Australian's Treasurer Wayne Swan has finally been convinced that the country's economic prospects and the sectors involved and contributing to its strength needs a major review from policy makers and industry players.

The recent closure of BlueScope's steel production facilities that would result to 1,000 job losses, prompted Mr Swan to take into account the importations done by big local firms associated with the mining boom.

"I'm a bit disturbed by that, so I'm going to examine these claims closely with the industry," he told ABC Radio.

The Australian Steel Institute has said the Government's lack of policy has allowed mining companies including Woodside Petroleum, Chevron, BHP Billiton, Rio Tinto and China's Citic Pacific to import most of the steel used in the recent construction of big mining and energy projects.

The institute said that domestic steelmakers, distributors and fabricators seemed to be missing out on billions of dollars worth of contracts, a related report on the Herald Sun said.

Mr Swan said he had heard from "several sources" that Australian companies are not benefitting from the mining industry boom.

This is not the first time that the Australian industry has complained about this irregularity.

In an interview on ABC Radio, Ai Group Chief Executive, Heather Ridout, said the manufacturing sector is facing real crunch from weak demand and undermined competitiveness.

"The combination of rising interest rates and actually contractionary interest rates, the dollar at a level that we haven't really seen for a protracted period in the history of the industry, are really poisoning the wealth for manufacturing. It is actually a slow burn. Our companies put up with it for a while, they nip and tuck but in the end as we've seen with BlueScope, it is just very hard to sustain jobs and sustain investment in the face of these pressures," said Ms Ridout.

In a statement emailed on Tuesday, the industry association, the largest group in Australia, has pointed out several elements that could help the sector that employs more than a third of Australia.

Ms Ridout enumerated the following comprehensive response actions from the Federal government:

  • Responds to the immediate impacts on businesses and employees affected by restructuring which today has focused on BlueScope Steel but needs to be expanded to be available as required;
  • Builds for the medium-term competitiveness of the manufacturing industry;
  • Delivers a longer-term strategy to ensure we have a diversified and balanced economy beyond the boom.

She said that the government would need some policies that are responsive and generous structural adjustment support for ailing industries

New Strategy to Stifle Bad Impact of Mining Boom

The Ai Group deemed it necessary to put up a strategy that could suppress the impact of the minerals boom on manufacturing as a whole, which is bearing the brunt of the high Australian dollar. The key elements of this strategy should include:

  • Reductions in the tax burden on these sectors to attract investment;
  • Creating incentives for the renewal of the capital stock, innovation and workforce training;
  • Sponsoring the development of business capabilities all along supply chains;
  • Supporting and facilitating the full and fair participation of Australian suppliers in government contracts and in major commercial projects;
  • Enhancing the focus and priority of public sector research including in areas such as:

- The upstream processing of our mineral and agricultural commodities

- High-technology manufacturing

  • Ensuring that industrial engineering and design skills receive strong support in education and training initiatives; and
  • Unplugging the current severe blockages impeding work in the important industries supplying Australia's defence capabilities.

Productivity Gains Drive

The Ai Group has been emphasising for several years, Australia needs a strategy to drive whole-of-economy productivity gains. These include:

  • A strong commitment to more flexible and adaptable industrial relations system that can drive productivity gains as a basis for the creation of sustainable jobs and wage increases;
  • Reform of our tax systems, including the crippling and highly inefficient state and territory tax systems;
  • Concerted efforts to reduce regulatory burdens across the Commonwealth;
  • A long-term commitment to sustained investment in infrastructure; and,
  • Greater investment in training and education and greater emphasis on driving the supply of high quality and responsive education services.

Carbon Tax

To alleviate the pressures on Australian manufacturers, the Government should be prepared to amend the proposed carbon tax and emissions trading regime. This should include reducing the uncompetitive prices set for the first three years of the scheme; ruthlessly rationalising the plethora of existing regulatory measures related to reducing greenhouse gas emissions to avoid imposing a double carbon tax burden; and ensuring the design and availability of the grant programs aimed at assisting businesses to adjust in the face of these extra costs effectively meet the needs of industry.

Dollar's Strength and Impact

There should be longer-term strategy to deal with the dollar and its impacts. This needs to be articulated and advocated and may include the establishment of a Sovereign Wealth Fund that stabilises the economy without the need for interest rate rises when surges in commodity prices create the risk of overheating. Other countries, including Norway, have adopted this approach and have at the same time helped to offset the appreciation of the exchange rate by investing the fund in assets held offshore.

"With more than 1,400 direct jobs lost in the steel industry in the past week alone and some 20,000 lost in this big-employing manufacturing sector since February, we have reached a crucial point which demands, government action in coordination with industry to ensure the sector is given the sustained support necessary to emerge through the current structural pressures and to prosper beyond the boom," Mrs Ridout said.