RECENT DEVELOPMENTS IN AUSTRALIA’S EXTERNAL SECTOR

UBS HSC Economics Day, Sydney, Tuesday, June 2, 2015

Australia’s external sector – measured by the balance of payments, the current account deficit and exports and imports – is an important part of the syllabus and, indeed, the economy. Australia would be a very much poorer country if we had no trade with the rest of the world or no flows of capital to and from the rest of the world. And yet with the exception of discussion of the terms of trade and the exchange rate, the external sector – and particularly the current account deficit and net foreign debt – is these days rarely mentioned in the economic debate, presumably because most economists don’t think there’s much there to worry about. But this lack of interest conceals the fact that, particularly in the years since the height of the global financial crisis in late 2008, the current account deficit has been a lot smaller, and the net foreign debt seems to have stabilised as a percentage of GDP.

Is the current account deficit a worry?

To many people anything called a ‘deficit’ must be a bad thing; all deficits must be bad, just as all surpluses must be good. But I trust you’ve learnt enough economics by now to know that sometimes deficits are good rather than bad, and sometimes surpluses are bad rather than good. It all depends on the economy’s circumstances at the time and whether a deficit or a surplus is more appropriate to those circumstances.

The fact is that Australia has run current account deficits in 128 of the past 150 years, which suggests such deficits can’t be too bad or by now we’d be in a lot more trouble than we are, and we don’t seem to be in much trouble at all. And, indeed, most economists think it’s a good thing rather than a bad thing for us to be incurring all those deficits. Why? Because what they mean is that Australia is a ‘capital-importing country’ and we’d be a poorer country if we weren’t.

Remember that if we’ve been running deficits on the current account of the balance of payments for all those years we must also have been running surpluses on the capital account of the balance of payments for the same period. The key to making sense of the current account deficit is to remember that, with a floating exchange rate, the current account deficit is at all times exactly offset by the capital account surplus. In other words, the current account deficit and the capital account surplus are opposite sides of the same coin. So the current account can be analysed by looking at its components: exports, imports and the ‘net income deficit’, which is our payments of interest and dividends to foreigners minus their payments of interest and dividends to us. Or it can be analysed by looking at the changes in the components of the capital account surplus.

Components of the capital account surplus

When you think about it, the capital account surplus represents the net inflow of foreign capital to Australia. Another way of putting it is that the net inflow of foreign capital represents our call on the savings of foreigners. And our call on the savings of foreigners represent the amount by which national investment during a period exceeds national saving during that period.

It’s become a lot more common these days for economists to explain movements in the current account deficit by reference to changes in national investment and national saving and their components, but we’ll have go at doing it both ways.

Before we do, however, let me finish the point about Australia being a ‘capital-importing country’ since the beginning of white settlement. The proof that we’re a capital importer is all those years of capital account surplus, of inflows of capital almost invariably exceeding outflows of capital. Why has all that foreign capital flowed into our economy? Because, from the outset, the opportunities for investment in the economic development of our vast, resource-rich country have always far exceeded the amount that Australians could save to finance the exploitation of those investment opportunities. So, from the outset, we have always invited foreigners to bring their capital to Australia and join us in developing our economy’s potential. And when inflows of financial capital exceed outflows, this allows us to import more than we export, including imports of the physical capital equipment need for new development projects.

Our current account deficits – and our foreign debt and other foreign liabilities – got a lot larger in the 1980s after we floated the dollar, much larger than we’d been used to. It took us a few years to realise that the international shift to floating currencies was part of financial globalisation – the growing integration of national financial markets – which was making it easier for financial capital to flow around the world and so achieve a more efficient allocation of global capital. Some countries (eg Germany, Japan) save more than they have profitable domestic development projects to invest in, whereas other countries (eg Australia) have more profitable investment projects than they can finance with their own saving. So both classes of economy should be better off as a result of higher flows from surplus economies to deficit economies.

Recent developments in the CAD and net foreign debt

Over the 30 years since the floating of the dollar in 1983, the current account deficit has averaged about 4.5 pc of GDP, with peaks of about 6 pc and troughs of about 3 pc. In the five years leading up to the GFC it averaged more than 6 pc, so it seemed to be getting a lot higher. As you see from the table, however, in the six financial years since the GFC, however, it has averaged 3.6 pc, close to the historical trough. And in the 2014 calendar year it was 2.8 pc.

