iscover
If the experts are to be believed, Australia’s period as a manufacturing nation has gone the way of the dodo. But what if they’re wrong?
As someone who grew up in one of the nation’s last remaining steel towns and whose family is still inextricably linked to steel and heavy manufacturing, I have never believed the myth that Australia, like many Western nations, must say farewell to its manufacturing sector.
Like many comparable nations, from the United Kingdom to Germany, and even the world’s formerly mightiest industrial power, the United States, Australia has, since the end of the Cold War, rapidly stood by as our industrial sector continued to decline as a proportion of our economy, resulting in a shallow economy dependent on real estate speculation, services and mining to generate our wealth.
Even the most charitable analysis would define Australia’s current economy as little more than that of a banana republic as former prime minister Paul Keating warned a shocked nation in 1992 during a phone interview with the now late John Laws, saying, “We [Australia] would have been one of those banana republics you and I talked about in the middle 1980s.”
Indeed, the Harvard University’s Atlas of Economic Complexity, which measures and assesses the “productive knowledge” of a nation, has Australia ranked at 105th out of 145 nations, wedged between Botswana and the Ivory Coast, lagging behind New Zealand (68th), India (44th), Vietnam (48th), Kuwait (64th), Saudi Arabia (60th), the United States (15th), China (16th), Japan (3rd), Taiwan (4th) and even Ireland (8th)!
In the Australian context, we have been repeatedly told that as a nation, we are not cost-competitive at the individual worker level, our energy costs (now) present significant challenges and our productivity all leave much to be desired, and that it is easier to simply let our industrial base (what little remains) shift overseas.
This shift has largely been driven by the “ironclad” economic principle of “comparative advantage” and the phenomenon of neoliberal, hyperglobalisation that came to dominate the policymaking bureaucracies across the post-Cold War Western world, which in some hold outs continue unabated to this day.
However, these ideological and political economic principles fail to account for a number of factors and living, breathing examples where world-leading, globally competitive and advanced industrialisation has been built from the ground up in nations across the globe.
Or simply put, Japan, Korea and Taiwan had no natural, “comparative advantage” when it came to their respective industrial bases beginning in the late 1940s and 1950s and accelerating from the 1970s, whether it was for cars, consumer electronics, shipbuilding, semiconductors or microprocessors. They put in the hard yards and built it from the ground up.
This means that “comparative advantage” is a “settings” issue, or put another way, a policy and regulatory issue, which means the solutions are far simpler to develop and implement.
Highlighting this is Brian Schimpf, co-founder and chief executive officer of US defence technology start-up Anduril, who spoke with Defence Connect at the recent Indo-Pacific International Maritime Exposition in Sydney, during which he unpacked the opportunities available to the United States and partners like Australia, if only they can get the settings right.
Reframing our view of industrialisation
Throughout the 20th century, industry policy across the Indo-Pacific shifted in response to geopolitical pressures, development needs and technological change.
Japan’s post-war model set an early benchmark: coordinated state planning, targeted subsidies and tight government–business collaboration drove rapid industrial upgrading and export-led growth.
South Korea and Taiwan followed with their own variations, using state-directed credit, technology acquisition strategies and protected domestic markets to build globally competitive conglomerates and advanced manufacturing capabilities.
Meanwhile from the late 1970s, China adopted a similar but larger-scale approach, combining special economic zones, foreign investment incentives and long-term industrial strategies such as Made in China 2025 to accelerate modernisation and climb global value chains.
More recently, India, Vietnam and Indonesia have blended selective protection, investment attraction and strategic sector development to strengthen domestic industry and reduce reliance on external supply chains.
These experiences highlight that well-designed industry policy can support structural transformation when it is targeted, disciplined and aligned with national strengths.
For contemporary Australia, the Indo-Pacific’s track record reinforces the potential of focused interventions in areas such as critical minerals, clean energy technologies, defence manufacturing and advanced processing, balancing open markets with strategic capability-building to improve resilience, competitiveness and long-term economic security.
