A grassroots effort by manufacturers is underway to crowdsource a new deal plan for reinvigorating Australian manufacturing post-COVID-19, Peter Roberts, editor of @AuManufacturing News, explains.
Australian manufacturers are used to being knocked about... by unsympathetic governments, by disinterested procurement officers, by the financial press and even by consumers who love to ask ‘do we still make anything in Australia?’
Of course we do make things. We make $109 billion worth of things, employ 915,000 people, account for 25 per cent of measurable innovation, and bring high-skills, high wage jobs, and value-adding to what is today outwardly a resources-based economy.
But it has taken the tragedy of the COVID-19 pandemic to expose to politicians and the people alike just how fragile and unbalanced is our economy, and just how stupidly we have neglected to build local manufacturing capability.
Shopping isles empty of basics from toilet paper to pasta, and hospital storerooms bare of medicines, hand sanitiser and facemasks, have brought home the importance of a capable domestic manufacturing sector.
Local manufacturers have made heroic efforts to catch up, the makers we have of these essentials gearing up to boost output, and other companies racing to help out by stepping into broken import supply chains.
At the heart of this mess is the dominant paradigm of economic rationalism and ‘comparitive advantage’ that has guided policy for decades.
Our national R&D effort has fallen to 1.79 per cent of gross domestic product, and our education system is falling in basics such as reading and writing ability and the number of students studying science, technology, engineering and mathematics.
Rationalist thinking says we should buy as cheaply as possible on world markets, open ourselves to maximum competition and ‘let the market decide’ what we do best.
This approach has left our national wealth dependent on undifferentiated commodities ripped from the ground and rushed to the ports with minimal value-adding locally.
And today global markets for our gas, iron ore and coal are looking shaky, especially in the medium term with the trend away from carbon-emitting fossil fuels.
In fact success in global markets is not due to natural comparative advantage, but the competitive advantage achieved by assembling finance, skills and technology together.
Yet there are bright sparks on the manufacturing landscape – companies like CSL, the world’s number three in biotechnology and number two in vaccines; Ansell, the dominant global maker of rubber gloves; and AMCOR and its domestic offshoot Orora, the world’s largest producer of flexible packaging.
These and many other smaller firms like Cochlear and ResMed in medical devices have prospered despite Australian government policy in recent years.
Not long ago Canberra was jolted into recognising that you do have to plan and intervene in the defence sector if Australian industry was going to play its part in securing the nation in times of crisis.
We learned that lesson prior to World War II when we built defence factories around the country, but we promptly forgot until purely political imperatives woke up the current Coalition government.
The current suite of defence industry policies, from R&D to procurement, access to global supply chains, and skills and technology upgrading are a model for industry policy in other areas.
In the supermarkets and furniture shops there is anecdotal evidence that consumers are asking where products are made as the public wakes to the essential nature of local supply.
The lesson has got through to Canberra, with the Prime Minister’s National Coordination Commission calling on former Dow Chemical global CEO Andrew Liveris to come up with a plan for manufacturing post-COVID.
Liveris has surrounded himself with the same advisers he used in 2012 to come up with an Advanced Manufacturing Plan for Australia, something that fell on deaf ears at the time.
Now manufacturers themselves are calling for their voices to be heard as their future is decided.
At the Australian Manufacturing Forum (AMF) LinkedIn networking group, and @AuManufacturing News and Media, we have been besieged by manufacturers wanting to have their say and turn a tragic epidemic into something positive.
In response we launched a campaign to source a new deal plan for manufacturing, now in its second week, to feed into the policy mix.
Manufacturers are not asking to return to the era of handouts.
They are focusing on reforms to government and major project procurement, developing leadership and workplace skills, access to technology, an industry-led approach to their relationships with public sector researchers and more.
Most important are a national will and a plan, and reinvigorating the institutions that support a complex, advanced economy.
@AuManufacturing’s web traffic has quadrupled over the last month and we have received dozens of submissions, opinion articles that we are publishing daily, and substantive commentary.
A volunteer group of members of the AMF is sorting through the ideas, preparing to distil contributions into a new deal plan from the grass roots up.
Members of the Liveris committee have agreed to receive our plan.
New thinking in manufacturing policy in defence has been an extraordinary success.
In only a few years manufacturers in adjacent sectors have raised their levels of skill and technology and become suppliers to industry.
Small and medium sized businesses (SMEs) have developed, often with help from government or knowledge of a need in defence, new products and services that are transforming Australia’s local capabilities.
The oft-used arguments that local manufacturing is more expensive was always dubious.
Large platforms like ships are essentially one-off products and there is no economy of scale effect in making them overseas – we just have to go through a process of developing our industries to be able to compete.
Our SMEs are more than capable of contributing to major platforms being developed by our allies overseas.
Smaller companies locally are showing they can respond to local needs in ways simply not available off-the-shelf from overseas.
And who can argue that Australia should not be self-reliant and strong – something which requires local defence supply chains.
There is no reason why this cannot be replicated in other areas once we throw off the blinkers and look honestly at our truncated economy, and how easily it was thrown off course by an external shock.
Local industry is not the heavily protected and lazy sector of the past.
Those companies that have survived decades of shocks are either in a cosy niche, and good luck to them, or are doing something very right indeed.
At its heart, the leaders and managers of manufacturers today are lean, hungry and ready to step up.
We already have areas of success in manufacturing – defence, medical devices and food and wine producers have grown their share of GDP in recent years despite the hostility of government policy.
Peter Roberts is a business journalist who had held senior positions in media including news editor and business editor of The Australian Financial Review, managing e ditor of BRW magazine and managing editor of Fairfax Business Media’s Asian IT magazine network. He is founder of the Australian Manufacturing Forum LinkedIn networking group and editor, @AuManufacturing.