As you also see from the table, the past decade shows our net foreign liabilities – that is, our net foreign debt plus net foreign equity investment in Australia – seem to have stabilised at about 55 pc of GDP. That is, the dollar value of our liabilities is now growing at about the same rate as nominal GDP.

Why has our current account deficit been significantly lower since the GFC, to the point where our accumulated foreign liabilities seem to have stabilised as a percentage of GDP?

Well, explaining it from the current account side of the balance of payments, our export earnings were at first boosted by the exceptionally high prices we were receiving for our exports of minerals and energy as our terms of trade improved to their best in a century or two. It’s true that prices reached their peak and started falling in mid-2011, but they remain much higher than they were in earlier decades. And the volume of our mineral exports has been growing particularly strongly in the past year or two as the many new mines and natural gas facilities we’ve been building have finally started coming on line and increasing their production.

Turning to imports, imports of capital equipment to be used in our new mines and natural gas facilities grew strongly for most of the period although, with the construction phase of the resources boom now coming to an end, imports of mining equipment are now falling sharply. And while mining construction has been strong for most of the past five years, consumer spending and business investment spending in the rest of the economy have been growing at below-trend rates.

Finally, remember that, because exports and imports offset each other, most of the current account is accounted for by the net income deficit. It has declined to its lowest percentage of GDP for several decades, mainly because Australian and overseas interest rates are so low.

But now let’s try to explain the decline in the current account deficit from the capital account side – that is, from changes in national investment and national saving. Remember that the nation’s investment spending in any year has three components: the household sector’s investment in new home building, the corporate sector’s investment in equipment and structures, and the public sector’s investment in new infrastructure such as roads, railways, bridges, schools, hospitals and police stations.

The nation’s saving in any year also has three components: saving by households, saving by companies and saving by governments. Companies save when they retain part of their after-tax profits rather than paying them out in dividends to shareholders. Governments save when they raise more in revenue than in needed to cover their recurrent spending (the spending needed to keep the daily activities of government rolling on).

Looking at national investment, households’ investment in new homes since the GFC has been weaker than normal, whereas the mining construction boom has meant corporate investment spending has been much stronger than usual. And government spending on infrastructure since the GFC has be greater than usual. Adding that together, national investment has accounted for a higher percentage of GDP in recent years.

Turning to national saving, households are saving a far higher proportion of their disposable incomes since the GFC, with the household saving ratio rising from zero or about 10 pc. Companies have been saving more as mining companies retain most of their after-tax profits for investment in their new projects and non-mining companies retain earning to reduce their ‘gearing’ (their ration of borrowed capital to shareholders’ equity). Only governments – federal and state – have been saving less – dissaving, in fact - as their budgets have fallen into recurrent (‘operating’) deficit. Adding that together, national saving has accounted for a much higher percentage of GDP in recent years.

So though national investment is higher than it was, national saving has increased by more than national investment has, meaning the economy’s saving/investment gap has narrowed, the capital account surplus is lower and so is the current account deficit.

The budget papers show the government is expecting a current account deficit of 3 pc of GDP in the financial year just ending, 2014-15, rising to 3.5 pc in the coming year, 2015-16, and then falling to 2.75 pc in 2016-17.

In the coming year, the government is expecting the volume of exports to grow by 5 pc, whereas the volume of imports falls by 1.5 pc, thanks to the lower dollar and weak imports of investment goods. However, the terms of trade – export prices relative to import prices – are expected to deteriorate by 8.5 pc. And the net income deficit will stay low because of low Australian and world interest rates, plus lower profits payable to the many foreign owners of our mining companies.

Financial year CAD NFD NFL

         % of GDP

04-05 6.5 46 55

05-06 5.8 49 54

06-07 6.1 49 57

07-08 6.7 51 56

08-09 3.4 49 55

09-10 5.0 52 58

10-11 3.1 48 54

11-12 3.3 50 56

12-13 3.9 52 55

13-14 3.1 55 55

Calndr 14 2.8 58 54

NFD = net foreign debt

NFL =  net foreign liabilities (debt + equity investment)

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RECENT DEVELOPMENTS IN MACRO MANAGEMENT AND THE POLICY MIX

June 2015

This year’s budget papers remind us that the Australian economy is entering its 25th consecutive year of growth since the severe recession of the early 1990s. This is the second longest continuous period of growth of any advanced economy in the world. What’s more, the government tells us, we are “one of the fastest growing economies in the advanced world”.

