies is that their manufacturing sectors are too small and that they don’t make enough stuff any more. A more specific moan is that they don’t make enough high-end stuff (remember that it was once fashionable to worry that Australia didn’t have enough electronics factories – up until around 2001, anyway). 

Well, as the chart below shows (taken from a recent speech by RBA Governor Glenn Stevens) so far in the Great Recession, it’s actually been a good thing not to make too much stuff. 

 Or as John Lanchester put it in an essay I linked to a week or so back, quoting an unnamed banker: ‘When your country’s economy depends on people buying a car every three years, and they decide that they’ll only buy a car every five years, you’re fxxxxd. Off a cliff.’ 

Mind you, the recovery story may well look a bit different...

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