Prime Minister Scott Morrison has used a National Press Club address to shed light on a $1.5 billion plan to reignite the fires of Australian industry, with a focus on competitiveness and economic recovery in the form of a ‘Modern Manufacturing Initiative’ to transform the national economy, laying the foundations for enhanced national resilience.
There is an old saying often attributed to Albert Einstein, which posits that "the definition of insanity is doing the same thing over and over again, but expecting different results", and nowhere is this clearer than in the realm of national policy making where many Australians feel increasingly disenfranchised by an apparent lack of forward planning by the nation's leaders.
However, it appears that the Prime Minister has sought to buck that trend in the aftermath of the COVID-19 pandemic and a disastrous bushfire season which have wrought unprecedented economic, political and strategic devastation, not only on Australia's economy, but equally across the globe.
These challenges, compounded by growing levels of economic stagnation and in some cases depression across the West, combined with growing public malaise and the ever mounting pressure of 'great power' competition are all undermining the global balance of power and the post-Second World War paradigm.
Adding further fuel to the fire is the global and more localised impacts of COVID-19, which range from recognising the impact of vulnerable, global supply chains upon national security as many leading nations, long advocates of "closer collaboration and economic integration", grasp at the lifeboats of the nation-state to secure their national interest.
While this economic, political and strategic turmoil is in some ways 'unprecedented', the favoured catchphrase of many a media personality seeking to describe anything from the bushfires that devastated swathes of the landmass, the economic impact of COVID-19 or the societal upheaval sweeping the West, Australia does its best work when its chips are down.
Responding to these challenges has pushed the public policy status quo to the edge, as government grapples with how to stimulate the economy, lower unemployment and prepare the nation for the increasingly disrupted and challenging decades to come.
Answering the challenge, Prime Minister Scott Morrison has used an address to the National Press Club to outline a $1.5 billion plan designed not only to reignite the fires of Australia's long neglected industrial and manufacturing base, but expanding on areas of natural competitive advantage driven by innovation and open up global markets for Australian export growth.
The Prime Minister's ‘Modern Manufacturing Initiative’ seemingly builds on the priorities identified by the CSIRO as part of a framework report, titled COVID-19: Recovery and resilience - Opportunities for Australia to leverage science and technology to support economic recovery and resilience.
This report highlighted specific areas for government emphasis, including a focus on long-term, value add, smart job creation and investment opportunities to help stimulate the Australian economy in the post-COVID world, namely:
- Agriculture and food;
- Mineral resources;
- Manufacturing; and
- Digital and high technology industry.
CSIRO chief executive Dr Larry Marshall explained, "Just as science and technology have been guiding our health and emergency response, so too will they drive our economic response and recovery from this pandemic."
These statements were reinforced by CSIRO Futures lead economist Dr Katherine Wynn, who explained that by acting now, Australian industries could increase productivity and cost efficiencies as well as create additional revenue from products, services and markets over the next few years.
Dr Wynn added, "Energy-efficient technologies is one immediate way to reduce energy costs, emissions and demand on the grid while creating local jobs, and we see many opportunities for increased productivity, such as energy-efficient appliances in buildings and electric vehicles in transport that use mature technologies that are readily adoptable today.
"The health sector has always been an essential part of Australia's economy and its importance has understandably been further emphasised during the pandemic.
"We also see potential for more efficient healthcare delivery through point-of-care diagnostics supported by bioinformatics and high-performance computing. The manufacturing sector could maximise its local manufacturing capabilities, creating jobs and adding value to Australia’s growth sectors, particularly in pharmaceuticals, food and beverage manufacturing, mineral resource processing as well as in space and defence."
Devil is in the details
The core of the Prime Minister's ‘Modern Manufacturing Initiative’ strategy is shifting not only the public dialogue, but equally the government dialogue on investment versus intervention and subsidy to leverage government 'co-investment' across six key priority areas where Australia is deemed to have 'competitive advantages'.
Geoff Chambers and Joe Kelly writing for The Australian quote an excerpt of the Prime Minister's speech, stating, "We make things in Australia. We do it well. We need to keep making things in Australia. And under our plan we will. Manufacturing employs around 860,000 Australians, and prior to the pandemic it generated more than $100 billion in value for our economy each year and over $50 billion in exports.
"The overarching objective of our modern manufacturing strategy is to build scale and capture income in high-value areas of manufacturing where Australia has either established competitive strength or emerging priorities."
Supporting this strategy, the Prime Minister and Treasurer are expected to provide additional support for this economic and industrial pivot, with emphasis on enhancing productivity and, critically, policy consistency across "affordable and reliable energy, tax policy, industrial relations, training and skills development, cutting red tape (and) infrastructure investment".
Building on this, the Prime Minister said, "Too often in the past industry policy has ignored these foundational elements in the vain hope that subsidies and work-arounds could make up for broader deficiencies in our economic settings."
Policy consistency has long been identified as a major shortfall hindering Australia's development and implementation of a true industry policy, while strides have been made, particularly with the Defence Sovereign Industry Plan, Naval Shipbuilding Plan and the government's commitment to building Australian Industry Capability, the broader policy has struggled.
Australia isn't alone in this struggle though, as like many former industrial powers, the impact of COVID has seen a growing push for greater domestic economic development, limiting exposure to vulnerable global supply chains and a public support for 'reshoring' of key industry sectors essential for national security and resilience.
This was identified in a timely report commissioned by Deloitte, Footprint 2020: Expansion and optimization approaches for US manufacturers, which while focused on the US industrial base, provides important guidance for Australian consideration, in particular the key catalysts identified by global brand executives look for when deciding where to expand manufacturing bases, including:
- Proximity to new market opportunities;
- Proximity to existing accounts;
- Talent availability, educational infrastructure;
- Business disruption risk; and
- State technology advances.
It would seem on that basis, Australia is a stand out opportunity, particularly when combined with the nation's wealth of traditional and 'next-generation' raw resources, like rare earth elements essential to modern, value-add manufacturing capabilities.
Australia is defined by its economic, political and strategic relationships with the Indo-Pacific and the access to the growing economies and to strategic sea lines of communication supporting over 90 per cent of global trade, a result of the cost-effective and reliable nature of sea transport.
Indo-Pacific Asia is at the epicentre of the 21st century’s era of great power competition and global maritime trade, with about US$5 trillion worth of trade flowing through the South China Sea and the strategic waterways and chokepoints of south-east Asia annually.
Enhancing Australia’s capacity to act as an independent power, incorporating great power-style strategic economic, diplomatic and military capability serves as a powerful symbol of Australia’s sovereignty and evolving responsibilities in supporting and enhancing the security and prosperity of Indo-Pacific Asia.
Australia is consistently told that as a nation we are torn between our economic relationship with China and the longstanding strategic partnership with the US, placing the country at the epicentre of a great power rivalry – but what if it didn’t have to be that way?
Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific and what you would like to see from Australia’s political leaders in terms of shaking up the nation’s approach to our regional partners.