All this is true, but the fact remains that, though we escaped the global financial crisis and the Great Recession it precipitated, we’re making heavy weather of the transition from the resources boom to more broadly-based economic growth. We did get through the boom’s upswing - the huge surge in the prices of our exports of coal and iron ore and the equally huge surge in investment in new mines and natural gas facilities - without the great outbreak of inflation that had accompanied previous commodity booms. This was mainly because of the major appreciation in the dollar prompted by the big improvement in our terms of trade, and permitted by our floating exchange rate. This cut the price of imports and thereby encouraged greater “leakage” from the circular flow of income, as well as reducing the output of our other export and import-competing industries - particularly manufacturing and tourism - by making them less internationally price competitive. But we’re making heavy weather of the downswing as export prices fall and the boom in mining investment construction activity falls away sharply.

The economy’s medium-term average (or “trend”) rate of growth in real GDP is about 3 pc a year. This is also its “potential” rate of growth - that is, the average rate at which aggregate supply - the economy’s potential capacity to produce goods and services - grows each year. But the economy has grown by less than its trend rate for five of the past six years, and is now forecast to grow by only 2.5 pc in the financial year just ending, and by 2.75 pc in the coming financial year. Since our growing labour force means the economy needs to grow at its trend rate just to prevent the rate of unemployment from rising, unemployment has been creeping up since early 2011 from 4.9 pc to 6.2 pc, with the participation rate falling by 0.8 percentage points to 64.8 (with only part of that fall explained by the ageing of the population).

So what policies have the managers of the macro economy been pursuing to try to stimulate the economy to counter the slowdown in economic growth and prevent the rise in unemployment? Well, as has long been the usual policy mix, they have relied primarily on monetary policy, though fiscal policy has been playing a supportive role. Let’s look first at monetary policy, then at fiscal policy.

Monetary policy

Monetary policy - the manipulation of interest rates to influence the strength of demand - is conducted by the RBA independent of the elected government. It is the primary instrument by which the managers of the economy pursue internal balance - low inflation and low unemployment. MP is conducted in accordance with the inflation target: to hold the inflation rate between 2 and 3 pc, on average, over the cycle. The primary instrument of MP is the overnight cash rate, which the RBA controls via market operations.

After the GFC reach its height in late 2008, the RBA feared we would be caught up in the Great Recession that hit other economies, so it quickly slashed the cash rate from 7.25 pc to 3 pc. By October 2009, however, it realised we would escape the recession, so began lifting the cash rate from its emergency level, reaching 4.75 pc in November 2010.

In November 2011, the RBA decided the resources boom was easing and would not push up inflation. It realised growth in the non-mining sector of the economy was weak - held down particularly by the dollar’s failure to fall back in line with the fall in export prices – at a time when mining-driven growth was about to weaken. So it began cutting the cash rate, getting it down to a historic low of 2.5 pc by August 2013.

For the next 18 months the Reserve sat back and waited for this very low interest rate work through the economy and have its effect. Not all that much happened, with the economy continuing to grow at a below-trend rate. The dollar did start falling in the first half of 2013, and by June 2015 it had dropped to about US77 cents (from its peak of US1.10 in mid-2011), but this would have been explained much more by the continuing fall in coal and iron ore export prices than by our lower interest rates relative those in the major advanced economies. The Reserve continued to note that the exchange rate hadn’t fallen by as much as the fall in commodity prices implied it should have, explaining this as a consequence of the major advanced economies’ resort to “quantitative easing” (money creation), whose main stimulatory effect on their economies came by forcing their exchange rates lower (thus causing ours to be higher than otherwise).

So in February 2015, after a gap of 18 months, the Reserve began cutting rates, dropping the official rate another notch, and again in May, to reach a new low of just 2 pc. Will it cut rates any further? It will if it has to, but won’t cut again if it can avoid it. The Reserve is desperate to get the economy moving and growing at a rate sufficient to get unemployment falling rather than continuing to creep up. And the only instrument it has to influence the speed at which the economy is growing is interest rates. It would like to see its low interest rates encourage greater spending on new housing (which is happening) and, particularly, see them encourage greater investment spending by non-mining businesses to counter the marked fall in investment by the mining companies. So far, this is not happening.

