Labor has a rare opportunity to give Australian manufacturing the attention it needs by designing bold capability and capacity policies with runways of a decade or more, according to those at the cutting edge of the sector.
The new government has promised billions in new investments but is being urged to look beyond election cycle grant programs and address the unique challenges facing the local sector in the wake of major manufacturers exiting the country.
“What we lost when we lost the end of car production here was a whole bunch of jobs and capability,” Innovative Manufacturing Cooperative Research Centre (IMCRC) chief executive David Chuter said.
“But what we really lost was a structure inside the manufacturing sector whereby you have a handful of really big companies at the top, who drive hundreds of other suppliers through tiered layers of supply chain to be better than they thought they could be and to take a handful of those out into the global world.”
Mr Chuter, who worked for 25 years in the automotive industry, including a decade in Australia with a tier one manufacturer before leading the manufacturing CRC, said the exit of global giants has left Australian manufacturing with a structure that doesn’t exist in markets like the UK and Germany.
The sector is now made up overwhelming by small manufacturers with less than 20 employees.
“[They have] less than 20 employees, which by global standards really are micro businesses. I would argue they’re not even small companies,” Mr Chuter said.
“And their capacity to invest in things like R&D and collaboration and partnerships, and to grow their businesses is somewhat limited by their scale.”
This is the great challenge and opportunity for the new government and Industry and Science minister Ed Husic, who will work with assistant minister Tim Ayres on manufacturing.
“The Covid-19 pandemic has been a reminder that manufacturing matters, and that is why the Albanese Labor Government is committed to rebuilding our science, innovation, skills, and manufacturing capability after a decade of neglect,” Mr Ayres said this week.
“Over the last decade the Australian economy has become less diverse, our exports less complex, and opportunity has shrunk as our exports have slipped down the global value chain.”
Labor comes armed to the manufacturing rebuild with a $15 billion National Reconstruction Fund, which includes $1 billion for advanced manufacturing, $1.5 billion for medical manufacturing, $1 billion for value adding in resources and $1 billion for emerging “critical” technologies like AI and robotics.
The money will be distributed as loans, guarantees and equity for projects in key sectors by an independent board, which Labor has promised will administer funds with “full transparency”.
After forming a majority government while the Liberal Party suffered heavy election losses, Prime Minister Anthony Albanese has been tipped to hold onto power for at least two terms and has said he is designing policies on at least this timeframe.
Mr Chuter said the funds and strong chance at multiple terms should underpin a “long term national industrial policy for Australia” that sets goals for five and 10 years based on Australia’s challenges and strengths.
“There’s a real opportunity now to bring manufacturing together as the primary enabler for industrial capability here in Australia and building some of that resilience and capability that we need to withstand the global changes,” he said.
This type of long term national industrial policy built around national advantages has proved effective in other markets like the UK and Germany, Mr Chuter said, and the bipartisan support for manufacturing since the pandemic exposed Australia’s vulnerabilities provides fertile ground for a similar approach here.
“We need to be looking at helping smaller companies become medium sized companies where they have the capability to invest. It’s we’ll documented we need to increase the value added that we do in Australia, so not just exporting critical minerals, but how can we turn them into more advanced products such as battery solutions and maybe even products that use those batteries,” Mr Chuter said.
“We need to increase the complexity of what we do and I think we need to very significantly increase the business investment in innovation and research and development, which is where we’re really falling behind.”
Labor inherits manufacturing policy built around the Coalition’s $1.5 billion Modern Manufacturing Strategy, which saw almost all the money go to grants, the majority of which was committed in the six weeks leading up to the election.
But the program took a strategic approach many had been calling for in some ways by restricting grants to six key sectors which were accompanied by long term roadmaps and work on improving the economic conditions for manufacturing businesses.
Mr Chuter said the Coalition program was designed to be “the start” of a more holistic industrial policy but the grants typically went to one- or two-year projects and the program was missing something to “glue the ecosystem together” by building capability and capacity over many years.
The Industry Growth Centres could well have played this role, he said, but the Coalition was ending their funding this year. Labor’s return to government came with a lifeline for the centres and a potential contribution to Labor’s plan.
“It is heartening that the incoming Labor Government has indicated it is open to continuing the Growth Centre Initiative, after all, and as far as manufacturing is concerned, it was originally a Labor policy – just under the term precincts,” Advanced Manufacturing Growth Centre managing director Dr Jens Goennemann said.
Dr Goennemann agreed Labor has little time to waste in rebuilding Australian manufacturing as part of a more complex economy.
“As a trading nation, we must get better at adding value, lifting the complexity of the items we make and tapping into 7.5 billion potential global customers as we transition away from the dig and ship mentality before our luck runs out,” he said.
Along with the growth centres, Cooperative Research Centres (CRCs) will play an important role in rebuilding manufacturing, Mr Chuter said.
His IMCRC has for the last seven years worked to help Australian manufacturing companies to improve through collaborative, market-driven research.
The CRC has invested more than $33 million of Commonwealth funding in over 70 collaborative research projects, generating $220 million industry investment in manufacturing and Industry 4.0 R&D.
“I employ a team of people who’ve got experience in manufacturing and research. So we can really stretch the thinking, stretch the ambition and make the government dollars go quite a bit further in terms of multipliers and leverage,” Mr Chuter said.
Government funding for the IMCRC ends this month, but it will continue operating until the end of the year to finish out underway research projects.