From the Union

A fair share for Australian manufacturing

Manufacturing is a growing industry globally. Almost every other job relies on manufactured goods, and demand for manufactured goods is growing here in Australia, but our domestic manufacturing sector is shrinking.

New research commissioned by the Australian Manufacturing Workers’ Union (AMWU) shows that Australia has the lowest level of manufacturing self-sufficiency in the OECD. Manufacturing selfsufficiency is the proportion of manufactured goods produced domestically compared to the volume of manufactured goods that are consumed. On this measure, Australia is at the bottom of the pile, outstripped not only by well-known manufacturing powerhouses like Germany, but every other OECD country from New Zealand to Latvia to Chile and Greece. We need a fair share for Australian manufacturing. We need to grow our local manufacturing sector by almost half to match our output with consumption of manufactured goods over the medium-tolong term. According to our research, this would create 400,000 direct jobs in manufacturing, and a further 265,000 jobs throughout the supply chain as well as creating more than $40bn per year in manufactured exports. Our goal is ambitious, but with the right policy settings it is possible. The alternative is to allow the gap between what we consume and what we produce to grow, deepening a trade deficit that already stands at $180bn a year. Two-thirds of international trade is in manufactured goods. If Australia does not grow our manufacturing sector, we will be locked out of trading opportunities in the future. A fair share for Australian manufacturing does not mean that we produce everything that we use. We should aim to scale up subsectors of manufacturing where we have a competitive advantage, and continue to import goods in other sub-sectors. This will enable us to engage in mutual and balanced two-way trade. Local capability should be built up in sectors of critical importance including defence, energy, and health to ensure that we can manufacture essential goods here at home instead of relying on long global supply chains. The first step in rebuilding Australian manufacturing is for governments of all levels to leverage their procurement powers to support Australian businesses and Australian workers by buying Australian. Stimulus measures like infrastructure projects should have industry participation plans and other measures put in place to ensure maximum local content. It just makes sense for our taxpayer dollars to be spent here to drive our domestic economy. Secondly, the Government needs to develop sub-sector strategies to co-ordinate funding and interventions across departments and programs to deliver the best ‘bang for you buck’ in the sub-sectors identified as having the greatest potential for growth and strategic significance. The patchwork approach that exists at present has proven woefully inadequate in supporting our manufacturing sector. We need to take a cohesive and long-term approach to reach our goal of self-sufficiency. The Government needs to facilitate cross-sector co-operation through networks or clusters, bringing together the public sector, private sector, universities and research institutions. Collaboration amongst a diverse group of stakeholders is crucial. Manufacturing is the most innovation-intensive sector in Australia. Despite only accounting for 6.9% of Australian employment, manufacturing makes up 26.4% of Australian research & development spending. No country can be an innovation leader without manufacturing. Australian firms need to be better supported to up-scale and commercialise their innovations here. The Government should create an Advanced Manufacturing Investment Fund with an initial A fair share for Australian manufacturing is possible – and it’s necessary for our country’s future prosperity… The commonly accepted wisdom that manufacturing will disappear as we move to a ‘post-industrial’ economy is simply untrue.

capitalisation of $1bn to make strategic equity investments in new projects, and amend tax laws to allow for accelerated depreciation measures and investment tax credits, which would better support local manufacturing firms. Our tax settings should ensure that research & development conducted here translates to products being manufactured here, rather than ideas being shipped offshore in the production phase. As part of this, the Government must scrap its proposed Research & Development Tax Incentive Bill 2019. This Bill, which is currently before the Parliament, has the perverse effect of making it harder for manufacturing firms that are research-intensive to qualify for the tax incentive if they do their manufacturing here instead of offshore. It’s the exact opposite of what our manufacturing sector needs. We should be making the most of our natural advantages in renewable energy. The decreasing costs of renewable energy infrastructure, including solar panels and batteries, can bring down energy costs for Australian manufacturers. We have an opportunity to not just mine the resources required for so many renewable energy products, but to be a part of the value-adding process for minerals like lithium. Australia should be a world leader in lithium battery manufacturing. And of course, we need to invest in skills and training. TAFE has been gutted, and desperately needs additional funding to ensure it can continue to deliver high-quality vocational education. A fair share for Australian manufacturing is possible – and it’s necessary for our country’s future prosperity. With a coherent and co-ordinated approach, we can rebuild our manufacturing sector and create hundreds of thousands of well-paid secure jobs. Australia’s lack of domestic manufacturing capacity makes us an outlier in the OECD. The commonly accepted wisdom that manufacturing will disappear as we move to a ‘post-industrial’ economy is simply untrue. Demand for manufactured goods will only continue to grow. Almost every job in almost every industry relies on manufactured goods. We can change the trajectory of Australian manufacturing, and build back better from the COVID-19 crisis.

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