But the extraordinarily low rates have encouraged a boom in the buying and selling of established houses, particularly by investors, which is pushing up house prices rapidly in Sydney and Melbourne, but less so in other capital cities. At the RBA’s urging, APRA - the Australian Prudential Regulation Authority - is trying to discourage excessive lending for investment housing by use of “macro-prudential” guidance of the banks, but it is too soon to say how effective this will be. The RBA is highly conscious of the danger of a house-price boom leading to a bust, which could damage individuals, hit confidence and even trigger a recession. Its problem is that interest rates are its only instrument for fostering demand.

Fiscal policy

Fiscal policy - the manipulation of government spending and taxation in the budget - is conducted according to the Abbott government’s medium-term fiscal strategy: ‘to achieve budget surpluses, on average, over the medium term’. This means the primary role of discretionary fiscal policy is to achieve ‘fiscal sustainability’ - that is, to ensure we don’t build up an unsustainable level of public debt. However, the strategy leaves room for the budget’s automatic stabilisers to be unrestrained in assisting monetary policy in pursuing internal balance. It also leaves room for discretionary fiscal policy to be used to stimulate the economy and thus help monetary policy manage demand, in exceptional circumstances - such as the GFC - provided the stimulus measures are temporary.

Mr Hockey’s first budget included many cuts in government spending, big increases in user charges for GP visits, pharmaceuticals and university education, a shift from indexing payments and benefits to wages to indexing them to prices, a return to indexing the fuel excise and a temporary deficit levy on high income-earners.

From a fiscal-policy perspective the first budget had two key features: 1) A slow pace of fiscal consolidation. Its new measures and revisions to forecasts were expected to do little to improve the budget balance in the first three years, but really cut in in the fourth year, 2017-18. This slow start was intended to avoid the budget having a dampening effect on growth while the economy was expected to be growing at a below-trend rate.

2) A switch in the composition of government spending. While spending on transfer payments leading to consumption was to be reduced, spending on infrastructure investment was to increase by $12 bil. About half this was to be spent on an ‘asset recycling initiative’ intended to encourage the states to increase their own infrastructure spending. The goal was to help fill the vacuum left by the fall in mining investment.

However, many of the proposed spending cuts proved highly unpopular with voters and many were voted down by the Senate. The government withdrew or modified many of them. The asset recycling initiative has not been taken up by most states.

Mr Hockey’s second budget, for 2015-16, seems aimed more at restoring the government’s political fortunes than at either advancing its efforts to return the budget to surplus or at using fiscal stimulus to supplement the efforts of monetary policy in getting the economy out of the doldrums. The budget has been packaged to make it look stimulatory - with increases in childcare allowances and, for small business, tax cuts and immediate full tax deductions for new business equipment costing less than $20,000 each. But, in truth, the budgetary cost of these measures was offset by savings from the decisions not to proceed with a more generous paid parental leave scheme or with a cut in the rate of company tax paid by big business. So the net effect of the discretionary measures announced in the budget will be neither expansionary nor contractionary.

That’s the strict Keynesian way to measure the “stance” of fiscal policy adopted in a budget. But the RBA assesses the budget’s implications for monetary policy using a simpler test which doesn’t distinguish between the cyclical and structural (discretionary) components of the budget balance. It just looks at the direction and size of the expected change in the budget balance. The budget deficit is expected to fall from $41 bil in the old financial year, 2014-15, to $35 bil in 2015-16, then to $26 bil, $14 bil and $7 bil in subsequent years.

Expressed as a percentage of nominal GDP, the government expects the budget deficit to fall by about 0.5 pc between the old financial year and 2015-16, and by about the same amount in each of the following three years. A change of 0.5 pc is considered to be right on the border between insignificant and significant in its effect on the economy. I therefor judge the policy stance adopted in the budget to be, at most, mildly contractionary.

New thoughts on the policy mix

Around the developed economies, it has been observed that monetary policy has become less effective in influencing demand as interest rates have got down to “the zero lower bound” and so many of them have had to resort to “quantitative easing” (creating money by having the central bank buy bonds from the trading banks and pay for them merely by crediting those banks’ accounts with central bank). Massive amounts of QE have pushed down those countries’ exchange rates relative to other non-QE countries, and pushed up prices in the markets for shares and bonds, but done little to stimulate demand. There is thus gathering support among economists for policy makers to make greater use of fiscal policy to get their economies moving, particularly by increased spending on public infrastructure.