At its core, this requires a fundamental rethink of industrialisation as a “concept” and in practice, particularly as we enter the age of automation in high-end manufacturing. Highlighting this, Schimpf told Defence Connect, “This is something that I think is really needs a fresh look. A lot of the traditional view of manufacturing has been kind of a 1970s era view. We’re going to bring it back. We’re going to have the steel workers stamping out steel.”
Highlighting this shift in thinking, Schimpf stressed the importance of ensuring or “baking in” mass producibility from the earliest stage of design to ensure that any platform, whether for consumer goods or for defence uses, is designed from the outset for production at scale, something we in the West seem to have forgotten.
“That’s how it’s all going to go. And it’s missing the point that the world has changed in a lot of these things. It even just doesn’t accurately reflect history on how these things worked. You look at World War II, the US was the dominant industrial power and we were able to convert to a wartime economy by looking at the processes and technologies we had in place that we could manufacture at scale. And we built systems around what was available in that supply chain and that we could actually solve for.”
This approach has direct implications moving forward, Schimpf details this, adding, “When we think of the production phase, it’s solving for how we are going to eventually mass-produce these systems. It is not designing the most exquisite system we can and then later figuring out if it was manufacturable. If we don’t take into account manufacturing at that design stage, there’s no way this is mass-producible. So that mass-producibility becomes really, really critical. And this has led us down a path of verticalising more of the design, really looking at what is available at scale in the supply chain. What are those non-traditional commercial and automotive suppliers that otherwise wouldn’t be involved in defence?”
It is critical to understand that such an approach does require a “base level” of industrialisation and manufacturing capacity, something that Australia has a dearth of currently, nor does this model minimise or mitigate the challenges associated with implementing a large-scale program of industrialisation (or reindustrialisation) in Australia’s case.
As Schimpf said quite poignantly, “You go to war with the industrial base you have, not the one you want.”
Flexibility and settings matter
This is where flexible policy and regulatory settings come into play and can do much of the heavy lifting, particularly as the world becomes increasingly competitive and challenging, requiring greater domestic industrial sovereignty and capacity.
Equally important is “baked in” flexibility within the industrial and manufacturing infrastructure that is equally as essential to long-term competitiveness and success, something Schimpf detailed using the company’s Arsenal factory concept as a powerful example and one that can mitigate some of the “sacred cows” that have been used to justify the steady de-industrialisation of Australia and the West writ large.
Schimpf said, “The idea is we really focus on the assembly dimension. So we focus on, we work with suppliers that are doing the metallic components, the composites, the printed circuit boards, all those pieces, and then we’re really focused on the assembly dimension there. The goal is to minimise the amount of fixed infrastructure you need. So we don’t want these big monuments, heavy gantries, anything like that. If we can avoid it, we can do moving carts. This gives us a massive ability to rapidly pivot that line from...
“Where by designing these things in a smart way, we’re really looking at relatively straightforward assembly steps with very simple tools. So it makes it incredibly scalable, incredibly flexible. I think this is a really important aspect where I know that in aggregate our demand is going to go up. I’m not sure what that blend is going to be. And if we took a traditional approach of saying we have this munitions plant that makes these, these munitions here and then we have this aircraft facility making these aircraft here.”
Another often cited challenge to Australian (re)industrialisation, manufacturing at scale and globally competitiveness is the labour costs and the associated productivity of Australian workers, particularly in comparison to low-cost and slave labour utilised heavily across the Indo-Pacific’s developing nations.
Now I don’t know who needs to hear it, but I will say it again, Australian workers and industry should not compete with low-cost countries to produce low-cost, consumer goods, it makes no sense, even with the advent of low-cost, high output automation.
