Interpac Business and Migration Solutions Melbourne Australia

(Aug.22)

THE government will unveil initiatives this week to encourage resource and other companies to ''buy Australian'', amid calls for a sovereign wealth fund as a buffer against a high dollar hitting struggling manufacturers.

The proposed buy-Australian measures - modest and not mandatory - follow emergency aid announced yesterday after steelmaker BlueScope said it will retrench 1000 workers and up to 400 contractors. Some 200 BlueScope workers will go from Western Port, plus about 60 contractors; the rest go from Port Kembla.

The government said it will bring forward $100 million of its $300 million carbon price package for the steel industry - although it insists the retrenchments are unrelated to the carbon tax - and give $10 million in services and support to help displaced workers. There will also be assistance for investments in the Illawarra area.

Opposition leader Tony Abbott has previously indicated the opposition will vote against the steel assistance package, which the Greens have also expressed doubts about.

But Greens leader Bob Brown said: ''Given Tony Abbott's supposed support for steel companies, it is his responsibility to pass the package - however if he refuses the Greens are willing to discuss the issues with the workers, unions and government in the national interest.''

In the wake of the latest blow to manufacturing, a national fund to save more of the mining boom received backing from the Greens, the Australian Industry Group, and prominent HSBC economist Paul Bloxham.

A sovereign wealth fund is a national savings pool used by commodity-rich countries to save the windfall of a resources boom or to soften the blow from a sudden fall in commodity prices. Mr Bloxham, a previous Reserve Bank economist, said a sovereign fund could help take some of the pressure off the dollar, but would probably require higher taxation of mining.

Senator Brown said he would approach the government's tax summit in October proposing a sovereign fund, to be funded by a higher mining tax.

Heather Ridout, the chief executive of the Australian Industry Group, said there should be a longer-term strategy to deal with the dollar and its impacts, which might include setting up a sovereign wealth fund. The group proposed, as part of extensive measures to help manufacturing, that the government should amend its carbon scheme.

Australian Manufacturing Workers Union state secretary Steve Dargavel said Australian steel mills ''should be running flat-chat'' servicing the mining boom. Instead the mining sector was forcing up the dollar and mainly using foreign steel. ''We want to see state and federal governments requiring local content in their mining leases,'' Mr Dargavel said.

He said manufacturing employed about 1 million and mining just 200,000 and governments needed to be more interventionist to support such a big employer.

BlueScope chief executive Paul O'Malley said the changes have been forced by a ''perfect storm'' of economic factors crippling the steel sector, including a high Australian dollar, a global glut in steel production, weak demand for steel in the Australian construction sector and extremely high prices for steel-making ingredients like iron ore and coal.

Premier Ted Baillieu said the a rising dollar, greater competition, commodity prices had caused the job cuts and also suggested the carbon tax played a role.