Analysis and Commentary

@AuManufacturing’s new deal plan for manufacturing – summary and recommendations

Analysis and Commentary

The @AuManufacturing new deal plan for manufacturing was crowd sourced from more than 60 substantial submissions from readers and members of the Australian Manufacturing Forum Linkedin group in 2020. With an election in the air and industry policy again in the news this week, we present again the plan’s executive summary and core recommendations as it is all still relevant. The full plan may be downloaded here.

After close to three decades of economic growth Australia’s luck has run out.

While today we are a wealthy nation – Australia enjoys one of the highest GDP’s per capita of any nation – the economic model we have been following failed at the first serious challenge.

Our export income has held up during the Covid-19 pandemic, but our economy is revealed as fragile to external shock, narrowly based, and crucially, lacking in the deep manufacturing capabilities and capacity enjoyed by other advanced nations be they Germany, Israel, Singapore or Taiwan.

Australia’s manufacturing capacity has been left to atrophy for too long, leaving Australia with the export profile of a third world nation, an industrial complexity similar to Senegal and Uganda, and a balance of trade deficit in elaborately transformed manufactures of $188 billion. Our appetite for imported cars and iPhones has to be paid for somehow, putting intolerable strain on other sectors to perform.

At the same time, our economy is becoming less innovative, with the R&D intensity of the economy falling from above two per cent of GDP only eight years ago, to 1.79 per cent today. Most worryingly business expenditure on R&D (BERD) which creates future wealth is also falling, down a massive 10 per cent in the latest year alone from 1.0 per cent of GDP to 0.9 per cent.

The good news is we start our recovery from a good place. While Australia’s manufacturing depth has been shown to be thin, where it exists it is excellent, dynamic and globally competitive.

Our largest manufacturer, CSL, is the world’s number two biotechnology company, Austal is the world’s number one in aluminium hulled ships, while our steelmaker BlueScope Steel is a global leader in steel coating and painting technology.

In the technology sector sleep apnea company ResMed and hearing implant maker Cochlear dominate their global niches, and tna Solutions is a global success story in food machinery manufacture. And our defence producers are beginning to emerge onto the world stage. All this is backed by a world-leading public research sector.

But to make more of the enormous potential of Australian manufacturing, our policy settings need a reset.

We need nothing less than A New Deal Plan for manufacturing, a plan crowd sourced from Australia’s manufacturing community and laid out in detail in the body of this report. The core recommendations of our plan are:

Recommendation 1 – A national commitment to manufacturing. Manufacturing needs a rigorous, game changing reimagination campaign launched by the Prime Minister and State Premiers as a key part of crossing that bridge to a revitalised post-Covid economy.

Recommendation 2 – National Manufacturing Plan. Replacing the ‘transitional’ plans of the past, a new National Manufacturing Plan can reflect the successful planning guiding the development of the defence industry.

Recommendation 3 – Bi-partisan and national support. To achieve policy longevity, core manufacturing policies should be negotiated and implemented as a joint venture between state and federal governments.

Recommendation 4 – National manufacturing body. To overcome fragmentation of effort, a new National Industrial Strategy Commission should be established to develop national priorities and manage the implementation of industry-facing programmes.

Recommendation 5 – Sovereign manufacturing capabilities. Over and above Protective Equipment (PPE), further analysis is needed to protect our sovereign capability in our critical supply chains.

Recommendation 6 – Workforce development plan. A whole of industry workforce development plan that clarifies what work, what knowledge, what skills, to what extent, when and where they are needed, is key.

Recommendation 7 – Leadership. Industrial transformation rests on the skill of industry leaders, and policy must focus on building capability in strategic planning, innovation, commercialisation and technology.

Recommendation 8 – Government procurement. The emphasis of new transparent procurement policies should be placed on value for money for the economy as a whole over the life of the product, as opposed to initial upfront costs. Large private sector projects need local procurement plans in the conceptual and design phases, not those implemented after the event.

Recommendation 9 – Superannuation as investor in manufacturing. Superannuation funds should be required to invest a tiny amount of their funds in commercialising manufacturing research, and manufacturing business scale-up.

Recommendation 10 – Accelerated depreciation. Manufacturers need incentives such as accelerated depreciation to encourage them to invest in retooling plants with the most advanced technology.

Recommendation 11 – R&D intensity. The key to future manufacturing success is innovation. The government should declare a goal of boosting R&D intensity in the economy to three per cent of GDP, through increased R&D incentives.

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