Schimpf hinted at this, saying, “The automation versus the human workforce side I think is an interesting question, which is humans are really good, flexible, responsive robots. Right? Like they’re really good and you can hire them quickly, you can scale them quickly. And if you again design for very fast training, very simple tooling, very simple assembly process, it’s really easy to ramp production that way.”
Schimpf added, “So you just end up in a very different set of trade-offs than this. Now you will scale jobs. I think that will be a very good thing. There will be good high-paying jobs and then a lot of this really looks like that upfront work around manufacturing, engineering and how we design smart production processes to make this work. But that’s really our goal.”
Bringing us to the broader policy and regulatory settings which will ultimately prove to be the deciding factor underpinning the longer-term success of (re)industrialisation in Australia and across the Western world.
Schimpf added, “You get to like, what are the actual levers of industrial policy that exist? And the US has started experimenting with some of these a little bit...
“You’re going to ease the regulatory burden around key areas you care about. How do we just get capacity built quickly, right? Creating those expedited pathways to say yes, we want this and yes, we’re going to have it and we’re going to find a whole of government way to get to, yes, quickly. Two, you can change the return profile and cost capital. Low-cost subsidised loans worked really well in the Inflation Reduction Act to incentivise battery production. There’s all these really interesting, straightforward ways to do that.”
Unpacking the intricacies and mechanics of this, Schimpf stated, “Can be loans, can be low cost, like, you know, low-cost subsidised loans, risk sharing, equity, capital investments, all these different things. You can use protective measures around tariffs, you know, and trans-shipment tariff structures. I know it’s a terrible thing, but the reality is creating these protection protective measures when you have an adversary like China who is manipulating the free trade system to their advantage, not fighting back.”
“Seems like a insane strategy to me. Right. So there’s always a question of what is the goal of the tariffs? You know. Is it national security, is it trade balance? You know, what’s the fair way to do this? But you know, I think there are but the protective measures are, you know, inherently a key part of this,” he added.
Final thoughts
Building Australia’s strength as an independent power, one with the economic weight, diplomatic influence and military capability to genuinely shape its region is no longer a lofty aspiration but an increasingly necessary expression of sovereignty.
It reflects an Australia prepared to take full responsibility for its own security while contributing meaningfully to a stable, prosperous Indo-Pacific.
For decades, our economy and strategic posture have been constrained: dependent on China’s markets, reliant on the United States for security, and often positioned as a spectator in others’ contests for power.
That path isn’t fixed. In a world sharpening along authoritarian–democratic lines, Australians deserve an honest conversation about our future and the choices required to secure it.
That conversation must involve the public, who ultimately bear the cost and carry the burden. Trust, transparency and genuine collaboration between government, industry and citizens are essential to reinvigorating a shared national project, one that strengthens critical industries, builds resilience against coercion and restores economic confidence.
A diverse, robust and self-reliant economy remains the bedrock of national power. And we must be clear-eyed about our ambitions: are we comfortable slipping into strategic irrelevance or ready to act as a true regional leader?
As Arthur Herman observed, advanced technologies and disciplined industrial strategy shape future prosperity and strategic deterrence.
This is something that Schimpf stressed, saying, “I think the failure to do this creates a serious deterrence risk where if our adversaries see that we can’t last for more than a couple of weeks in a conflict, so therefore we might not even enter it in the first place, that increases their likelihood that they think they can prevail.”
“That’s a huge failure of deterrence. And so I think this industrial capacity as deterrence, the responsiveness of it and the resilience of it, that is a missing equation that nobody’s talking about in this overall deterrence problem and we need to focus on it much more,” he added.
The same applies to Australia.
For without bold investment in capability, innovation and sovereign resilience, we risk drifting into managed decline and with it, the steady erosion of our prosperity, security and independence.
Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific region and what you would like to see from Australia’s political leaders in terms of partisan and bipartisan agenda setting in the comments section below, or get in touch at
Stephen Kuper
Steve has an extensive career across government, defence industry and advocacy, having previously worked for cabinet ministers at both Federal and State levels.
