Comment
GEOFF CRITTENDEN – CEO, Weld Australia
The impact of COVID-19 on Australian manufacturing And, in the 1960s, Alcoa opened its first alumina refineries in Kwinana, Pinjarra and Wagerup. Throughout the 1950s and 1960s, Australian manufacturing was responsible for approximately 28 per cent of the GDP, and 28 per cent of all employment.
A decline in Australian manufacturing There is a commitment needed from state and federal governments to increase levels of local content for all procurement decisions in the country.
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USTRALIA has a long, proud history of manufacturing throughout the 20th century. With the federation of Australia in 1901, customs barriers were eliminated between the states, so they could more easily trade with another. This saw the first wave of manufacturing expansion, particularly in Victoria and New South Wales. By 1913, manufacturing employment totalled at 328,000 and accounted for 13 per cent of GDP. During World War I, the Australian Government quickly realised that our economy was too reliant on imports; it was near impossible to source many products in wartime. As a result, Australia started to manufacture a range of products onshore during the war, from aspirin right through to chlorine. Our steel industry also experienced enormous growth. BHP opened a new steelwork in Newcastle in 1915, which generated huge profits due to the unprecedented demand for steel to build ships, ammunition and artillery. Australia quickly matured from a rural economy into a substantial manufacturing power. The 1920s marked the beginning of the car manufacturing boom in Australia. Both General Motors and Ford established factories across the nation, in Adelaide, Brisbane, Fremantle and Sydney. At the time, it was more cost effective for these American manufacturing
8 MAY 2020 Manufacturers’ Monthly
giants to assemble their cars using imported components, rather than import complete vehicles. By 1929, 440,000 people were employed in manufacturing, approximately 18 per cent of the total population. While car manufacturing took off, Australia also faced challenges in 1920s; the Great Depression impacted several of our industries, particularly heavy industrial manufacturing (such as tools and metal parts). To help industry stave off these challenges, the Australian Government applied tariffs to some imported goods, encouraging Australians to buy local. As a result, the Australian metalworks and heavy industrial manufacturing sectors expanded in the 1930s. BHP took over the Port Kembla steelworks. General Motors started building all-steel welded car bodies at its new plant in Melbourne. Rheem started manufacturing water heaters. The Commonwealth Aircraft Corporation opened their plant in Melbourne. When World War II hit in 1939, Australian manufacturing was poised to play an even greater role than it had during World War I. With imports scarce, local demand was high. And, Australian also became an important supplier of manufactured goods to the UK and the US. Australian manufacturing remained strong in the years immediately after World War II. For instance, Toyota opened up shop in the late 1950s.
By the 1970s, Australian manufacturing was in decline. Local manufacturers were unable to compete with imported goods. Imports were much cheaper than goods produced in Australia, which meant businesses and governments alike began to consistently off-shore their contracts for products and projects. Manufacturing saw its share of total employment fall from 25 per cent in 1970 to 19 per cent by 1980. Fast forward to today and, while manufacturing remains a vital part of the Australian economy, it is responsible for just five per cent of the GDP, and only 5.4 per cent of total employment. Arrium collapsed in 2016. Holden and Ford have closed their facilities. Australian manufacturing is dying. This slow and painful death is due, in part, to market forces: an extended period of unfavourably high exchange rates; the rapid rise of China as “the world’s factory”; increasing wage costs; a lack of skilled workers; and increases in local energy and other input costs. But it cannot all be blamed on market forces. Successive state and federal governments continue to off-shore manufacturing work that the local industry is more than equipped to handle. Take, for example, rail industry projects. As recently as 10 years ago, most rail vehicles were designed and manufactured here in Australia. Not anymore. The $2.43 billion contract for the new Intercity train fleet was sent off-shore by the New South Wales Government. Sydney’s Waratah trains have only 20 per cent local
content. Queensland’s new trains were fabricated in India, failed to meet Australian Standards for accessibility, and are now undergoing significant rework. And, while Victoria’s Metro Trains are manufactured locally, all the fabrication work is completed in China. And let’s not forget about the big corporates. Many, if not all, of the major mining companies off-shore their fabrication work. It was not so long ago that BHP awarded more than 20,000 tonnes of structural steel work for its $4.7bn South Flank project to an off-shore manufacturer. The $150bn investment by the federal government in the defence industry has revitalised many small-tomedium enterprises (SMEs) within the Australian manufacturing supply chain and brought in new investment from overseas. However, this is just a drop in the bucket; we need a much larger proportion of government spending to remain in Australia.
A global comparison Let’s compare Australia to the rest of the world. Manufacturing makes up about one per cent of the workforce in Germany, Japan, and Switzerland. Canada, whose economy otherwise is similar to ours, has 1.7 million manufacturing workers, compared to our 47,500. In Israel and Sweden, with far smaller populations, advanced manufacturing is thriving. South Korea – the 5th largest export economy in the world and the 6th most complex economy according to the Economic Complexity Index (ECI) – had a positive trade balance of $124bn in 2017. In comparison, Australia lags behind as the 20th largest export economy in the world and the 59th most complex economy. In 2017, Australia had a positive trade balance of just $44bn – just a third of that of South Korea’s. It is a matter of national pride to buy South Korean-made goods, from trains to cars to telephones. Imports manmonthly.com.au