Though Australia’s circumstances are very different to those in the major advanced economies, there are some obvious similarities. It’s clear that cutting the official interest rate from 4.75 pc to 2.5 pc between November 2011 and August 2013 did little to stimulate activity, apart from home building and house prices. And on several occasions Reserve Bank speakers have hinted that they’d appreciate more help from fiscal policy, presumably by increased spending on worthwhile infrastructure projects to fill the void left by mining projects.

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Hockey's return to surplus not credible

There's an obvious question mark over this year's budget that the media have yet to highlight: how could the Treasurer announce so many giveaways and backdowns but still claim that "our timetable back to a budget surplus is unchanged from last year"?

That's even harder to believe when you remember the $52 billion by which Joe Hockey has had to write down his expected tax collections, thanks to greater-than-forecast falls in commodity prices and slower-than-expected growth in wages.

The short answer is that Hockey is stretching the truth, creating illusions and padding his budget. And that's without questioning his forecasts and projections for the economy (as opposed to those for his budget).

In truth, his expected trajectory of the budget balance over the next decade is significantly inferior to the one he announced last year.

Last year the budget was expected to return to a surplus of about 1 per cent of gross domestic product (say, $20 billion) in 2019-20. This year the budget balance for that year is expected to be just the tiniest fraction on the positive side of zero. In reality, the projections show the budget returning  to a noticeable surplus a year later, in 2020-21.

Last year, the surplus in 2024-25 was projected to have grown to almost 1.5 per cent of GDP. This year, it's now projected to be less than 0.5 per cent.

Next, remember that the impression we were given of a bountiful, "stimulatory" budget was an illusion, the product of media manipulation. Study the budget figures and you see that when the small-business giveaways and more-generous childcare subsidies are seen in the context of all the policy changes made in the budget, the net effect on the budget balance is too small to matter.

That's mainly because of the saving of more than $10 billion over the forward estimates that the government will make by abandoning its earlier decision to introduce more-generous paid parental leave, plus its new decision to exclude big business from the cut in company tax.

The third factor that makes the revised projections for the budget balance look less bad than they actually are is that they've got a lot of padding in them.

For openers, there's what my colleague Peter Martin calls the "zombie measures" – measures announced in last year's budget that aren't alive because the Senate has rejected them, but aren't dead because they're still being counted in the forward estimates.

These include university fee deregulation, changes to family tax benefits and the discretionary increase in the pharmaceuticals co-payment.

Then there's the projected $80 billion saving  over 10 years from moving to stingier indexation of grants to the states for public schools and hospitals. These need no Senate approval, but are so tough on the states that the Feds are almost guaranteed to have to water them down.

John Daley, of the Grattan Institute, has pointed out that real growth in government spending is budgeted to average only 1.1 per cent a year until 2017-18.

"This would be remarkable restraint given long-term growth is more than 3 per cent each year," he says. "It would be particularly remarkable in a period that spans an election year."

Just a small part of this Herculean achievement would rest on the plan to claw back a grant of $1.5 billion from Victoria because the new government has refused to proceed with the East West Link. Good luck.

Another tiny part would come from the calculation that the "no jab, no pay" policy of denying benefits to parents who don't get their kids immunised would save $500 million over four years.

This is nonsense, based on the (usually sensible) rule that measures are costed without allowing for any change in behaviour they may prompt. But this measure is intended to change behaviour, forcing parents to get the jabs so they keep the pay.

To the extent it works, it will cost the government money (for more jabs) and save it nothing on benefit payments. The budget's costing assumes it will be a total failure, which is unlikely.

Saul Eslake, of Bank of America Merrill Lynch – who, along with former econocrat Dr Mike Keating, wins the prize for most diligent examination of budget entrails – has noted a change in the accounting rules so that, from 2020-21, the annual net earnings of the Future Fund will be counted as budget revenue, not as an increase in the balance in the fund.

More trivia? Not quite. Eslake estimates that this seemingly petty change will account for more than half of the budget surpluses projected for 2024-25 and 2026-26.

These books have been cooked.

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The economy: old dog shows signs of life

With bad news this week from the March quarter survey of business capital expenditure, we need cheering up. Fortunately, budget statement No. 2 shows Treasury has been looking under every rock to find some good news.

It kicks off its annual assessment of the economic outlook by reminding all us worriers that the economy is entering its 25th consecutive year of growth, which is the second longest continuous period of growth of any advanced economy in the world.

And, we're reminded, though the economy has grown by less than its medium-term average ("trend") rate of 3 per cent-odd for five of the past six financial years, and is now forecast to grow by just 2.5 per cent in the financial year soon to end and 2.75 per cent in the coming year, this still leaves us as "one of the fastest growing economies in the advanced world".

Treasury gives us an update on the story we've become so familiar with in the past few years: the boom in investment in new mines and natural gas facilities is fast subsiding, leaving a big vacuum in economic activity that needs to be filled by faster growth in the rest of the economy.

To encourage such growth, the Reserve Bank has resumed cutting the official interest rate, such that it's now fallen 2.75 percentage points since its peak in late 2011, to a record low of 2 per cent. And, despite all the complaints about spending cuts, Joe Hockey has ensured his budget is only a minor drag on economic activity.

In response, we're now getting quite strong growth in new home building, and consumer spending is stronger than it was.

Fine. But that brings us to the crux of our continuing sub-par performance: business investment spending. Treasury expects mining investment to fall by more than 15 per cent this financial year, then by 25 per cent in the coming year and a further 30 per cent in 2016-17.

Yipes that's precipitous. And Treasury fears non-mining investment will show only modest growth until 2016-17 when it should increase by 7.5 per cent.

Put mining and non-mining together and you see business investment spending is the economy's continuing weak spot. After falling by 5 per cent last financial year, total business investment is expected to fall by another 5 per cent in the year just ending, then by 7 per cent in the coming year and even by a further 3.5 per cent in 2016-17.

Now you see why this week's figures for business "cap-ex" were such a downer. They really confirmed Treasury's dismal outlook. They showed a weak outcome for the March quarter and an unexpected deterioration in how much non-mining businesses expect they'll be spending in the coming financial year.

Moving right along, Treasury reminds us the economy does have a couple of things going for it apart from rock-bottom interest rates: one is lower petrol and oil prices and another is lower electricity prices (with more falls to come in some states).

And then, of course, there's the lower dollar, down mainly because the prices of our mineral exports are down, but perhaps also because our interest rates are lower than they were relative to those of other countries.

Our "real" exchange rate – that is, after adjusting the nominal exchange rate for our inflation rate relative to those of our trading partners – appreciated by about 30 per cent during the mining prices boom, but since September 2011 it has depreciated by about 13 per cent.

That's bad news for businesses and households buying imports, of course, but good news for Australian firms competing against imports in the domestic market. It's also good news for Australian exporters, who now get more Aussie cents for every US dollar they earn.

Treasury is forecasting strong growth of 5 or 6 per cent a year in the volume (quantity) of our exports over the next few years. Most of that is increased exports of minerals and energy as new mines come on line, but some of it comes from faster growth in non-mining exports.

On the other side, Treasury's expecting the volume of our imports to fall by 3 per cent in the year just ending and by a further 1.5 per cent in the coming year, before growing moderately by 2.5 per cent in 2016-17.

Why? Mainly because of fewer imports of heavy mining equipment, but also because the lower dollar will allow local firms to recapture market share from imports.

Such as? A classic exporting and import-competing industry is tourism. Real travel spending by international visitors to Oz has grown by 11 per cent since the start of 2012, whereas real travel spending by Aussies travelling abroad has decreased by 11 per cent.

The combined effect has been to turn our balance of trade in tourism services from a small deficit to a much bigger surplus. The increased inflow of tourists has been shared by all states.

Remember how much our leaders bang on about the big bucks to be made from China's rapidly growing middle class? Tourists from China accounted for more than a quarter of the growth in tourist spending in Oz last financial year.

The more than three-quarters of a million Chinese visitors that year spent an average of $8600 per person with our businesses.

Now get this: the volume of our exports of medium-skilled and technology-intensive manufactures has grown almost continuously over the past 30 years, as have our exports of high-skilled and technology-intensive manufactures, with the latter now bigger than the former.

It's really only the low-skilled and labour-intensive manufactures that have fallen back. The starring industries make goods such as pharmaceuticals, professional and scientific equipment, and machinery and transport equipment.

Strikes me we're not dead yet.

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